By Jason Theodorou

Britain needs to step up plans to reduce the budget deficit, according to a leading credit rating agency. As a result the pound has fallen by 1% against the dollar, extending a year long decline which has reached 11% at this stage.

Fitch Ratings analysts said in their report: ‘The scale of the UK’s challenge is formidable, and warrants a strong medium-term consolidation strategy, including a faster pace of deficit reduction than set out in the April 2010 budget’.

Fitch Ratings said that the budget needed to be reduced at a faster pace than announced by the Labour government. The report is released as Prime Minister David Cameron announces that interest payments on UK debt could reach a ‘staggering’ 70 billion pounds in five years.

The Treasury saw the Fitch report as a green light for its policy of increasing spending cuts. A spokesman said: ‘Fitch's report makes the case clearly for an acceleration of deficit reduction, particularly in light of events in the euro-area sovereign debt market in recent months’.

Credit rankings in countries such as Spain and Greece have
been cut, with growing fears that widening budget deficits could get in the way of growth.

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