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Is the UK government supporting the economy?

Today's revelation that UK government finances were far worse than expected in October has forced many analysts and researchers back to the drawing board. City experts had been expecting a £7.1 billion deficit in government finances for October but the figure came in at £11.4 billion. This would suggest that not only are public services and debt financing causing more heartache for the government but that tax income has yet to show any signs of recovery.

As a consequence, there is a growing feeling that the money being pumped into the UK economy is effectively supporting the economy in the short term and when this ends we could see a marked falloff in economic activity. October has traditionally been a very strong one for taxes but this October has been very different from any other and the government is still struggling to balance the books. As a consequence we should see an increase in the £175 billion budget deficit forecast for 2009, sooner rather than later.

This is possibly the worst case scenario the UK government could have anticipated just weeks before going to the polls in what could be one of the most controversial general elections in living history.

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