The IMF warned that the proposed £45bn in unfunded tax cuts announced in the mini Budget last Friday would stoke ‘inequality’, urging the government to ‘re-evaluate’ its tax measures.

It added that the Chancellor Kwasi Kwarteng’s mini Budget would risk undermining the efforts of the Bank of England in tackling inflation amid the cost of living crisis.

In a statement, the IMF said: ‘We are closely monitoring recent economic developments in the UK and are engaged with the authorities.

‘We understand that the sizeable fiscal package announced aims at helping families and businesses deal with the energy shock and at boosting growth via tax cuts and supply measures.’

The government plans to abolish the additional rate of income tax, removing the 45% rate and effectively cutting tax by 5% to 40% for the highest earners, as well as cutting the basic rate of tax by 1% to 19% from April next year. At the same time corporation tax will be frozen at 19%, while the 1.25% rise in employee and employer National Insurance contributions will be reversed from 6 November.