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    By Paul Joseph WatsonThe UK is heading towards a cash-displacement crisis as a cash shortage drives up demand for goods and services, a recent study has revealed.

    In a new report, the Institute for Fiscal Studies (IFS) said that the UK’s fiscal position could be in “very deep trouble” as the government struggles to provide adequate resources for a large number of public services.

    The UK’s budget deficit will hit 1.6 per cent of GDP in the current financial year, compared with a projected deficit of 2.2 per cent in 2021-22, the IFS warned, pointing out that the deficit will rise to 2.7 per cent this year and 3.1 per cent by 2021-23.

    The report also said that, as the cost of living increases, the UK economy will become “disadvantaged by a combination of rising inflation and the cost-of-living pressures of living in an ageing population”.

    If we are to get back to a sustainable long-term economic recovery, the IMF said the UK will need to boost spending on services to the level of the OECD average, and that it would be a mistake to ignore the needs of the public finances.

    If we’re serious about recovery, we should look at spending as an investment in our long-run prosperity, said IFS director Simon Burnton.

    This means we should spend more on the social services that are essential for the health, education and safety of our citizens.

    The institute’s economists found that, if the UK had a national debt of €500bn, it would have a “tremendous fiscal deficit” of around 1.7pc of GDP.

    “The country’s current fiscal position is very bad, with a fiscal deficit of around €500 billion, and this is only a small part of the problem,” said Burnton in a statement.

    “It would be the worst financial crisis Britain has seen since the 2008 financial crash, and it is very difficult to get it back to normal.”

    The UK government is struggling to provide sufficient funding to the NHS and public services, which have been hit by rising demand for services. 

    “The impact of the cost pressure on the public purse is exacerbated by the high cost of social security,” the IFSC said.

    “The government is now facing a fiscal gap of over €400bn.” 

    “For all its challenges, the NHS is not in dire straits.

    But its financial position is likely to deteriorate further if the costs of providing services continue to rise,” the report added.

    The country has been struggling to avoid a cash crunch, which is due to the government’s failure to meet its commitments to pay its debts, and to pay for its public services in the event of a financial meltdown. 

    The IFS found that the government will have to borrow about £7bn more this year to fund its spending commitments, with further borrowing required to pay back the loans already taken out.

    “This will leave the government with a cash deficit of £2.5bn,” the IFS said. 

    This is the first time in history that a country’s debt is now approaching the debt-to-GDP ratio.

    It comes just a month after the IMF released a report showing that debt levels in the UK have risen from their pre-financial crisis level of 120pc of gross domestic product (GDP) to 140pc of that in 2020-21.

    The IHS said the latest IFS study was the first to examine the impact of a cash surplus. 

    Its analysis of the UK government’s financial position suggests that the country could face a cash shortfall of 1.8pc of the GDP by 2021.

    “We are not just talking about a small shortfall, we’re talking about an increase of the current deficit to over 2pc of GDP by 2021,” Burnton said.

    The IMF’s latest report comes as Britain’s parliament prepares to vote on the Government’s latest fiscal plans, which are expected to be passed in the coming weeks.