Economic Policy of the United Kingdom Government

Policy Brief

Overview of issue

It is important for the Government of the Prime Minister, David Cameron, to reduce its budget deficit. The research focuses on the importance of discussing an article favoring David Cameron’s Government’s policies of focusing on the local economy over the European Union Economy. The government needs cash inflows to enhance the local United Kingdom economy. Moreover, the government needs funds to pay for the expense of running the local United Kingdom government. The research also centers on the importance of a second article that proposes prioritizing the European Union economy over the local United Kingdom economy. The second article places importance on the Prime Minister’s Government to pay too much attention to the enhancement of the European Union economy over the local United Kingdom economy. The policy maker must prioritize reducing the United Kingdom budget deficit by centering on the local United Kingdom economy over the European Union economy.

Theory

Dermot McCann (McCann, p. 18) proposed that David Cameron’s Government’s budget deficit could be reduced by increasing the amount of government revenues over the amount of government expenditures. The Prime Minister’s government is poised to unwaveringly reduce of its current budget deficit. The global economy of the European Union generates financial impacts on each of the economic players. The process of market integration will work in favor of all the exporters and importers. The importers will benefit using the low-priced imports as raw materials for the production of exportable goods. The discussion clearly shows that the United Kingdom policy makers must center on reducing the United Kingdom budget deficit by focusing on exports over imports.

The company’s Gross Domestic Production
Figure 1. The company’s Gross Domestic Production

According to Marshall, the above graph clearly shows that the company’s Gross Domestic Production is in a dismal state due to the decline in the company (Citywire.co.uk.).

The major spending budgets of the United Kingdom
Figure 2. The major spending budgets of the United Kingdom

In addition, according to Rogers, the above 2009 – 2010 graph shows the major spending budgets of the United Kingdom (Guardian.co.uk). The Prime Minister’s Government must immediately act to reverse the unfavorable declining gross domestic production line.

Article summaries

Based on the first article, the Prime Minister, David Cameron, is serious in his plan to reduce the United Kingdom’s budget deficit. The Journal article “Many Miles to Go” focuses on one of the Britain Prime minister’s economic agenda (Economist.com). The Prime Minister, David Cameron, pursues his government policy to fix Britain’s increasing budget deficit. The Prime Minister’s policy procedures have been favorably noticed by many sectors of the British population. In fact, the Prime Minister’s current policy generated a credit rating that is the envy of many of his European Union member states’ political leaders. Currently, the Prime Minister, David Cameron, has not made any significant mistakes that would reduce the British Economy to an economic depression status. The journal article states the British government’s is implementing a painful procedure of removing the local government’s structural deficit by the end of the parliament’s term. Consequently, the local United Kingdom economic sectors are in danger of losing faith into authorities, thus the British Governments will be economically feasible.

To improve the British economy, the Prime Minister, David Cameron, as well as Mr. Osborne and his fellow British politicians in government can pump-prime the British economy by implementing capital spending by an estimated £ 5 billion in 2011. Then, the Prime Minister’s government can increase the capital spending to £ 5 billion in 2012. The Prime Minister, David Cameron, can also include an additional £ 2 billion to set up a bank to allow small business investors to borrow funds needed to increase the British economy’s financial wheel. The small business investor banks policy is also backed by Adam Posen. Posen is a member of the Bank of England monetary committee. The issue of small lending banks is very important in terms of hastening the British economy’s wheels. The lending strategy will perk up the British economy. However, the same strategy will not endanger the British economy’s funds. The government’s austerity measures under the Prime Minister, David Cameron, will significantly hasten the increase in the government’s funds. The funds will be used to lessen the British government’s current debt effectively.

To accomplish the current Prime Minister’s policy of reducing the government’s budget deficit, the government must release funds to the public. The private institutions borrow money from the banks to generate revenues. The revenues will be used to defray the daily operating expenses of the business entities. The entities are required to generate enough profits and profits. The bank borrowers use the funds to sell their goods and services. In turn, the companies will generate net profits if the generated revenues exceed the total operating expenses of the business entity.

Based on the second article “David Cameron tells Eurosceptic Rebel MPs: We disagree only over means, not ends” to reduce the British Government’s budget deficit, the Prime Minister, David Cameron, voiced his plan to be withdrawn from the European Union (Economist.com). This is very understandable. The British Pound currency is very economically stable compared with the American dollar currency. Being a member of the European Union, the United Kingdom normally complies with the European Union policies. One of the policies is to use the European dollar as a medium of exchange. Another policy is to prioritize the European Union economy over and above every European Union member country’s economy. In response, The French President, Nicolas Sarkozy, sternly announced that he was sick of David Cameron’s complaining about the European dollar’s discouraging effect on the Unite Kingdom economy.

UK  GDP Growth rate
Figure 3. UK GDP Growth rate

To repeat, the above graph clearly shows that the company’s Gross Domestic Production growth rate is in a dismal state (TradingEconomics.com). The growth rate for 2011 shows a gross domestic production growth rate decline from 0.6% to 0.1%. The Prime Minister David Cameron’s Government must immediately put into action the recommendation to increase its gross domestic production output by increasing its exports and reducing its unnecessary imports.

Analysis

In terms of budget deficits, Stanley Brue (123) emphasizes the economic theory where deficits occur when the total amount of incoming government revenues (cash inflows) are lesser than the total amount of spendings (cash outflows). Normally, budget deficits occur when the government lowers taxes below the total amount of government spending. Government spending includes payments for the construction of roads, bridges, hospitals, schools, and other infrastructures. In addition, government spending includes paying the salaries of police officers, mayors, and other political officers within the United Kingdom. Government spending includes paying the salaries of doctors, soldiers, teachers, and other government employees. The bulk of the Prime Minister, David Cameron, cash inflows come from taxes.

