However, doubts remain over whether Chancellor George Osborne can meet his reduction goal this year, amid weaker-than-forecast growth and resistance to the cuts from the unions. In the first two months of 2011, the deficit widened by £1.5 bn from a year earlier to 27.4 billion pounds.
"That still leaves progress during the full year so far as disappointing," said Investec economist Philip Shaw. It's early days, but we would be hoping to see more positive effects of the spending cuts coming through in the figures."
The Government is one year into a five-year plan to largely eliminate the country's budget deficit. However, the opposition has accused the government of trying to reduce the deficit too quickly, thereby hurting the country's fragile economic recovery.
However, Prime Minister David Cameron’s response to Labour’s calls to slow the pace cuts was that their “plan B would stand for bankruptcy.”
But Mr Cameron’s insistence on keeping to the Government’s plan, which will squeeze the public sector, is setting him on a collision course with the unions. Around 750,000 public-sector workers are set to take part in a national strike on June 30 to protest against government plans to curb their pension rights.
The independent Office for Budget Responsibility forecasts that public borrowing, excluding financial sector interventions, will total £122 bn during the current 2011/12 tax year, more than £20 bn lower than the £143.189 bn borrowed in the previous year. This is equivalent to a budget deficit of 9.58 per cent of GDP, down from 11.13 per cent in 2009/10.
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