 Poor Alistair: This year the government is spending so much more than it's earning that he has to borrow 175 billion pounds. He's promised he will halve that in the next four years. He could cut spending, but the cuts would have to be enormous. The equivalent of one year�s education budget or 3/4 of the entire health budget. He could raise taxes but he would have to almost double the basic rate of income tax to make up the 87.5 billion pounds he�s looking for. But there�s some good news for him. He doesn�t have to cut all the deficit straight away and if the economy recovers in the next few years he could get more money in taxes, spend less on benefits and stimulus measures and even get back the money he has spent on the banking system. But the dilemma is, at some point he probably needs to cut spending and raise taxes, but if he does it too sharply then he might stop the recovery from happening. What is he to do?
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