Building the deficit mountain

What is the deficit? This is what the government has to borrow each year to cover spending. This is different to its net debt, which is the accumulated total amount Britain owes. The annual deficit has shot up as the economy has collapsed into recession. This shows how it has built up - and how Alistair Darling’s plans could bring it down

£178bn
deficit

2009/10

Chipping away at the mountain
£3.5bn Increase in National Insurance £0.6bn Bank payroll tax

National debts
As a % of GDP, 2010

102.1% 69.3%

106.6%

56.9% 32.6%

57.0%

65.0%

£29.6bn Decline in borrowing as economy recovers

Canada

Germany

France

UK

US

Italy

Japan

How Treasury predictions have changed
Projections of GDP growth for 2009
2007 PBR 2008 Budget

£4.2bn Do not renew temporary current spending policies £4.2bn Do not renew temporary stimulus to investment spending £8.5bn Reverse temporary VAT cut £2.8bn Reverse other temporary tax changes

+2.75%

+2.5%

2008 PBR

-1.0%
2009 Budget

£5.6bn Revenues from new taxes on high income individuals £1.4bn Revenues from higher rates of fuel duties £2.8bn Revenues from higher NICs charged to above-average earners

-3.5%

2009 PBR

-4.75%

£21.2bn Proposed reduction in current spending

£14.1bn Proposed reduction in investment spending

2013/14 2008/09 deficit

£96bn £88.1bn

target deficit

£14.1bn Further decline in borrowing as economy returns to trend level of activity

2014/15

£82bn

target deficit

£45.1bn Additional fiscal tightening (higher taxes or lower current spending)
Numbers are based on estimates of the effect of each measure on the deficit. Totals do not take account of other measures which may increase the deficit

2007/08 2006/07 deficit

£30.9bn
The amount added to the national debt in the financial year

£34.5bn
deficit
Including £25bn bailout of Northern rock Including £42bn nationalisation of Bradford and Bingley, £20bn and £25.5bn bailouts of RBS and £17bn bailout of Lloyds/HBOS Including £3.2bn in tax changes, £4.9bn in one-off payments to pensioners and families with children, £4.8bn investment in public services, £6bn bailout of Lloyds and £32bn bailout of RBS

£26.8bn
target deficit

2017/18

2006/07

2007/08

2008/09

2009/10

2010/11

2011/12

2012/13

2013/14

2014/15

2015/16

2016/17

2017/18
SOURCE: IFS, OECD, PRE-BUDGET REPORT