Politics: Tax Growth Helped Deficit Cuts

The coalition is 1 year into its 5 year deficit reduction plan.

The coalition is 1 year into its 5 year deficit reduction plan.

In September, tax growth and flat spending helped the government cut its borrowing and put it on track to meet its targets for reducing the target.

Though the government is on track halfway through the financial year, the weakening economy means outlooks for the second half are much darker.

Budget deficit

The coalition government’s most important platform is the elimination of budget deficit in the next five years.

However, this policy will be put to the test this year as the global economic crisis means recovery is not taking place as fast as expected.

Many critics say that austerity measures are not the way to get the economy up and running again, and that strict budget guidelines means the government has not left itself room to prop up the struggling economy.

According to the Office for National Stastics, the public sector net borrowing – excluding public sector interventions – fell to 14.138 billion pounds last month from September 2010’s figure of 15.411 pounds.

Economists say that these ONS figures are welcome news for George Osborne and other politicans concerned with cutting government spending.

However, the economy remains frail and companies continue to announce job cuts by the thousands.

‘Major battle’

Experts predict that Osborne will have a “major battle” on his hands throughout the second half of the financial year to keep his deficit reductions on target.

Currently, the government is one year into a five-year budget deficit elimination plan. Before the current government came to power in May 2010, the UK’s budget deficit totalled over 10% of its gross domestic product (GDP).

Other figures show that tax rose by 5%, which is largely in line with inflation, while government spending rose at a lower pace.

The government has set its goal for this fiscal year at lowing the deficit to 122 billion pounds, or 7.9% of GDP. That would take it down from 137.067 billion pounds, or 9.31% of GDP, for the fiscal year that ended in April 2011.

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