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UK budget deficit under extreme pressure

The revelation that the UK government had to borrow £16.1 billion to balance the books in August has caught many analysts and economists offguard. This figure is 63% higher than the same period last year and is in fact the largest shortfall since records began back in 1993. Since the beginning of the new tax year the UK government has borrowed in excess of £65 billion compared to only £26 billion for the same period last year. The situation is now worsening and many expect the budget deficit to increase before it gets any better.

This comes against a backdrop of Gordon Brown's promise to retain frontline public service investment despite the fact that the UK may well have been declared bankrupt if it was a company. This year's budget deficit is expected to top £175 billion pounds and could in fact move higher in the short to medium term. As a consequence, the pressure on the UK government to reduce spending and increase taxes is starting to grow even though the unions are adamant that expenditure on public services will not be reduced.

The next budget should be very interesting and will no doubt contain the obligatory blue sky scenario even though many people believe there are rain clouds in the background.

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