𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

John Healey has been warned against dishing out state handouts at his upcoming Budget to ease cost-of-living pressures. The International Monetary Fund (IMF) downgraded its outlook for UK growth and warned of further price rises and job losses.

The fund said that an “urgent” need to reduce borrowing meant that help with the cost-of-living crisis should be used “sparingly” in all countries. Any measures must be “well funded” to maintain credibility, it added.

“Any new spending increases or tax cuts should be well-funded to secure the necessary fiscal adjustment paths,” the IMF said in its latest world economic outlook on Tuesday. Fiscal support measures should be used sparingly, designed in a way not to complicate the task of monetary policy, and unwound rapidly as the shock dissipates.”

UK households are also set to face a sharper rise in inflation than previously forecast as the conflict in the Middle East propels food and energy costs higher. Consumer prices are set to increase by 3.3% in 2026, up from a previous prediction of 3.2%. This would mark the joint second-highest rate among the G7 group of countries.

Meanwhile, inflation is expected to slow to 2.8% for next year, but this is significantly higher than the 2.4% rate previously forecast by the IMF.

The Bank of England has said it expects UK inflation to rise to “slightly above 4%” in the first quarter of 2027, partly linked to another increase in the household energy price cap in January.

However, inflation is then expected to swing back lower throughout the year.

The IMF said it expects core UK inflation to fall back to target levels by the end of this year, later than it had previously forecast.

UK gross domestic product (GDP) is set to grow 1.3% this year, having previously predicted a 1% rise.

But growth for next year is set to slow to 1.2%, down from a previous forecast of 1.3%.

Mr Healey and Prime Minister Andy Burnham are under pressure to ease the cost of living at their maiden Budget on October 28.

Mr Healey said: “Conflict in the Middle East and Europe is hitting people in the UK and around the world.

“But Britain’s economy is showing strong international resilience in the face of these challenges: we’re forecast to be the joint second fastest-growing G7 nation in 2026 and have the lowest deficit in the G7 by 2031.

“This week I will meet international finance ministers in Bangkok to discuss how we limit the impact of the conflicts on people and businesses, while maintaining strong fiscal discipline.

“We are determined to drive good growth in every postcode, provide some breathing space for today, and fresh hope for the future.”

Shadow Chancellor Andrew Griffith said: “John Healey must tackle both problems in the Budget by getting Britain drilling and dealing with out-of-control welfare spending.

“If the Chancellor reaches for more tax rises instead, he is choosing slower growth and working people will pay for it.”