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Budget 2011: Osborne to admit borrowing rise

by: IFAonline
  • 22/03/2011
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Budget 2011: Osborne to admit borrowing rise
The “wrong kind of inflation” will mean the government has to borrow significantly more over the medium term than planned, George Osborne will be forced to admit in the Budget.

A deterioration in the medium-term government borrowing numbers – in spite of a lower deficit than forecast in November – will cast a shadow over Osborne’s deficit reduction programme, the Financial Times reports.

Britons are suffering their biggest drop in living standards since the 1970s, according to a new report by the Institute for Fiscal Studies (IFS).

The study flags up the fragility of the UK’s economy as it struggles out of the deepest recession since the 1930s.

Inflation is normally thought to boost public finances because rapid earnings and prices growth raises revenues from income tax, national insurance and value added tax without similar effects on public spending.

However, in the Budget forecasts, higher inflation that is hitting household incomes is also set to squeeze government finances.

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