Abstract
This article intends to examine the issues of public debt and austerity policy in the United Kingdom. It attempts to provide an evaluation of fiscal policy under neoliberalism and to consider the relationship between this policy and the macroeconomic performance of the United Kingdom economy. There also seem to be ambiguities among the policy makers about austerity. Therefore, it seems important to examine the issue of government-imposed austerity policies and fiscal deficits. There is a need to borrow to cover the deficits as there is no inflationary pressure in the United Kingdom. Most democratic solutions against any inflationary pressures are to reduce the money in circulation through higher taxes. This study concludes that increased state intervention, as a means to enhance long-term growth, is crucial for achieving economic stability and greater equality.
Highlights
This study intends to examine the issues of public debt and austerity policy in the United Kingdom
It attempts to provide an evaluation of fiscal policy under neoliberalism and to consider the relationship between this policy and the macroeconomic performance of the UK economy
The International Monetary Fund (IMF; 2016) report has lowered its estimate for UK GDP growth in 2017, downgrading it from 1.7% to 1.6% and expecting the economy to grow by 1.5% in 2018 (Elliott and Inman 2017)
Summary
Soon after the financial crisis in 2008, the United Kingdom government allowed the budget deficit to rise to expand domestic demand. One view is that fiscal consolidation and a reduction in budget deficits will boost confidence and lower interest rates, which will increase investment and economic growth.
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