Government Cutbacks Why Are They Necessary and What Might They Do to the UK Economy

In 2010 the government debt was at 1105.8 billion pounds, which was 76.1% of the GDP. Of that public sector net borrowing was 10.3 billion pounds in 2010 and the public sector net debt was at 58% of the total GDP (Economic Indicators, 2011). The growth predictions by IMF have been 1.75% in 2011 and the interest rates in 2011 have been at a record low at 0.5% (UK interest rate held at a record low of 0.5%., 2011). The British Chancellor George Osborne has announced plans to reduce the government spending in the public sector. Restrain will be enforced on government spending like benefits for the retired, higher education, flood defences (Spending Review 2010: George Osborne wields the Axe., 2010). As part of the plan, some surgery procedures will be restricted like a cataract operation, some common orthopaedic surgeries. Nursing homes for aged people will be closed and funds will be rationed for IVF procedure and obesity cures (Donnelly, L., 2010). There will be other austerity measures like budget cuts for many facilities like libraries, trusts, theatres, counseling and advice centers on the country (Public Sector Cuts: Where will they Hit? 2011). Prior to the budget, the Chancellor had said that with this budget he wanted to take the country from a course of rescue to the course of reform. According to Cameroon, the level of debt and the credit crunch are the main causes of the recession. So he preferred the strategy of monetary activities to control the recession. There was a tremendous opposition for the reduction in VAT by the Gordon Brown government, which led to a loss of revenue for the government facing a shortage of fund. On the contrary, the previous government relied on borrowing to increase government expenditure. According to them, it would push the economy back on a path of growth.