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Government borrowing undershoots target for the year

Despite the fact that £23.5 billion was borrowed just last month by the government, the highest figure since the end of the second world war, total government borrowing for the fiscal year 2009/10 came in at £163 billion which is less than the £167 billion forecast in last month's budget. So what does the future hold for the UK government and the UK budget deficit?

There's no doubt that the deficit needs to be severely reduced in the short to medium term otherwise the strain on UK government finances will intensify. There's also the risk that credit rating agencies will again review the UK's AAA rating and potential look to downgrade in the medium term. Even though the government has promised to half the deficit within four years, even £80 billion a year will continue to pile more debt and more pressure on UK finances.

Whichever government wins office at the next election there is no doubt that this is something of a poisoned chalice with the next government having to do the hard work and make painful decisions before the next election. Is this really an election which David Cameron wants to win? Would a Conservative win see them jettisoned at the next election after taking many difficult but necessary decisions?

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