Government Budget Deficit Explained: What’s the Hole in the Budget?
11 November 2025·4 min
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💸 Have you ever heard the phrase “the government has a hole in its budget” and wondered what it really means? In this video from The Industry Portal’s Finance Explainer Series, we break down the concept in plain English and show how it works step by step.
You’ll discover how the UK Treasury’s account at the Bank of England works just like a household current account, why a budget deficit simply means outflows are bigger than inflows, and how the government plugs the gap by issuing gilts (UK government bonds).
✅ In this video, you’ll learn:
- What a “hole in the budget” actually means in accounting terms
- How the Treasury’s account at the Bank of England functions like a household bank account
- Why the gap between government spending and tax revenues creates a deficit
- How the government fixes the hole by borrowing through gilts
- The difference between monthly borrowing figures and the annual deficit
- Why managing day-to-day liquidity is critical for the Treasury
💡 By the end, you’ll understand that a budget hole isn’t a missing entry, but simply the shortfall between spending and income — and how it shows up on the government’s balance sheet.
👉 Whether you’re a student, finance professional, or just curious about economics, this video gives you a clear and practical explanation of government borrowing, deficits, and budget management.
📚 Learn more at: www.theindustryportal.com
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💬 Comment below: Do you think the government should fix the hole by raising taxes or by issuing more gilts?
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