In terms of a deeper analysis, Prime Minister, David Cameron, is right in prioritizing the survival of the United Kingdom over the survival of the European Union. Emma Rowley reiterated the United Kingdom budget deficit was ranked as the 3rd one in Europe in 2010 (Telegraph.co.uk). The Prime Minister David Cameron Government’s financial status amounts to only 10.4pc of the country’s gross domestic products during the same year alone. The ranking is based on the economies of 27 European nations. Specifically, Ireland needs loans amounting 32.4pc of its gross domestic production.

In fact, Prime Minister David Cameron excellently discussed his view to prioritize reducing the United Kingdom budget deficit over the economic problems besetting the European Union with the statement “our national interest…it is not the right time, at this moment of economic crisis, to launch legislation that includes an in/out referendum. When your neighbor’s house is on fire your first impulse should be to help put out the flames, not least to stop them reaching your own house. This is not the time to argue about walking away, not just for their sakes, but for others”. The Prime Minister, David Cameron, is right if fighting against the European Union. Being a member of the European Union member states, the United Kingdom must not implement government policies that will violate any of the policies of the European Union. Mike Gape (10) insists the United Kingdom agreed to comply with all the policies written in the Lisbon Treaty. The Lisbon Treaty mandates that the European Union member states can be overruled or controlled by the European Union leaders if the member states violate any of the policies written in the Lisbon Treaty. Consequently, the Prime Minister’s government must do its best to increase and maintain the European Union economy when compared to prioritizing the reduction of the British government’s budget.

For example, David Cameron’s government can reduce imports from each of the European Union member states to reduce its spending or cash outflows. The spending or cash outflow will increase the British government’s budget deficit. By implementing this policy, the European Union member states can file a complaint against the United Kingdom. The European Union member states can ask for a trial to force the United Kingdom government to accept the European Union member states’ imports. Putting it another way, David Cameron’s Government must prioritize compliance with its mandate to give millions of the United Kingdom pounds to foreign aid when compared to saving the same amount to reduce the Prime Minister’s government’s budget deficit. Bryan Ardy (Ardi 26) theorized the British economy was a loosely held hostage of the European Union member states’ policy. The policy removed the major impediments to free trade among the members of the European Union.

In terms of exports, the Prime Minister David Cameron can increase its exports to the European Union member states. This would translate to the reduction of the Prime Minister’s government’s budget deficit. However, the European Union member states can protest the United Kingdom’s use of force to let the European Union member states buy products and services which are not primarily needed by the member states. The forced implementation of the European Union policy on the United Kingdom territory is a clear indication of outside interference in the Prime Minister David Cameron Government’s dedication to reduce its budget deficit.

Conclusions

The first article shows that the Government of the Prime Minister David Cameron must prioritize their own territorial economy when it is made to choose between the local and the European Union economy. The first article shows the Government of the Prime Minister, David Cameron, as very realistic and practical in its decision making activities. The government will not have the necessary funds to run the government if the revenues are lesser than the expenses.

The first article clearly benefits the United Kingdom residents. The graph shows that the United Kingdom’s Gross Domestic Production is in a repair state because of the avoidable decline in the United Kingdom’s showing from above 2.0 to less than 1.50. The Government of the Prime Minister, David Cameron, must put into action the recommendation to increase its GDP by increasing its exports and reducing its unnecessary imports.

Further, economic theory states deficits occur when the total amount of incoming government revenues (cash inflows) are lesser than the total amount of spendings (cash outflows). Normally, budget deficits crop up whenever the government lowers taxes below the total amount of government disbursements. The United Kingdom’s disbursement includes payments for the construction of roads, bridges, hospitals, schools, and other public service infrastructures.

On the other hand, the second article describes the Government of the Prime Minister, David Cameron, and states that it make wrong decisions which touch the United Kingdom economy. The article shows that the Government of the Prime Minister, David Cameron, must center on the European Union economy over the local the United Kingdom economy. The second article creates a wrong picture of the current Government of the Prime Minister, David Cameron, as a bad decision maker. Indeed, the United Kingdom policy’s makers should focus on reducing the British economy’s budget deficit by prioritizing the increase of the local United Kingdom (exports) revenues over generating revenues for the European Union (imports).

Works Cited

  1. Ardi, Bryan. The European Union: Economies and Policies. London: Cambridge University Press, 2011. Print.
  2. Brue, Stanley. Economics: Pirnciples, Problems, and Policies. London: McGrawHill Press, 2007. Print.
  3. “David Cameron Tells Eurosceptic Rebel MPs. We Disagree only over Means, Not Ends.” Economist.com. The Economist, 2011.
  4. Gapes, Mike. Foreign Policy Aspects of the Lisbon Treaty. London: Stationery Press, 2008. Print.
  5. “Many Miles to Go”, Economist.com. The Economist,  2011.
  6. Marshall, Chris. “UK Economy ‘More and More Sickly’.” Citywire.co.uk. Citywire Money, 2011.
  7. McCann, Dermot. The Political Economy of the European Union. London: Polity Press, 2010. Print.
  8. Rogers, Simon. “UK Spending 2009-1010.” Guardian.co.uk. Guardian, 2010.
  9. “UK GDP Growth Rate.” Tradingeconomics.com. UK Office for National Statistics, 2011.