How can the government pay back the budget deficit?
As suggestions that this year's UK budget deficit will reach £50 billion and next year will be in the region of around £100 billion continued to swirl around the City many people may be wondering how on earth the UK government will be able to repay these borrowings. A possible total of £150 billion is no small figure although the repayment process is maybe a little more straightforward than many would assume.
The ongoing budget deficit is actually being used to fund a massive investment into the UK economy, UK industry and the money markets. This money is being invested in order to obtain a longer term return which will be presented to the government in the form of increased taxation receipts as and when the economy picks up. Those who assume that the £150 billion investment plan will never be repaid are sadly mistaken.
The required increase in government income will only come into play as and when the economy starts to grow again and the economy requires this additional investment in order to increase business activity - which will then translate into higher personal and corporate taxation receipts for the government. However, this sounds very simple in principle but is a lot more difficult in practice.
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