The International Monetary Fund is set to warn Britain that public spending must be brought under control.
The warning comes in its twice-yearly World Economic Outlook, which also states Britain's housing market is vulnerable to further increases in interest rates.
However, the IMF praises the robustness of the British economy and raises its forecast of economic growth for this year and next.
But there is a "critical need" for "restraint of public spending" because Britain's budget deficit has ballooned to a larger proportion of national wealth than in the United States.
It says borrowing costs may have to rise again following last month's interest rate increase to 4.75%, and that a tighter policy from the Bank of England poses a risk to the property market.
The Washington-based organisation says fears about the cooling housing market in the US are spreading to other countries such as Britain, Ireland and Spain. It claims British houses prices are overvalued "by most conventional measures."
But it has reduced the severity of its warnings, stating house price softening in countries like the UK and Australia had been absorbed with "relatively mild and brief economic slowdowns."
Fears were also voiced about the level of private savings in the UK because of the "considerably less generous" state pension compared to other EU countries.
The Financial Times reports Gordon Brown has pencilled in public expenditure growth of 1.9% above inflation in his March budget, a figure below the expected rate of economic growth, meaning it would lead to a fall in public expenditure as a share of national income. In 2006 the figure peaked at 43.1%.
If the Chancellor decides to stick to his 1.9% in real terms growth in public expenditure it could herald tough decisions in public services. Health and education services, which have been used to growth rates of roughly 7% a year, would face intense pressure to keep costs down.
