UK needs £50bn of extra cuts - IMF

Prepare for more tax rises and spending cuts. As much as £50bn, the International Monetary Fund (IMF) has warned.

The IMF claims the extra money is needed for long-term pension and healthcare costs, not to mention paying down more public debt. But who could take the brunt of the cuts - if made - most?

Spending pressure

The IMF claims that in order for the UK to reduce public debt from 82.5% to 60%, a second wave of cuts is needed. The Telegraph claims such an adjustment would be equivalent to 11.3% of national output. By comparison the existing £123bn austerity program is equivalent to 7.5% of GDP.

The problem with the IMF line is that more austerity rises will likely put more pressure on consumer confidence as more debt is paid down, more jobs are lost and less is spent generally, also shrinking tax revenues. But the public sector would again be highly vulnerable.

Growth upped

Such IMF pronouncements should worry the poor. The welfare budget faces a £10bn cut by 2016. But by 2016, benefits and tax credits will cost UK taxpayers £230bn out of a total £709bn budget. A massive proportion of total spending.

There's better news on growth; the IMF says the UK is likely to expand by 0.8% this year, compared to its previous 0.6% forecast, possibly outperforming both France and Germany in the process.

We'll know more detail on how the economy is doing when GDP figures for the first quarter are released next week. Crucially, they will reveal whether the UK, technically speaking, has entered a recession given the 0.3% slump in the last quarter of 2011.

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