IMF predict £7bn deficit by 2020
16/04/2015
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.’
Need Financial Advice?
If you have any personal finance questions related to this news article, please contact our financial advisers. You can get in touch by asking a question online, calling us on 0800 092 1245, or by arranging a visit.
Share this..
Related stories
UK think tank warns of public service cuts
While there is much pressure on the UK government to cut back on investment in public services, with a £1 trillion national debt to contend with, a report by the Centre for Cities has today warned that a reduction in this particular area will impact upon graduates. It is believed that more than 50% of all graduates in the UK will move to the public sector for their first employment position altho...
Read MoreUK inflation surges to 2.9%
In a surprise move it has been revealed that the UK inflation rate increased to 2.9% in December, a far cry from the 1.9% seen in November and expectations of 2.4% for December. This has sent shockwaves through the financial markets with a suggestion that UK base rates will almost certainly begin to increase in the latter part of 2010. A number of analysts had believed that UK base rates would rem...
Read MoreFat Cat pay in the City to be curbed
In what seems like a joint effort by the UK and US authorities it seems as though the so called Fat Cat pay model in the City could well be on the way out. While there is very little they can do from a legal standpoint the authorities have chosen to work from within by taking stakes in some of the weaker UK banks and introducing new salary caps as part of the deal.
It is very much...
How long can the Bank of England avoid 0% interest rates?
As we approach the next MPC meeting it appears to be taken for granted within the city that rates will fall from 1.5% to 1% this week. Slowly but surely we are edging towards 0% interest rates in the UK and there is some debate as to how long the UK government and the Bank of England can avoid such a move. Liquidity is still dangerously low in the UK financial markets, businesses are still struggl...
Read MoreGordon Brown claims victory in Gulf talks
Gordon Brown has claimed victory in his recent talks with Gulf states where he asked them to contribute part of the trillion dollar windfall they have received from the recent spike in the oil price to the IMF. While there has been no official comment from the Gulf states there is immense pressure on them to increase their contribution to the IMF at a time of great hardship.
As econ...