Britain’s government met its deficit reduction target for the financial year just ended – but only just – and the figures that have been released show an enormous task ahead.
Finance minister George Osborne’s top priority is eliminating the huge budget deficit created during the financial crisis.
But long-term targets are looking increasingly hard to meet with the UK economy close to tipping back into recession.
The Office for National Statistics said on Tuesday that the government’s preferred measure, public sector net borrowing excluding financial sector interventions, fell to 8.30 percent of GDP in 2011/12 from 9.27 percent in 2010/11.
“We have very low interest rates in an environment where many European countries have higher interest rates. That’s a reflection of the market confidence in the UK’s debt reduction plan,” finance minister George Osborne told parliament on Tuesday.
But an uncertain growth outlook, as the euro zone debt crisis threatens Britain’s biggest trading partner, could yet derail the government’s attempts to reduce a deficit that exceeded 11 percent of GDP when it came to power.
“They are making gradual progress in reducing the deficit,” said Ross Walker, an economist at Royal Bank of Scotland.
“It’s going to get more difficult in subsequent years … we haven’t really had any significant current expenditure cuts.”