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IMF predict £7bn deficit by 2020


The International monetary Fund (IMF) believes that the UK will still be in deficit of £7 billion by 2020, even though the Office for Budget Responsibility (OBR) predicted at the last budget a surplus of £7 billion.

The IMF has highlighted the challenges faced by the next government to reduce the deficit (the gap between what the government spends and what it gets in income, mainly from taxes). The Conservatives are the only party to claim that they are committed to generating a surplus on the overall budget, so this announcement will be particularly damming for them.

The IMFs prediction assumes that there will be a another coalition government after the May general election, which means spending is predicted to be higher, because the main party may be forced to increase taxes or cut spending a bit more than currently planned. Government spending may also need to be higher on welfare and tax credits than predicted by the OBR while the country gets back on track.

The IMF also believes that the OBR is being overly optimistic about growth and tax revenues in the latter years of the next parliament.

Vitor Gaspar, director of fiscal affairs at the IMF, has warned countries how vital it is for them to get their public finances under control.
He said:
‘Countries that fail to build buffers in good times often find themselves without fiscal space to manage a crisis and that is very costly.’

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