IMF figures underscore need for drastic spending cuts

Today’s Telegraph reports

The International Monetary Fund has warned that long-term fiscal reforms will be required among advanced economies as it projected the UK’s gross debt to gross domestic product would rise to 90.6pc in 2015.

According to Mark Littlewood at the IEA,

These statistics underscore the need to drastically cut government spending. Only through cutting spending and subsequently lowering the tax burden will growth be stimulated in the UK economy.

The IMF is right to point to the UK’s spending on health and pensions as areas of concern. However, when pensions liabilities are taken into account, UK national debt already stands at a staggering 333% of GDP; far worse than the 90.6% the IMF predicts for 2015. It is time for politicians to be frank and honest about our real debt levels.

The coalition government has made a start, but it must be bolder and more radical if it truly is to deal with this gargantuan task.

The 333% figure comes from an IEA report published in June, A Bankruptcy Foretold 2010: Post-Financial-Crisis Update, which uses standard accounting practices to estimate the true level of UK government debt.

Regular readers will remember the Cobden Centre article by Prof. Kevin Dowd, which suggests the figure may actually be as high as 530% of GDP — “Two different methodologies by reputable researchers, both painting a very bleak picture”.