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Public sector borrowing less than expected

Public-sector borrowings for July were less than expected as the UK government benefited from an increase in corporation tax receipts. The net borrowing figure for July came in at £3.8 billion against a forecast of £5.25 billion and compares favourably to the £6.1 billion of net borrowings in the same month last year. So what does this mean for the UK government?

While there is no doubt that we will see further cuts in the public-sector budget there is also no doubt that public-sector borrowing is under shooting current forecasts. So far this financial year the government has borrowed £44.9 billion against £47.5 billion at the same stage last year, a welcome improvement considering the economic backdrop. If, and this is a big if, borrowings were to continue at the same rate for the remainder of the 2010/11 tax year they would be significantly less than the current forecast of £149 billion. But this is no time to become complacent!

If the UK government was to take time out to "pat itself on the back" the situation could very quickly turn around again. The truth is that a focused approach will be required for many years to come and there are still a number of very difficult and potentially unpopular decisions to be made. If you were looking at the current progress as a "school report" you would likely read that good progress has been made but "could do better".

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