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Should we be concerned about record public-sector borrowing?

This week's news that the public-sector budget deficit hit a record high in August has caused concern amongst investors and economists in the UK. However, should we be concerned about a short-term increase in public-sector borrowing or is the situation under control?

While there is a major danger of being complacent about the UK public sector budget deficit there's no need to panic as yet because government public-sector spending cuts have yet to really hit home. If six months down the line we are still seeing record budget deficits we should be concerned because spending cuts should have kicked in by then. There is speculation that the UK government will fall short of its £149 billion target for the year although really it is too soon to formulate a firm opinion.

If the UK government ever needed more ammunition to support proposed public-sector spending cuts then this week's news has been something of a godsend. Those who are fighting public-sector spending cuts have had their arguments weakened by news of the record deficit in August which surprised many people. It will be interesting to see how the rest of the year pans out with regards to the public-sector spending deficit and whether indeed the government can remain on target for its full-year forecast.

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