Chancellor Rachel Reeves got a pre-Budget boost as leading economists dramatically increased their forecast for growth in Britain.
In July, the month of the general election, the International Monetary Fund predicted that the UK economy would grow by a miserly 0.7 per cent in 2024.
It increased this to 1.1 per cent in its latest World Economic Outlook, a significant rise though still relatively weak by historical standards.
The latest IMF prediction, which includes 1.5 per cent for 2025, puts the Washington-based economists largely in line with many other forecasters.
Ms Reeves said: “It’s welcome that the IMF have upgraded our growth forecast for this year, but I know there is more work to do.
“That is why the Budget next week will be about fixing the foundations to deliver change, so we can protect working people, fix the NHS and rebuild Britain.”
Dan Coatsworth, investment analyst at AJ Bell, stressed: “Chancellor Rachel Reeves is looking for all the good news she can get ahead of the Budget and an upgraded UK economic forecast from the IMF has certainly come at the right time.”
However, the healthier growth forecast leaves the Labour government with a challenge in explaining why, if the economy is picking up speed, are tens of billions of pounds of tax rises needed in the Budget on October 30, many of which will hit London hard.
Official figures from the Office for National Statistics on Tuesday showed borrowing so far in the first half of this financial year hitting £80 billion.
Ms Reeves is also arguing that she inherited a £22 billion black hole from the Tories in the public finances, a claim rejected by her predecessor Jeremy Hunt.
Ministers have also defended pay rises for public sector workers, since Labour came to power, to avert more strikes by junior doctors and train drivers, and they claim some of the settlements including for teachers had not been factored into the public spending books.
But the Tories have accused the Government of making a political choice to increase public sector pay and also hike taxes.
The Chancellor is expected to raise National Insurance on employers, freeze the thresholds for paying income tax for another two years, increase capital gains tax, and make changes to inheritance tax and stamp duty.
The IMF report also predicted UK inflation for 2024 is set to be very slightly higher than expected at 2.6 per cent, 0.1 percentage points above its earlier forecast.
Unemployment is also set to be slightly worse than previously expected by the IMF.
It said the UK unemployment rate is set to be 4.3 per cent for 2024 as a whole, compared with a previous 4.2 per cent estimate.
The IMF maintained its projection that the world economy will grow by 3.2 per cent in 2024 in its latest update.
It predicted that the global economy will also grow by 3.2 per cent next year, 0.1 percentage points down from its previous estimate.
