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To the surprise of many analysts, the figure for Public sector net borrowing (PSNB) in July is considerably lower than it was last year. In 2010 the figure was £3.5Bn, massively higher than last month’s £20m. This huge reduction in borrowing is the result of higher corporation taxes, cuts in government spending and the levy on banks which in itself provided an extra £660m that month.
The total amount borrowed by the public sector this year is now £40Bn and it has been forecasted that by the end of this financial year the figure will be around £122Bn.
It has been promised by the government and Chancellor George Osborne that the UK’s deficit will be eradicated in the next four years. This is ambitious considering the deficit made up 11% of the country’s GDP last year and economic growth has been sluggish for almost a year and a lot of economists have expressed their concerns that the target will not be met.
Despite these concerns however, it cannot be denied that the PSNB figure is promising. Michael Saunders at Citi has expressed his optimism for the recovery as a result of the figures. He explained that even though the deficit is not falling at a rapid pace it is falling steadily. This is an achievement when compared to other countries that have trade deficits. He believes that the UK is the only country which has a high deficit, that is seriously on its way to becoming financially stable again.
The chief economist at the British Chambers of Commerce, David Kern, was also pleased with the result. He explained that although it is still likely that the government will not remain in its borrowing budget, it will no go over it by as much as was expected. He also explained that the plan to reduce the deficit has factored in the slow growth and deterioration of international economies.

About The Author

Lee Murphy

MAAT and ICPA accountant, with a passion for making accountancy and bookkeeping accessible. Other interests include cloud-based software development for web and mobile access, keeping fit, reading, and entrepreneurship.

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