They may have been quiet for a while, but the International Monetary Fund (IMF) have now stepped in to deliver a highly critical verdict on the current UK economy, outlook and the problems which lie ahead. While in the recent budget the chancellor stood up and claimed that the UK was well positioned to fight the ongoing credit crunch, and we would not fall into recession, the IMF have delivered a stark counter to those claims.

The UK government have been shown as severely over optimistic with their forecast of growth for 2008 quoted at over 2%, while the IMF believe that the UK economy will only grow by 1.6% this year – so what does it all mean, and will it impact upon everyday life in the UK?

Apart from the fact that a slowing economy will mean less jobs, more unemployment and more strain on the benefits system, if the IMF are correct in their calculations then that will leave a black hole of some £3 billion in the government’s spending plans. This figure is expected to widen to between £6 billion and £7 billion in 2009/10, leaving Gordon Brown in a mess as he approaches the next election. So what can the government do?

Time and time again the government have had the opportunity to try to tackle the worsening position head on, but each time they have buried their heads in the sand. Firstly we need the government to take off their political cap and admit that the UK economy is set to slow sharply over the next couple of years, roll up their sleeves and try to soften the blow as much as possible. Voters would rather they cut back ambitious spending plans now rather than find they have no choice in 12 months time, at which point people have begun to depend on these spending plans. Like King Canute, Gordon Brown and his advisers are trying to hold back the sea knowing that at some time it will surround and engulf them. So how will these funding plans be funded in the event of falling tax revenues?

While the UK authorities have for some time been very vocal in their belief of strong fiscal controls and systems, it seems that slowly but surely these will be loosened as the Treasury are forced to take on more and more debt to fund ambitious funding plans. This will see more and more future tax income used to pay the interest on mounting debts, leaving less and less to spend on public services and the like. As and when the worldwide economy starts to pick up this will mean that the UK is not in a position of strength and we could see other countries power past us, snatching more and more business. It is a very tricky situation…..

It would be wrong to pile all of the blame onto the UK government, who have been as much a victim of circumstance as anything else, but they did not make sufficient provisions in the good times to cover the lean. Out of control spending on public services has left very little in the Treasury pot, at a time when it has never been more vital.