UK public finances - Essay Example

According to forecasts published by the HM Treasury for the month of June -July 2010 and June - July 2011, it is evident that GDP during the same period will increase from 1.2% to 2.1% respectively (HM Treasury Report July, 2010) The detailed overview of the public finances databank available from the government, it is revealed that the current budget surplus is -105.6 billion and net borrowing of 154.6 billion with overall net debt of 53.8% for the year 2009-10. It is further evident from the data below that the trend in net borrowing is decreasing thereby promoting the growth of GDP.

The table below shows that current budget surplus has come down to zero resulting in healthy GDP of 67.4% by 2014-15. (Table 1) The data furnished above should motivate the executives and decision makers to invest in the country eyeing the long term objective of making profit. However the following diagram shows that most of expenditure is targeted towards social protection which aggregates to 28%, which is understood in the present circumstances of continuous threat of terror attacks. Health and Education is also one of the important areas where the government is spending huge money.

According to following diagram, it is suggested that company executives may invest in other areas like housing loans and insurances as the government spending in those areas is very minimal. It is forecasted that the government would receive majority of its income from tax deductions, which means good income to the public, followed by National Insurance (17%). Figure 1 Figure 2(Source: Public Sector Finances Data Bank - HM Treasury http://www.hm-treasury.gov.uk) The government received 153.

5 billion as Income Tax in the year 2008-09, 96.9 billion from National Insurance, 78.4 billion from VAT and also from tobacco duty, fuel duty, spirits, wine, beer and cider duties, air passenger duty. As mentioned above, company executives may focus on providing products and fix prices keeping in view the predicted spending and generated income by the government. As the diagram (Figure 1) shows that government spending is huge in social protection but least in housing and environment, it is assumed that opportunity persists for the businesses in realty and banking sector.

It is assumed that banking sector will flourish during the next few years as financial assistance could be provided to the people from agricultural sector as well as in realty sector. (http://www.hm-treasury.gov.uk) It is important to mention that economics uses theories and methods to study the behavior of people involved with allocating resources and aiming to reach some optimum situation (Elliott and Payne, 2005:1). As the government is