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Budget 2010: How will the government finance the 2010/11 budget?

The press today is obviously full of information on the budget and how this will impact businesses and consumers in the UK although there is also interesting information about the make-up of the UK budget for 2010/11. So where will the £704 billion needed for government spending come from?

By far and away the largest income stream will be income tax which will bring in £146 billion, national insurance will bring in £97 billion, VAT £78 billion with excise duty, corporation tax, council tax, business rates and other income streams also chipping in their fair share. However, despite the fact that the government has promised to bring down national debt there will be a huge £163 billion shortfall for the 2010/11 tax year which will be funded by debt.

At a time when UK consumers, UK businesses and investors are crying out for a viable debt reduction plan it seems that UK debt will continue to rise for the foreseeable future. There is no way that the UK can support such debt increases in the short to medium term and despite Alistair Darling's insistence that public sector investment will continue, and indeed increase by £30 billion this year, this is likely to change after the election, no matter which party is in power.

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