Why is the government considering tax cuts?
The next few weeks are sure to be dominated by the potential for up to £15 billion in tax cuts at a time when the economy is under serious pressure. However, many people are asking what exactly a tax cut will give to the consumer and eventually the economy.
In essence the plan is to reduce government tax income and put more money back into the pocket of the consumer, via lower tax charges. The idea then is that the consumer will use these extra funds to purchase goods and services in economy, thereby increasing turnover and income to the business world, which should then lead to greater job security and eventually a growing economy.
The main problem is the fact that after borrowing extra money to pay for these tax reductions the government may well need to cut back on certain public services. This is where the problem arises in that there will be a short-term reduction in money ploughed back into public services which could affect a whole host of people in the UK. There will be a lag between "investing" into the economy via tax cuts and a return to taxpayers and the UK population in the shape of a growing economy, greater income and greater job security.
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