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Are we seeing a cutback in the UK government budget?

Amid reports that the UK government is in discussions with defence and finance ministry officials regarding the Eurofighter defence contract, it appears as though we are entering a period of budget cutbacks. Despite a number of suggestions to the contrary in the House of Commons as the UK budget was presented, it appears as though a number of public sector projects may well be under review.

There are sizeable cancellation fees attached to the Eurofighter project and the government is currently considering whether to take the cancellation fees now and delay the project until funding is available. This is only the first of a number of expected significant cutbacks in UK government spending as the purse strings are pulled tighter by the Treasury and Alistair Darling in a significant cutback in defence spending and others areas of the public sector.

While the authorities dare not reduce the NHS budget there have been moves to find "annual savings" in the civil service which are effectively cutbacks in all but name. It will be interesting to see how these project cancellations and delays are presented in House of Commons and what impact they actually have on the government budget in the short to medium term.

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