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Why is the British Government pursuing a policy of austerity while the economy is not growing - Essay Example

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The current economic situation being witnessed in the Britain has led to the Government admitting that it is its past strategies and approaches towards dealing with the economic crisis that faced Europe in 2008 that have led to the economic failures being witnessed in the country. …
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Why is the British Government pursuing a policy of austerity while the economy is not growing
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Why is the British Government pursuing a policy of austerity while the economy is not growing

Download file to see previous pages... The failure strategies and policies include the government opting to greatly cut down on the budgets of some of its departments to as low as thirty percent (Barrell and Liadze, 2009, p. 208). The Government had employed the austerity policies and hoped that it will greatly check on the budget deficit to minimum level of zero percent by the end of that financial year. This was also considered as a move by the government to boost its economic status and assist in paying off its public debt. Despite the above measures, the budget deficit of Britain has remained at an alarming rate and with the impact being felt most by the citizens following the increased recessions (Barrell and Liadze, 2009, p. 207) Pressure in now mounting on the government to come up with working solutions as well as cut down on the credit ratings. The austerity approach failed to meet its intended role of certifying things beyond reasonable doubt thus resulting to a huge setback in the economic development of Britain. The Government of Britain is being accused of simply trying to experiment how efficient the austerity approach can be to its economy (Barrell, Holland, and Hurst, 2012, p. 933).This experiment has led the Britain citizens to live in depression for a long period of time.. From the look of things with regards to Britain economy, it is most likely that the austerity policies will not be easily implemented. Economists have come out strongly explaining that measures like cutting down on government expenditure may in the long run reduce the economic output largely, tax revenues to decrease, and spending on benefits to increase (Barrell and Liadze, 2009, p. 207). This however takes time and may end up resulting in an increase in the budget deficit. The government had intended to win back the favor of investors and businessmen by employing the austerity strategy. The effort to try and salvage the economic situation following the implementation of austerity policies has resulted to a big battle by the Bank of England to try slash investment spending (Delong and Summers, 2012, p. 78). This measure has however remained decimal and depressed. The government has also blamed the Eurozone for being its biggest business partners yet in has don e nothing to help it with the issue of recession. The government of Britain may try resolving this recession issue by loosening its fiscal policy (Delong and Summers, 2012, p. 78). Despite such positive advice, the government has remained adamant and has continued to propagate the pre-Keynesian economics. This approach has resulted in some positive changes in the country’s fiscal policy but most people have not yet felt the fruits of his efforts and opt for better contribution. Back in 2009, the government had forecasted that come 2013, the deficit would have gone down by 3.5 per cent of G.D.P. With time, the forecast has proven to have been too optimistic (Delong and Summers, 2012, p. 78). Despite the government coming up with measures to reduce economic budget deficit as well as government spending, it has not yet fully implemented these measures as it keeps on postponing them with the latest future date being put at them forward until 2016 to 2017 (Fatas, 2012, p. 78). The debt-to-G.D.P. ratio, which the government opted to go up by about seventy per cent, has surprisingly hit seventy-five per cent, and chances are that it will continue to increase up to eighty per cent in 2016. (Fatas, 2012, p. 78). The British government also blames the Eurozone crisis for the immense reduction of the amount of Britain exports goods. If the government realized that the external environment was unreliable it could have adapted to boosting the domestic market and solve ...Download file to see next pagesRead More
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