Policy paper

2010 to 2015 government policy: deficit reduction

Updated 8 May 2015

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

This is a copy of a document that stated a policy of the 2010 to 2015 Conservative and Liberal Democrat coalition government. The previous URL of this page was https://www.gov.uk/government/policies/reducing-the-deficit-and-rebalancing-the-economy Current policies can be found at the GOV.UK policies list.

Issue

The financial crisis of 2008 and 2009 exposed an unstable and unbalanced model of economic growth in the UK, which was based on unsustainable levels of public and private sector borrowing.

Rebalancing the economy is not about trading the success of one sector for another. It’s about spreading our success more evenly - both geographically and by sector - and supporting the world class industries we already have, as well as the new ones that we’re developing.

By reducing the deficit (the gap between what we spend and what we raise in taxes), we will put the public finances on a sustainable path again and help achieve balanced economic growth - helping keep interest payments lower for families, businesses and the taxpayer - meaning more jobs and greater prosperity.

Actions

We are taking the following actions to reduce the deficit:

  • the Chancellor has set out tax and spending plans to 2015 to 2016, including action to drive out further efficiencies and to ensure that welfare remains affordable
  • Spending Round 2013 announced how £11.5 billion of savings will be made from day-to-day departmental spending in 2015 to 2016
  • at Autumn Statement 2013, we announced that government departmental budgets for 2014 to 2015 and 2015 to 2016 will be reduced by an additional 1.1%, not including protected departments, local government, security and intelligence agencies and HMRC
  • by 2015 to 2016, the cost of running Whitehall departments will have been reduced by around 40 per cent compared to 2010
  • at Autumn Statement 2013 we announced a review into the way the government manages its debt including using surpluses in good years to help reduce it

To rebalance the economy:

Read more about what we are doing to achieve strong and sustainable economic growth, including how we are encouraging businesses to invest and increasing access to finance.

Background

According to the IMF, by 2007 the UK had the largest structural deficit of any G7 economy. As tax receipts decreased, the gap between spending and revenue widened and public spending had risen to around 47% of GDP by the financial year 2009 to 10.