The UK is currently embarking on one of the longest sustained periods of cuts to public-service spending since the Second World War. Government departments are entering a period of austerity, with many facing budgets far lower than what they had become accustomed to over recent years. This is commonly blamed on the financial crisis, but what actually happened?
Government borrowing, otherwise known as a budget deficit, occurs when what the government spends — on things like welfare payments and providing public services — is greater than what it gets in revenue — mainly from taxes. Total government borrowing (the difference between total spending and total revenues in any given year) has two broad components:
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