IMF Issues Deficit Warning Ahead Of Election

The International Monetary Fund (IMF) has unwittingly entered a crucial debate on the economy ahead of the General Election, warning the UK will not be able to balance its books by 2020.

The fund, which promotes financial stability and can act as a lender of last resort to its 188-member nations, made the prediction in its twice-yearly Fiscal Monitor.

The report came as the leaders of five opposition parties go head-to-head - while David Cameron and Nick Clegg stayed on the campaign trail.

The deficit is among the topics on discussion as Ed Miliband, Leanne Wood (Plaid Cymru), Natalie Bennett (Green Party), Nicola Sturgeon (SNP) and Nigel Farage (UKIP) square up for the televised debate.

The report said it expected falling tax revenues in the next Parliament would be deeper than those predicted by the UK's independent Office for Budget Responsibility (OBR).

It said the resulting loss of income to the Treasury would impact any Government's plans to eliminate the deficit - the amount spent annually in excess of earnings - by the end of the decade.

It also forecast the need for higher public spending, despite saying the UK economy was "solid", above the amounts predicted by the OBR.

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The deficit is expected to total just over £90bn in 2014/15, down from £145bn at the start of the last Parliament.

The IMF said its expectations were for a £7bn deficit by 2019/20, which is £14bn worse than the OBR forecasts announced in the last Budget.

The IMF sees weaker GDP growth than the OBR over the next five years, though still running at more than 2% annually.

It should be said that the fund does not have the best track record in its predictions for the UK.

Two years ago, there was outrage within the Treasury when the IMF downgraded UK growth prospects and accused the Chancellor George Osborne of "playing with fire" with his austerity plans, for fear they would damage the recovery.

It later praised the balance in fiscal policy as the economy grew.

Despite this, the IMF's timely analysis of the OBR's public spending plans risks haunting politicians, given the prominence of the economy on the campaign trial.

Each of the main parties has committed to fiscal tightening in the next Parliament in their manifestos but deficit targets vary:

:: Conservative

Running a small budget surplus by 2019/20.

:: Labour

Eliminate the deficit by the end of the next Parliament.

:: Liberal Democrats

Use a different measure. The party has pledged to eliminate the structural current deficit (the Government's annual overspend that is not directly affected by economic performance) in 2017-18.

:: UKIP

Would run surplus after three years of next Parliament.

:: SNP

Wants an end to deficit reduction and austerity to help poorest.

:: Green

Would not eliminate deficit in next Parliament but cut taxes instead of spending.

Commenting on the pledges, Sky's political editor Faisal Islam said: "There are differences of emphasis, differences of approach.

"Just remember there is vagueness here which means they can compromise on them in any post-election negotiation.

"In fact, all the parties are even using different measures of the deficit and seem far keener to talk about the other parties' approach to the deficit than their own.

"At the heart of this though is a judgement by the Conseratives that the public wants a surplus and the party's reputation means it can be trusted not to fully identify the measures that would bring that about and from Labour that the public wants costed policies but is a little wary of years more of cuts."