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George Osborne backs Bank of England

Chancellor of the Exchequer George Osborne has today backed the Bank of England in relation to its current policy regarding the UK economy. He is fully in favour of maintaining relatively low UK base rates, which have remained at 0.5% for in excess of 18 months, and indeed it looks as though he is also looking to push through an increase in the quantitative easing budget which has stalled at £200 billion. So how will austerity measures impact upon fiscal programs for the UK economy?

There is no doubt that cutting the public budget on one hand and injecting more money into the UK economy on the other would seem to be counter-productive, but ultimately it depends upon where this funding is targeted. If, as many people fear, the UK money markets begin to stall then effectively the UK economy will come to a standstill and all businesses will struggle. If banks are unable to lend to businesses and consumers then the property market, consumer market, service industry and other parts of the UK economy will literally dry up overnight.

There is a need to focus fiscal stimulus programs upon vital areas of the economy while also looking to trim the public sector budget as much as possible. With over 50% of the UK workforce either directly or indirectly dependent upon the state for employment there are few who would argue this figure is too high and detrimental to the long-term productivity of the UK economy.

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