IMF Warns Chancellor Reeves May Need Tax Rises, Pension Cuts to Balance UK Finances

The International Monetary Fund (IMF) has warned Chancellor Rachel Reeves that she faces significant fiscal challenges, including an estimated £30 billion shortfall, and must consider raising taxes on working people, scrapping the state pension triple lock, or introducing charges for NHS services to maintain fiscal sustainability. The IMF's report highlights medium-term pressures from an aging population and a ballooning pensions bill, suggesting that without increased revenue or spending cuts, core welfare pillars and public services might need to be scaled back. Despite praising Reeves' commitment to fiscal rules and earlier welfare reforms, the IMF noted the government has since diluted some of these measures, exacerbating budgetary pressures. The watchdog emphasized the limited fiscal headroom available and the risk of failing to meet fiscal rules if unexpected economic shocks or interest rate rises occur. Political resistance to tax hikes and welfare reforms complicates efforts to stabilize public finances, with the IMF urging greater spending prioritization and possible means testing of benefits and NHS access for higher-income users. Overall, the IMF's assessment underscores the urgent need for difficult decisions to avoid worsening the UK’s debt and borrowing costs amid weak growth prospects.