Outline the factors which determine government deficit and


Economists were forecasting that borrowing would hold steady.

The latest figures are a setback for Chancellor George Osborne, who in March pledged to cut the budget deficit by more than 10% over the next 12 months.

Between April and September borrowing was £58bn, a rise of £5.4bn compared with the same period last year.

That is an increase of 10.3%. Last month's figures showed borrowing between April and August was 6% higher than a year earlier.

"We have seen stronger growth in receipts this month, but as today's figures show, the impact of the great recession is still being felt in our economy and the public finances," a Treasury spokesman said.

"At the same time, we have to recognise that the UK is not immune to the problems being experienced in Europe and other parts of the world economy."

Poor run Economists say the borrowing situation will limit the government's options in the run-up to next year's election. "The continued run of poor UK public borrowing figures looks set to severely hamper the chancellor's ability to announce giveaways to address his party's deficit in the nationalopinion polls before next year's general election," said Samuel Tombs, senior economist at Capital Economics. "The chancellor will be forced to acknowledge in December's Autumn Statement that the fiscal consolidation is not going to plan, limiting his scope to announce pre-election sweeteners." Weak income tax receipts are behind the rising dependence on borrowing, in the first half of the fiscal year receipts were up just 0.1% compared to the same period last year. "Income tax receipts have been held back by weak earnings growth and the fact that much of the employment growth has been in low paid jobs or in self-employment," said Howard Archer, chief UK economist at IHS Global Insight. The chancellor's move to increase the amount people can earn tax free is also depressing tax receipts. The UK Personal Allowance - the amount you can earn in the UK before having to pay any tax - has risen during the current Parliament from £6,500 to its current level of £10,000. From next April, it is due to rise to £10,500. Reacting to the borrowing figures, shadow chief secretary to the Treasury, Chris Leslie said:"These figures are a serious blow to George Osborne. Not only is he set to break his promise to balance the books by next year, but borrowing in the first half of this year is now 10% higher than the same period last year."

1. Outline the factors which determine Government deficit and debt.

2. Outline the factors which led to the rise in Government debt between September 2013 and September 2014.

3. Why is high Government borrowing a concern?

Request for Solution File

Ask an Expert for Answer!!
Microeconomics: Outline the factors which determine government deficit and
Reference No:- TGS01243139

Expected delivery within 24 Hours