Spending Cuts of Local Authorities by the British Government - Essay Example

Spending Cuts of Local ities by British Government Spending Cuts of Local itiesby British Government Introduction The issue of global recession has also affected practices and policies of the British government, which is one of the most stable and sound administrative bodies of the world. Stats show that the inflation rate in UK has been consistent over the last decade and that has changed the outlook of the government polices largely. The annual budget of the United Kingdom depicts the fact that a major portion of its annual budgets goes to local authorities in their public services (Crawford, 2009). For this reason, the government has adopted tactics to reduce these expenditures in order to increase government savings. These reductions include health planning budgets, building new schools and pension budget of local authorities. The questions of whether these reduction policies will bring economic growth or will push thousands of people below the line of poverty and in public service degradation are highly debatable. This paper will aim to focus on the impact of these reductions on local authorities and issues which might be raised in against these spending cuts policies. Arguments The incentive of the British government to boost national economy by cutting spending on local authorities does not seem to be an effective measure. The UK’s GDP analysis of the past four years shows that the recession in the state has remained consistent over the past years. Many economists believe that public and local authority’s funds cutting can be beneficial if the state is economically stabilized. However, in the era of recession when private sectors are not willing to take over the government sectors, than this could result in raise of unemployment and inflation in the state countries (Pettinger, 2010). The key argument that can arise in local authorities is the decrease in their monthly wages and worse job loss, by cutting the spending of local authorities. In the developed countries of England, Scotland and the Northern Ireland the rate of unemployment has already reached above 10% and this is anticipated to grow in the coming years (Ryan, 2012). The criticism of local authorities on the spending framework of the government can be justified by these disappointing facts (Ryan, 2012). The British government has divided their public spending budget into departmental expenditure limits (DEL) and annually managed expenditure (AME). This division method is adopted to better manage and control departmental spending of the state. Spending of local authorities, public health and education and Municipal Corporation spending are all included in the DEL. These budgets are revised over a period of three years after keeping a reserve portion for extra need of any department (Crawford, 2009). This highlights that the national income is not properly divided among local authorities, and have complicated their resource management system. Another defect in this policy which leads to unemployment is that the budget is not divided in current and capital spending but in total budget. This means that each department has to work and survive within the allotted budget and if they fall short, then investment in public sectors and employee’s wages has to be compromised (Crawford, 2009). One argument that has already taken root and is likely to grow rapidly within local authorities is cutting of governmental spending on unnecessary services rather than cutting spending of local authorities. From economic point of view, this argument can be justified by pondering the diverse aspects of localities. Government expenditures in public and national security have risen significantly over the years (Pettinger, 2010). A major part of the entire budget goes in to the defense of the state, which can be cut down easily. Facts show that the amount the British government is planning to save by cutting spending of local authorities can be far more if they revised their budget of defense sector. Financial reports on the UK liabilities justify that the UK debt conditions are mainly because of its investment in the defense sector. Maintaining a balance in the national and public interest would help the state to reacquire the path of economic growth (Pettinger, 2010). Areas of education, housing, health and transport infrastructure have a direct impact on the long term productivity of countries. On the contrary, reducing security and red tapes measures would not affect the productivity of the state to that extent. Hence, this can be argued that in an era of economic downturn, savings can be made by considering these alternatives (Serwotka & Godrich, 2013). This is quite evident that local authorities will not be able to maintain the quality of services after the reduction of their annual budget and government incentives. An argument could be raised that spending cuts would deprive local citizens from acquiring adequate health and security facilities. As stated by the Council members of the labor authority that the government plans for generating savings is not based on practical analysis and would divide public services into partially governmental and partially privatized. This might look as an opportunity for local departments to merge with the private ones, but that is not the case in reality. Service delivered by the private sectors will not serve all people equally and will benefit the elite class more. Moreover, if this rate of spending cuts of local authorities continuous, than the private sector will completely take over government bodies of health and security. People would then have to buy all services which are actually their right to avail (Butler, 2012). The expenditures of health services have also been targeted by the British government in their run for national savings. Reducing the annual funding of the National Health Services has stimulated fear in the public health sectors. Local authorities have openly discouraged these initiatives, arguing that the government is unable to judge the long term adversities of such plans and policies (Triggle, 2010). A valid argument in this respect can be that spending cuts of local authorities from public services will compel them towards to make no additional investments in health and social welfare plans. These investments can provide future growth both in economy