The International Monetary Fund (IMF) has urged Britain to curb public spending as it tempered praise for Britain's "impressive" economic performance with a warning about the state of the nation's finances.

The IMF warning came as it emerged that a fall in British house prices accelerated in November to its steepest rate since the recession of the early 1990s. A survey by the Royal Institute of Chartered Surveyors found new evidence that the property market downturn is gathering pace.

The survey said that 48 per cent more of their members were reporting house price falls than rises, pushing down their seasonally adjusted house price index to -48 in the three months to November, from -40.

The fall defied economists' expectations of a stabilisation in prices and marked a new low in the balance since December 1992. At that time, the last British housing market bubble was bursting, trapping millions with a home worth less than the debt they had taken on to buy it.

The IMF predicted robust growth for the British economy next year but warned that expansion would not be as rapid as predicted by the British finance minister, Mr Gordon Brown.

The UK Treasury reacted coolly to the findings of the mission sent by the IMF to the UK this month. It noted that the IMF has in the past underestimated Britain's growth rate and exaggerated the size of the budget deficit.

Analysts believe Mr Brown may be forced to tighten fiscal policy by £10 billion (€14.5 billion), either through higher taxes or more modest spending growth.

While Mr Brown has pencilled in growth of 3-3.5 per cent next year, the IMF is expecting expansion of 2.5-2.75 per cent and is concerned about a slowdown in the housing market.

"Resolution of the widely perceived overvaluation of house prices and its implications for private consumption are major uncertainties, with the balance of risks for both activity and inflation probably on the downside.

"The macroeconomic impact of house price developments will likely remain a challenge for interest rate decisions. Our central projection of a modest decline in house prices would require little response from policy," it said.

The IMF said the UK's fiscal position had "deteriorated substantially" in recent years, and questions were emerging about "how and when the necessary correction" would take place. - (Guardian Service, Reuters)