Business and economics - Assignment Example

That was the year the UK economy went into recession, pushed to the brink by the global financial contagion, together with rising levels of debt in the consumer market, as well as sharp falls in the prices of residential properties. The recession spurred government into pump-priming mode, spending on government projects to spur the economy, taking a stake in the banking system and effectively nationalizing portions of that system, reducing taxation, and putting on hold curbs on government borrowing.

These acts pushed Britain to the opposite end of another brink, and that is an elevation of public debts, and the ballooning of the public deficit levels, that then spurred the government of Cameron, formed with the support of both Democrats and Conservatives, to initiate a five-year plan of austere reforms in 2010. The goal of the program was the reduction of the budget deficit to just a percent of GDP by 2015, from 10 percent of GDP at the start of 2010. By the next year, the government announced an extension of the austerity program through to 2017, owing to the perceived inadequacy of the interventions to effect change, the lower than desired rates of growth in the economy, and the effects of the crisis sparked by the debt problems in many parts of the EU (Central Intelligence Agency 2013).

There was an increase in VAT in 2011 to 20 percent from 17.5 percent as part of the measures tied to this program. Meanwhile, the tax rates for companies in the UK were targeted to go down in 2014 to just 21 percent. Also, $605 billion was earmarked for a program to purchase assets by the end of 2012. In all, 2012 was characterized by public deficit levels that stuck persistently in the range of 7.7 percent of the GDP, above targets; a 0.1 percent contraction in the GDP; tepid spending by consumers; tepid investment levels among business concerns; and the continued rise in the levels of public debts (Central