Chancellor Jeremy Hunt has been warned he will need to hike taxes to balance the books and avoid public debt getting out of control.
The International Monetary Fund (IMF) has said Governments will need to bring down their spending or increase taxes as high interest rates make borrowing expensive.
The group said: “Faced with myriad spending pressures, political red lines limiting taxation, at an insufficient level, translate directly into larger deficits that push debt to ever-rising heights.
“Something must give to balance the fiscal equation. Policy ambitions may be scaled down or political red lines on taxation moved if financial stability is to prevail.”
The group said the UK Government is not on course to meet its target of bringing down borrowing to three percent of GDP by 2028.
Analysts also predicted debt interest payments will soon likely account for around half of the UK’s borrowing.
The IMF has also warned growing public debt across the world could reach the size of the entire global economy.
The market experts said the US and China are driving increased global debt while other “large and rich” countries are struggling to control their debt.
The IMF said in its latest report: “While immediate financial pressures are absent, the perpetuation of current policies entails an unsustainable fiscal path. For all countries, it is becoming hard to balance public finances.”
Analysis from the Institute for Fiscal Studies (IFS) has predicted taxes will continue to rise with the average household paying an extra £3,500 a year in 2024, compared to 2019 levels.
Ben Zaranko, senior research economist at the IFS, said: “It is inconceivable that this parliament will turn out to be anything other than a tax-raising one – and it looks nailed on to be the biggest tax-raising parliament since at least the Second World War.
“This is not, for the most part, a direct consequence of the pandemic. Rather, it reflects decisions to increase government spending, in part driven by demographic change, pressures on the health service, and some unwinding of austerity.
“It is likely that this parliament will mark a decisive and permanent shift to a higher-tax economy.”
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