Saturday, May 22, 2010

Annual Budget Deficit Improves

After all the discussion of government borrowing this week, it is interesting to note the office of National Statistics have reported government borrowing is not as bad as feared.

The annual deficit predicted, by budget was £163bn (12% of GDP and worse than Greece). However Britain’s deficit last year (2009/10) was actually £145bn – just over 10pc of GDP.

Tax receipts were better than expected, helped by an improvement in economic growth, and bank profitability.

A budget deficit of 10% of GDP is hardly cause to be smug. It is still a record peace time deficit. But, it does make the UK's situation better. It also shows:

  • The importance of economic growth in reducing deficit.
  • The difficult of predicting government borrowing, especially during recessions.
  • This may be a sign that the borrowing is more cyclical than previously thought.

No comments: