“There’s still a long way to go. We’re borrowing around £100?billion a year — and paying half that money a year in interest just to service our debts. We’ve got to make more cuts”
These cuts are going to be made from various sectors. However, the 3 sectors that are going to be protected are pensions, healthcare and education. These 3 areas of the economy are justifiably going to be receiving the highest sums of money. On the other hand, everything else will have to come to some sort of compromise in order to reduce public spending; defence, emergency services, local government and transport along with other areas of the economy will see reductions in their expenditure which means there will be knock on effects to the public in different ways.
However, continuing with austerity does suppose that the economy will improve for the future. This is because austerity can bring debt under control as spending is reduced, thus promoting investment and subsequent growth for the UK. But, many may argue that there are alternatives that will improve the situation such as:
– Further benefit reductions may be required: This may be needed to even the balance safely and would see £12bn more cuts in benefits, in addition to the £25bn planned already. Consequently, this is an unlikely option as it will hinder the popularity of the Conservatives and Liberal Democrats.
– Reducing expenditure on pensioners’ benefits: The issue with this is that the government has made numerous pledges to protect the financial interests of the elderly population. This becomes even more important as the UK has an ageing population.
– Raising taxes: It is likely that the government will have to resort to a raise in taxes in order to help balance spending with borrowing. This is one of the big consequences seen for the new austerity plans as it will mean another 4 years of raised taxes.
Any of these options are viable. The balance between taxes and spending is an inclement tightrope, and the subjects of spending and budgeting will be on everyone’s mind till the next election. Economic policy may even become the abundant factor which decides who will win the next election. The new austerity plans will result in many unhappy faces; however, it could be promising for the future of the UK economy.
Contributed by Pajmit Gulati