IMF warns Britons to raise taxes - or else

The world's leading financial watchdog warned that the British Government would have to impose £12bn tax hikes to prevent a crisis in the public finances without resorting to big spending cuts.

The International Monetary Fund urged the UK to speed up its "fiscal consolidation" over the coming parliament - code for cuts in public spending, tax increases or new charges for public services.

David Robinson, its deputy chief economist, said: "It would be difficult to meet their own fiscal rules over the course of the next economic cycle. The amount we are looking at is perhaps of the order of 1 per cent of GDP over five years."

The Tories said it was a "timely reminder" that the Government's spending plans meant there would be tax rises after the election.

Oliver Letwin, the shadow Chancellor, said: "He has ruled out raising income tax in the manifesto. So why doesn't he come clean and say which tax it will be?"

The Liberal Democrats said they wanted to see the state of the public finances.

The report gave little help to the Tories or Lib Dems as the £12bn of fiscal tightening - equivalent to 3.5p on the basic rate of income tax - is greater than either party is proposing.

The Labour Party said: "The Treasury has consistently disagreed with the IMF about fiscal forecasts for the UK economy. The Budget showed we will meet the fiscal rules on cautious assumptions."

- INDEPENDENT