With the coalition government we have, there has been a lot of public spending which is good now but the government doesn’t always have the money it spends. This borrowing and spending results in the country being in enormous national debt.
Is this a sensible decision?
Well, on the one hand, a lot of the spending did need to happen particularly with healthcare and education and more recently defence. The NHS is in a financial crisis as the deficit is heading towards a hefty £1 billion. More than half of all hospitals are in deficit with the service likely to be ending this year in the red. In addition, spending on education is vitally important in fostering economic growth. Of course, this is an indirect impact as generally, the more educated people are, the higher paid jobs they will potentially have which can promote extensive spending. More spending makes businesses more profitable which in turn means they can potentially employ more workers with higher salaries and so the process starts again.
On the other hand however, getting into debt does not do anyone any favours in the long term. The more the government gets into debt, the more it will need money to repay later which means more of the public’s taxes and less on areas that need it such as health, work and pensions, education and welfare. The national debt is higher than it’s been for around two decades but when taken into account with the whole of the 20th century it is relatively very low. However, the country can not run large deficits forever and the more it builds up, the higher the interest payments will be. Sustainability is also a big part of economics and running into large amounts of debt with incurring interest payments is not an example of good sustainability, particularly as countries/organisations become reluctant to lend money to the government.
I think that the government could afford to make cuts in some areas in order to pay off their large debts. Such areas could include disability allowance and benefits. Now, I’m not in anyway against disabled people receiving a government allowance but I know that some people don’t actually require it and so don’t tend to claim it. However they could claim it if they weren’t honest and this is where the government is too generous I think. In addition, many people manage to make a living off state benefits without actually looking for work. There are 20.3 million (64%) families claiming benefits with many people not even job seeking, which means the government is shelling out on potentially wasteful benefits when it could be spent better elsewhere such as healthcare or education where it will be put to good use. By claiming benefits and not working i.e. not being economically active, they are slightly hindering economic growth. As benefit spending is the second largest government expenditure in the country I believe this could be cut significantly for the reasons mentioned above.