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Is the chancellor staring into a £20bn public finance black hole?

It is hard to believe that the Budget is only a few weeks away, but it is indeed upon us, and despite recent growth figures looking good for the chancellor – a big headache could be just around the corner.

That is if research conducted by the Financial Times is correct and the chancellor is, in fact, staring into a £20bn black hole in public finances, which means austerity may have to last a year longer because the government would not be able to rely on economic recovery to eliminate part of the deficit.

Based on analysis of Office for Budget Responsibility models, the FT has identified the potential ‘black hole’ by focusing on the difference between the actual deficit, which is on course to be around £111bn in 2013-14, and the cyclically adjusted deficit, due to be £85bn this financial year.

If the estimates are correct, the chancellor may have to implement even more spending cuts (rather than tax increases) to eliminate the remainder of the budget deficit.

So it could mean even harder times ahead for those working in local government and across the public services – despite already being hard-pressed. It also means that whoever wins next year’s general election could – after coming through the rigours of campaigning, mud-slinging and of course debate –  be stuck with a real political ‘hot potato’ to deal with from the off.

(Image copyright: Press Association)

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