The IMF has warned the British government it must make savage cuts in NHS spending and carry out pension ‘reforms’ to cut its debt to the banks.
The IMF said NHS ‘reforms’ would be necessary to ‘help keep a lid on the debt’ and restore financial stability.
The public demand made at a press conference in Turkey on Thursday brought back memories of the Callaghan government when the then Chancellor Healy went to the IMF in the face of the collapse of the pound and was forced to announce the NHS cuts in 1976.
Oliver Blanchard, IMF Economic Counsellor and Director of the Research Department, told the Istanbul press conference at a joint annual meeting with the World Bank that the next UK government will ‘have to take measures that improve the medium-term debt outlook’.
The IMF estimated that by next year Britain’s debt will represent 81.7 per cent of GDP.
Even with the Labour government’s planned cuts and tax increases, it predicted a figure of 98.3 per cent of GDP by 2014.
Blanchard said there has to be ‘reforms of the retirement system’ and ‘reform of the healthcare system.
‘These reforms have basically to be confronted. The idea of just us going to put fiscal rules and not do these reforms, is a joke.’
He stressed that ‘fundamentally, some structural reforms are needed’.
The IMF said that pensions reform should lead to a rise in the national retirement age from 65.
The IMF warned that UK unemployment will continue to rise from 7.6 per cent of the workforce this year to 9.3 per cent next year. That would see three million without jobs.
The IMF diktat came as stock markets continued to slide in the face of slowing manufacturing output and high unemployment figures.
In London yesterday the FTSE 100 index fell below the 5,000 level, adding to big losses on Thursday.
The FTSE 100 was down over 65 points at 4,982.72 by mid-afternoon, having fallen by 86 points on Thursday.
Banks were among the main fallers, with RBS down 3.9% and Lloyds 3.4% lower.
US stock prices fell on Thursday with the Dow Jones index ending down 203 points at 9,509 points, its biggest day fall since 2 July.
Japan’s Nikkei index slumped 2.47 per cent, hitting a new two-month low, over worries about the impact of the stronger yen on exporters.
In Paris yesterday, the CAC 40 index slid 1.18 per cent and Frankfurt’s DAX dipped 0.69 per cent.
Among the Euro member states, the jobless rate was highest in Spain, with a rate of 18.9%, and Latvia, with a rate of 18.3%.