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Reducing the deficit

As the government’s spending cuts begin to bite, Roderic Ancastle looks at the case for reducing the UK’s budget deficit

In 2010/11 the British government incurred a budget deficit of £150 billion. This excess of government spending over tax revenues amounted to 10% of gross domestic product (GDP). It is a huge percentage by peacetime standards, and the largest of any developed country. The Conservative–Liberal Democrat coalition is committed to reducing this deficit, but there is debate as to how fast it should be cut and by how much it should be reduced.

It is useful to split the deficit between the cyclical part (£70 billion) and the structural part (£80 billion), since the methods of reducing them are different.

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