Andy Burnham has been given a stark warning over spiralling debt and the burden on businesses ahead of the Budget.

IMF chief Kristalina Georgieva said Governments were failing to take 'tough' decisions needed to stabilise their books.

The intervention comes as Chancellor John Healey grapples with an increasingly bleak outlook for his fiscal package on October 28.

The OECD has downgraded growth forecasts for next year and cautioned that inflation is likely to stay stubbornly high as the Middle East crisis drags on. 

Economists warned the 'walls are closing in' on Mr Healey yesterday as figures showed Government borrowing surging.

The public sector borrowed £18.3billion last month, up around a fifth on August 2025, as rising tax revenues failed to keep pace with Labour's spending.

That was around £3billion more than expected, and £3.5billion more than the Treasury's Office for Budget Responsibility (OBR) watchdog predicted.

The Tories have been urging Mr Healey to curb benefits spending instead of heaping on more taxes, but any such move would meet intense resistance from Labour MPs.  

Some £8.8billion went on interest payments for the debt mountain, which was hovering just below £3trillion. 

Speaking to the BBC on the sidelines of the UN General Assembly in New York, Ms Georgieva said Governments needed to show 'courage'.

She said successive economic shocks had been 'pushing debt levels up like a staircase not to heaven' but there was 'no action to contain that service cost'.

The IMF managing director said: 'There are these two things that must be done: bring debt levels down, put fiscal consolidation as a priority, and make sure that the central banks deliver on their mandate for price stability.

'It is impossible to stress strongly enough how critical it is to get the courage to take the steps that are necessary. These are politically tough steps to take, but necessary steps to take.'

Ms Georgieva said the UK's position was 'not very different' from other major states, despite nervous investors driving up interest rates on borrowing.

She suggested there was 'fairly consistent action' on lowering debt, but warned Governments 'don't have the cash' to boost growth and must encourage the private sector to invest.