Could the UK budget derail the UK economic revival?
George Osborne's five-year plan, which he will announce today, to reduce the UK budget deficit will see massive cuts in public sector investment and an increase in taxes. This will inevitably withdraw money from the UK economy and some experts believe there is a danger of derailing the UK economic revival. So could the UK budget derail the already fragile economic revival in the UK?
The government has expressed a hope that by withdrawing funds from the public sector budget this could in reality create a vacuum for the private sector to fill. This would then potentially offset any slowdown in the private sector and hopefully keep a lid on the unemployment figure. However, there is a growing feeling that this is really a forlorn hope and ultimately we could see the overall UK economy slow down markedly over the next 12 months.
Whatever angle you take, whatever your opinion and whatever your view of the UK government there is no doubt that short-term pain is required to fix what could become a long-term problem if left to fester. The UK has one of the worst budget deficits in the developed world and unless this is addressed as soon as possible we will see the competitiveness of UK PLC fall overseas - which would create an even worse long-term problem!
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