The Organisation for Economic Co-Operation and Development (OECD) is calling on the UK Government to take control of the UK’s spiralling debt.
The OECD also said that restoring the flow of lending to the economy is an urgent priority - even if it meant nationalising more banks.
The warning from the organisation comes as the Bank of England today reported that mortgage lending figures are at their lowest level since April 1993 - at £324 million, and a tenth of levels seen a year earlier.
In its report, the OECD said: “It is essential that the supply of new lending is not held back any longer by banks with insufficient capital to meet losses associated with past lending.”
“A slower than expected return to normal financial conditions would have a negative impact on the economy,” added the report.
Meanwhile, returning to the UK’s debt, the OECD is urging the Government to slash its spending - the UK is on target to borrow a record £175 billion this year.
The organisation is forecasting that the recession will be deeper and longer than predicting by Mr Darling, with the fallout resulting in debt of the equivalent of 90% of Gross Domestic Product (GDP) - way above Labour’s fiscal rules (now obsolete) which said that national debt would not exceed 40% of GDP.
The report concluded that the Government could do take more action to bring forward its programme of stabilising the public finances.
Finally, the OECD is forecasting that output will decline by 4.3% this year, revised upwards from its March forecast of a 3.7% fall.
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