UK Cuts Spending As IMF Forecasts GDP Fall

There's a grim warning today of a possible new global recession - with the UK in the forefront of the crash.

The fears emerged after the International Monetary Fund (IMF) slashed the UK's growth forecast and warned that the world's economy was entering a "dangerous new phase".

The grim warning prompted renewed calls for a change of direction over the coalition government's spending cuts, but ministers last night insisted that they "remain committed" to their hard-line approach to tackle borrowing.

It has also emerged that European debt worries also rose this week when Italy had its credit rating downgraded by the Standard and Poor's agency amid concern over its ability to pay off its massive borrowings.

According to the IMF, the UK will see gross domestic product (GDP) grow by just 1.1% in 2011, according to their latest World Economic Outlook, compared with 1.7% in April.

It is now also predicted to grow by 1.6% in 2012, compared with 2.3% in previous forecasts.

It also emerged today that the UK Government has already started austerity measures by cutting more than £3.3bn pounds off Scotland's budget as part of its cutbacks.

Scotland's SNP-led government is therefore anticipating a spending shortfall that will have to be met in its first budget since the Scottish National Party's landslide election win.

It is expected to announce that spending will be frozen across all departments except health.

It will also outline how it's going to pay for its plans to freeze council tax for the next five years and protect Scottish students against higher education tuition fees, which currently they don't have to pay at all, while road building, the new tramline in Edinburgh and other projects look set for being shelved or delayed.

(BMcC/GK)