![Pinterest](https://pinterest.com/pin/create/button/?url=https://uknews.evprotec.com/why-does-the-government-want-to-cut-spending/&media=https://uknews.evprotec.com/wp-content/uploads/2022/11/127590816_gettyimages-1346974228-1.jpg&description=Image source, Getty ImagesFrom nurses' salaries to school supplies and state pensions, over £1 trillion will be spent on public services and investment this year. Government spending has only been entirely matched by money raised from taxes in six of the last 50 years. It is more typical to have an annual shortfall averaging about 3% of the money the UK economy makes per year.But this is not the infamous "black hole", which refers to a future sum shaped by the government's own target.The government can raise enough money to fund its spending by borrowing on financial markets via bonds, which are essentially IOUs. To borrow at relatively low rates, it needs to persuade investors that it's a good bet.So markets expect governments to draw up and meet rules about how much they should borrow and how that debt is managed, to prove that they are financially responsible.We won't know the government's exact target until the Autumn Statement on Thursday. But it has indicated, as is fairly standard, that it will bring down the size of the debt - the sum of all our outstanding annual deficits - relative to our national income, in the medium term (typically, five years).It's the extra money the government needs to find to meet that self-imposed target in the future that's been labelled the black hole.Covid-related support packages pushed government borrowing to its highest level since the end of World War Two. Now the cost of help for energy bills and tax cuts has raised fresh concerns about debt.Much depends on how the economy fares but the independent Institute for Fiscal Studies (IFS) reckoned that, after September's tax-slashing mini-budget, over £60bn may be needed in 2027 just to stabilise the size of debt relative to national income.Many of September's tax cuts have since been reversed, but some economists still predict the government may have to find tens of billions of pounds by 2027 if it imposes such a target. The figure is uncertain, it will depend on the measures in){kind=link}
From nurses’ salaries to school supplies and state pensions, over £1 trillion will be spent on public services and investment this year.
Government spending has only been entirely matched by money raised from taxes in six of the last 50 years.
It is more typical to have an annual shortfall averaging about 3% of the money the UK economy makes per year.
But this is not the infamous “black hole”, which refers to a future sum shaped by the government’s own target.
Let me explain.