and public benefits. Therefore, the not only local authorities will be seize from economic growth and expansion, the public services will also not move towards betterment. (Butler, 2012) The most affected people in the midst of spending cuts are the working class areas which are associated with the government. It is a perspective of researchers and politicians that whenever the working class or the middle income level group is hurt economically in a country it affects the whole nation. United Kingdom employees higher level of middle class economy which shapes up the overall economy of the country. An economic downturn is likely to occur due to unconditional spending cuts by the government (Pettinger, 2010). The elimination of workers is a first step toward downfall of an economy, whereas, the shrinkage of funds to the public trusts and institution will further take an economy towards depression. The public trusts including children welfare, public hospitals, and public education institutions will also get affected by the government’s decision. This will in fact contribute less to these institutions which is most likely to suffer in the future. The foreign direct investments might also become weaker because the spending power of an economy becomes weak. Therefore, it is unwise for the government to take stance or otherwise make these public institutions independent of the decision taken by the government (Pettinger, 2010). The argument that is understandable here is that the government cuts spending so that it can reduce the inefficient spending which government thinks it is been carried out, and so that the country can move towards economic growth. However, the government can still reduce the inefficient spending by different ways such as cutting down its expenditures, shut down those projects that are being bankrupted, and to avoid making investments in those projects which are not beneficial for the country. However, in the light of government’s decision on cutting the spending in public sectors will only harm general public because many people are being entertained through public institutions in which decline may arise. Cutting down the government’s spending not often provides strength and stability to the economy which can be reflected in the situation of countries such as Spain, Greece, and Ireland. The British government must learn from decisions of these countries that did do them good (Arnold, 2010). Cutting the government’s spending also often is targeted towards bring the foreign direct investments and provides an opportunity for private sectors to make investments in the country so that the government may privatize its assets. However, according to some analysts, it is believed that the system is most likely to act in reverse proportion and due to the uncertain demand in the economy the private sector might not even consider investing in the country. It is therefore inappropriate for government to take measures without knowing the necessary outcomes generated by their decisions. The government should not base their facts according to the investments that might be incurred by the private sector but also to make countermeasure strategies if an outcome does not react as the way it should (National Audit Office, 2012). Private sectors are uncertain about the conditions of an economy due to various reasons and difficulties they have to encounter. These groups are threatened by the prospect of recession in Europe, and are hesitant about consumers’ confidence of spending. These are the factors which is in turn resisting the sector to invest freely in British economy. There might arise a conflict amongst analyst that the UK government might save lesser amount than it has actually lost as their potential income. If the UK government was able to earn more income through public institutions that to earn money through savings by reducing its investment in public sectors then it would not be wise to make the particular decision. The governments in the particular scenario have to decide for an opportunity cost that might in turn provide gains to the economy (Pettinger, 2010). Conclusion To conclude the argument, the UK government might view the prospect of saving money for the economy by cutting spending of public sector and to allow much greater private investments in the areas to begin, but the idea can lead to various uncertainties in the economy. The decision can lead to huge economic downturn as public sectors will face reduction in its investment. The government is mostly dependent on public sectors to invest in areas and to cover major in which investments were not made. However, it is uncertain that private sectors may not be interested in investments because of high chances of recession and have lost confidence in consumers’ spending power. It is therefore wise for the government for not to cut further public spending. List of References Anon., 2009. A Survey of Public Spending in the UK. Research Report. London: Institute for Fiscal Studies Institute for Fiscal Studies. Arnold, R., 2010. Economics. 2nd ed. Mason: Cengage Learning. Butler, P., 2012. Birmingham city council warns of effect of 17% spending cuts. [Online] Viewed at: http://www.guardian.co.uk/society/2012/oct/23/birmingham-city-council-cuts-warning [Accessed 19 January 2013]. Crawford, R., 2009. A Survey of Public Spending in the UK. Research Report. London: Institute for Fiscal Studies Institute for Fiscal Studies. National Audit Office, 2012. Cost reduction in central government: summary of progress. 1st ed. London: The Stationery Office. Pettinger, T., 2010. Cutting Government Spending. [Online] Viewed at: http://www.economicshelp.org/blog/2070/economics/cutting-government-spending/ [Accessed 19 January 2013]. Ryan, J., 2012. U.K. Unemployment Will Rise Until 2016 on Fiscal Cuts. [Online] Viewed at: http://www.bloomberg.com/news/2012-05-06/u-k-unemployment-will-rise-until-2016-on-fiscal-cuts-cebr-says.html [Accessed 19 January 2013]. Serwotka, M. & Godrich, J., 2013. There is an alternative: The case against cuts in public spending. [Online] Viewed at: http://www.pcs.org.uk/en/campaigns/campaign-resources/there-is-an-alternative-the-case-against-cuts-in-public-spending.cfm [Accessed 19 January 2013]. Triggle, N., 2010. Spending Review: NHS gets bare minimum funding rise. [Online] Viewed at: http://www.bbc.co.uk/news/health-11582619 [Accessed 19 January 2013] Read More