Economics weekly by Lloyds TSB

The focus of the new coalition government – the first in over 70 years – has been made crystal clear: lowering the budget deficit and reversing the rise in debt. Budget deficit is focus of new UK government

The focus of the new coalition government – the first in over 70 years – has been made crystal clear: lowering the budget deficit and reversing the rise in debt. The parties agreed that tackling the deficit is the best way to ensure economic recovery, so there needs to be: ‘a significantly accelerated reduction in the structural deficit over the course of a Parliament with the main burden of deficit reduction borne by reduced spending rather than increased taxes’. This clearly lays out the new government’s position on this. We estimate that the structural budget deficit is around £70bn, see chart c. With an 80:20 split for reducing the deficit in favour of spending to tax, this suggests total spending cuts over the next five years of £56bn and additional tax rises of £14bn.

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