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Summer Budget: Debt reduction plan slows

Date: 08 July 2015   |   Author: Rupert Saunders

The Chancellor of the Exchequer in his Summer Budget revealed a significant slowdown in the rate at which the UK's national debt will be reduced.

The surprise came move came despite extra income forecast from additional tax revenues, government departmental savings and the sales of state-owned assets such as bank shares.

The Chancellor told parliament that the deficit would be cut "at the same pace as during the last government" but then went on to say the country would not move to a budget surplus until 2019/20; one year later than forecast back in March before the General Election.

The forecast is based on a 2.4% GDP growth rate this year (down by 0.1% from the figure given in March) and then 2.3% in 2016, rising to 2.4% for the next three years.

The deficit rate is still falling; government borrowing is forecast to be down this year to £69.5bn and then £43.1bn in 2016 and 24.3bn in 2017.

But this is a much slower rate of reduction than given in March when the 2016 borrowing figure was £39.4bn and the 2017 figure was £12.8bn. A surplus of £10bn will not be achieved until 2019.

The figures suggest the government is holding some cash back to reduce its austerity measures and boost economic activity.