When will the UK government tackle the increasing budget deficit?
Over the last few days we have seen a number of prominent financial parties in the UK go public on their criticism of the UK government and its handling of the growing budget deficit. Currently standing at around £175 billion for the tax year 2009/10 there is every chance that this figure could actually increase over the next few months. The UK government has yet to put forward a detailed plan of action and there are concerns within the investment markets and the money markets regarding the UK credit rating in the short term.
While it is unlikely that the UK credit rating will be downgraded in the immediate future, even a suggestion that it was potentially under review for a possible downgrade would be damaging. Aside from the fact this would impact upon the investment worthiness of UK businesses and UK assets, it would also significantly increase the cost of debt and the cost of servicing debt for the UK government. When you consider UK national debt is rumoured to be around £1.5 trillion even the tiniest reduction in the credit rating would add billions of pounds to the cost of servicing the current debt pile.
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