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Budget deficit of UK

All achievements of the UK reached by a right policy of Gorge Osborne - stable GDP growth, fall of unemployment, and growth of wages - take away attention from the current important problem. It is a budget deficit. In the nearest future the volume of budget deficit may exceed even the most positive forecasts.


This problem is rather politic than financial. However, it doesn't mean that financial markets may exclude this risk from their attention. In comparison with budget deficits of the Eurozone countries, the UK budget deficit takes the fifth place at its 5.7% of GDP.


This Wednesday released data showed that borrowings were cut by 13.9% in the last two quarters against the same period in 2014. Current volume of borrowings is £46.3 billion. The government forecasted a fall by 22.9%.


As can be seen, financial data are unstable. The data may be periodically revised and fluctuations of changes may be very sharp. However, final volume of budget deficit for a fiscal year may be at £78 billion. It is by £8 billion more than it is forecasted.


Favourable factor is paces of tax revenues in budget, which became even higher than expected. Additional driver here is a high rate of taxes from corporations. Period of low interest rates and inflation gives opportunity to cut public spending on obligation rate payment. However, at this time budget spending became higher than expected on the background of the slow UK economy.


Chancellor of the Exchequer aims to reform a social sphere and provide with a new budget plan in a month. On this background budget deficit may break the whole picture even if its excess is not so significant.