How will UK prosperity affect the UK budget deficit?
In the excitement of today's news that UK economic growth in the final quarter of 2009 was better than expected, it is easy to forget that the UK budget deficit for this current tax year will be in excess of £170 billion. When you also consider that the UK national debt now stands at over £1 trillion and consumer debt is in excess of £1.5 trillion it is obvious that there is still much work to be done with regards to UK finances. So how will UK prosperity affect the UK budget deficit?
Once the improvement in the UK economy touches all areas of consumer and business finance we will see an increase in tax income for the government, a reduction in benefits payments and ultimately the UK budget deficit will start to fall, albeit fairly slowly initially. It will take more time for the UK national debt to be paid off as the government will need to push through tax rises to bring in the additional income required over and above UK budget requirements.
Many experts believe it could take decades to get the UK national finances back on an even keel although the UK budget deficit will obviously be reduced significantly in a shorter time frame. But those who believe that a return to economic growth in the UK will immediately lead to an improvement in national finances should think again.
Share this..
Related stories
Investigation into Flyglobespan collapse
The Scottish government has today announced an investigation into the collapse of Scotland's largest airline company, Flyglobespan. The company collapsed last week after last-minute rescue talks failed and the group had no alternative but to call in the administrators. Over 500 staff lost their jobs at the company and thousands of holidaymakers were left stranded overseas, many of them unprotected...
Read MoreIs the Bank of England about to spoil the economic party?
The Bank of England is this week expected to pour cold water on hopes that the UK economy is on the verge of a significant recovery. Despite politicians attempting to talk up the economy at any opportunity it seems the Bank of England is set to reduce growth forecasts of 2009 and 2010 and question the strength and vulnerability of the "ongoing economic recovery".
This could not have...
How will the UK economy perform in 2010?
As we move towards the final few days of 2009 all eyes are starting to move towards 2010 and the prospects for the UK economy. This is an economy which only two years ago was flying high and one of the leaders in the world but has now fallen by the wayside and is lagging countries such as Denmark. So what exactly can we expect from the UK economy in 2010? Whichever political party wins the next...
Read MoreToxic assets and their impact
While in theory many people may believe that toxic assets are just a short-term problem which will "go away" in due course, they could be in for a serious shock. In real life this is very much different because these toxic assets in many cases have formed the asset base of leading UK banks and financial institutions, which has allowed them to borrow more and more finance at better rates.
Will China mark the end of the worldwide recession?
While all eyes have been on the US economy as the bellwether of the worldwide economy, many people have failed to appreciate and monitor the Chinese economy which has of late become as important to the worldwide economy as the US. China has seen many changes over the last 20 years and has become more a part of the worldwide trade market than at any other time in its history. As a consequence, the...
Read More