Phil MeekinView Profile
We are a trading nation and our marketplace – the global economy – is still financially wobbly. Therefore we are more reliant on consumer-led growth.
Even before the Autumn Statement 2014 has been officially announced, it has to be admitted the government’s marketing and PR machine has been working overtime.
Whether you agree with their policies or not, details about the Autumn Statement 2014 have been systematically released and few surprises are anticipated (I could be proved to be wrong!). Both the government and the opposition parties are acutely aware, we are only six months away from a General Election so there will doubtless be political showboating on all sides.
In the UK, we have a budget deficit (where income generated from taxation is insufficient to cover public services costs). In simple terms, there are two ways of addressing a budget deficit – increase amount of income (taxation) or reduce public spending.
The reduction of the deficit has fallen short of government targets, which limits any big giveaways by the Chancellor.
- Although unemployment has fallen, many new jobs are either low paid or part-time. As a result, Income Tax generated has been either modest or non-existent
- More austerity measures are likely to be in the pipeline to cut public spending
- The government has reiterated its commitment to tackle corporate tax loopholes by the likes of Goggle and Amazon
But the main thrust is all about growth in the economy – a continuation of the recovery from recession. Forecasts of economic growth in the UK for 2014 are around the 3% mark but medium term projections suggest a tailing-off over the next few years[i]. We are a trading nation and our marketplace – the global economy – is still financially wobbly, therefore we are more reliant on consumer-led growth.
The government has previously announced and re-announced a number Keynesian of capex and infrastructure upgrades. Danny Alexander, Chief Secretary to the Treasury was reported by the BBC on Tuesday as having said[ii],
“New houses support economic growth and are a crucial element of a fair society, so I’ve prioritised the investment of almost £2bn to ensure we can build on average 55,000 new homes a year until 2020,”
As well as being “eye candy” for voters, it is hoped that the following proposed expenditure – much of it on capital projects – will boost economy as well as create jobs:
- £15bn – Roads Revolution
- £2.3bn – Flood projects
- £2bn – frontline health services
- £2bn – housing
- £1bn – financial support for High Street businesses, many of which have struggled to complete with on-line enterprises
Nobody underestimates the difficulties faced in maintaining growth in Gross Domestic Product (GDP). The UK’s economy is hugely complex. Public capital spending on infrastructure not only creates jobs and pumps money into the economy, it also promotes confidence, encouraging more investment.- effectively creating a multiplier effect. Of course this is diluted if we spend our money on imported products. The improvements obviously benefit future generations.
A stronger economy should lead to less company failures, Administrations and Liquidations and lower instances of personal bankruptcy.
[ii] BBC – Business