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The Need to Control Government Spending in the Context of the UK Economy - Coursework Example

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It is evidently clear from the discussion that at a time when most governments across the world are bogged down by excess spending that seriously impacts on the outcome of other government prerogatives, it becomes important to limit the amount of spending on public resources…
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The Need to Control Government Spending in the Context of the UK Economy
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Download file to see previous pages Like most economies, the UK practices a system where most critical social services are provided by the government (Engineers, 2008). Education and healthcare sectors are some of the areas where the government plays very imperative roles. However, with a growing budget deficit that continues to raise concerns, austerity measures become inevitable. The United Kingdom, with its expanding public sector coupled with a growing population, has been forced to borrow severally to finance its budget deficits. Such continued borrowing may have long-term impacts on the economy considering that the debts have to be repaid. In such a case, the austerity measures advocated for by most policy advisors become necessary. It certainly becomes a plus to the many private firms across the country as new opportunities will emerge in product and service delivery. However, in light of the recent street protests against the proposals to cut government spending, several considerations emerge. Several hospitals in the UK are already bogged down by numbers courtesy of the cuts that greatly impact on the quality of social services. The education system in the country has for several years been one of the best in the world (Al-Mazrouei, 2001). This attribute emerges out of the great support that the government allocates to basic services like education, water, and healthcare. It, therefore, becomes imperative that several considerations be made before any major government spending is practical. In most cases, increased taxes are normally dreaded by the public. Nevertheless, a government that effectively uses the tax money on proper policies that impact positively on the masses certainly faces little antipathy towards its social reform policies. The UK’s situation is indeed one of the most notable cases in the entire world. It demands greater government intervention which can only be attained through proper spending policies. In its bid to exercise its mandate in the establishment of the lending base rate that guides the interest rates in England, the Bank of England’s monetary policy Committee faces myriad challenges in its approach to the whole issue (Tennant, 2009). The essence of setting the base rate is basically to ensure price stability in the country and to limit variations in the various interest rates across the country. In light of the emerging economic challenges that continue to bedevil the world, it is inevitable that economic priorities to need to change with a view of addressing the whole issue. Currently, the Committee’s main focus is keeping the interest rates at the basement levels with a view of economic expansion. In the recent years, it is indeed true that inflation overshot has characterized the UK economy as the Banks pretense that the situation will return to normalcy in two years only help to escalate the tensions that emerge in policy circles. However, in view of this challenge, the basic challenge that confronts the Bank of England needs to be understood. The excess price and output volatilities are issues that must be addressed in tandem with the inflationary extremities (Giuseppi, 2008). The high inflation rates in the country have greatly influenced the performance of many firms. As the borrowing rates become unbearable, most commercial firms are reconsidering their borrowing policies. The high inflation rates have also affected the purchasing power of the consumers which subsequently reduces the productivity of most firms. ...Download file to see next pagesRead More
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