International Public Sector Accounting and Finance
The historic nations such as England, Wales and Scotland, and Northern Ireland comprise the state of United Kingdom. Both present-day parliamentary democracy and Industrial Revolution are belonging to the United Kingdom (BBC News, 2018). In the world, while consider sovereign state the United Kingdom ranks as 78th-biggest sovereign state. In the case of crowded nation, the United Kingdom ranks as the 22nd-most crowded nation where 66.0 million occupants in 2017. London is the capital and biggest city of the United Kingdom and it is global city as well as financial centre that has urban population of 10.3 million (nationsonline.org, 2018).
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With developing era, and an increase in competition every country aims their best to earn more money and make sure their economy doesn’t suffer loss. For an economy to perform well, they need to make sure they have a low debt and that’s what United Kingdom has decided to. Also, Brexit is taking place in the United Kingdom in year 2019 which will affect the economy of the United Kingdom. According to the BBC News (2019), Last year 1.5% growth was forecast by the economists accurately. Meanwhile in year 2019 economists said forecasting for this year is impossible because of the vulnerability made by the Brexit.
For Government to create revenue and solve inter-temporal and sustainable deficit, United Kingdom Government have come up with two policies, which are as below:
In a dynamic economy limitation on the stock of wealth over specific periods and the restrictions on income and spending flow are referred as intertemporal budget constraints. Intertemporal budget refers that every financial agent including the government borrowing are recognised in particular period of time and generally position of the government adds to zero (Arestis & Sawyer, 2006).
United Kingdom policy of cutting child tax profit has been one of the controversial policies as the government has decided to cut of the benefits in order to save money. In future families of more than two children who will apply for tax credit will not receive the credit for their third or more children. On the other hand, children with special needs will be offered additional support. Statistics say, 59% of the 73,500 families who lost financial help for a third child were in work. 9% of United Kingdom claimant family units with at least three or more children were affected. This policy is being labelled as two-child policy. The Government is additionally lessening dimension which tax credits are pulled back from families who procure cash through work. 500,000 family units will get off duty credits and 300,000 off Universal Credit (Butler, 2018). Cutting on child tax will help to cover the value of current and future taxes by being sufficient to cover the government current and future spending along with the first stage of government debt. With now less money being spend on child tax, government can use it in order to invest it in the economy. Moreover, with big families knowing not all of the kids will get child support parents will start working which will in return generate more income for the government to cover their deficit. This will help government overcome their inter-temporal budget constrains as with the help of the cut in benefits government can now use that money to cover their debts, On the other hand, some might argue that cutting child tax might put burden on families as now they have to work extra hours in order to provide for their families. Campaigners said the number of families influenced by the policy would increase United Kingdom poverty levels, putting an expected 200,000 children into hardship (Butler, 2018). But in the end what needs to be considered is that cutting the chid tax will help the government to overcome their deficits. For example, during the 1990s, Canada government cut their spending by 20% even with cutting down there spending Canadian economy kept on developing. Canadian economy profited from lower financing costs to help spending, this same can be the case for United Kingdom (Pelinescu, 2000).
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Another policy which United Kingdom has implemented is increasing council tax. Residents confront swelling busting council tax which is rising to an average of £100. Council have been given the ability to force a 5.99% hike, taking the expense for a normal B and D property to around £1,686. local Government Secretary Sajid Javid facilitated a 1.99% top on increments, enabling councils in England to slap bill payers with yearly ascents of 2.99%. What’s more, authorities which give social care can force a statute of up to 3% – leaving an absolute conceivable rise of 5.99%. After increase of 5.1 percent in council tax was reported toward the start of the tax year in April this made up the biggest increment in council tax for English family households for a staggering 14 years. With an increase in council tax up to 6% this will lead to government earning more money (Bloom, 2018). As now they can earn more money through housing and council tax.
Government may also setup their sustainable deficit where sustainable deficit refers to as the ability of the Government to continue its present spending. Revenue from housing and council tax also helpful to pay debt, tax or other current policies compared to selling their own assets and this can save economy from going into the deficit.
Some might argue that imposing an increase in tax might not be the best solution as with an uncertainty already going in United Kingdom with Brexit and the economy suffering loss people might find it hard to pay the tax, and for those who can’t pay government has to pay those tax. However as said before because of the rescission United Kingdom is going through in order to solve their sustainable deficit they need to increase housing or council tax, so they can generate income to help run the economy if the Brexit deal goes through. For a country to grow economically they need to make sure they keep their deficit as low as possible.
The UK’s exit from the EU marks a huge change in the nation’s economic association with the coalition. The UK will move far from close integration and co-task with its closest neighbours. The fate of United Kingdom is still unknown with Brexit deal still being negotiated. With United Kingdom facing sustainable deficit and inter-temporal budget constrains the policies which some might find harsh but are suitable to overcome these constrains. Limiting child benefits to only 2 children and increasing council tax will help government to save money in order if their currency depreciate if European Union leaves United Kingdom. If Brexit takes place, living cost will increase as now they will have to pay tax for the food coming to United Kingdom until or unless the government can come up with a solution which can be best suitable for both United Kingdom and European Union.
- BBC News. (2018). United Kingdom country profile. [online] Available at: https://www.bbc.co.uk/news/world-europe-18023389 [Accessed 10 Jan. 2019].
- Nationsonline.org, k. (2018). United Kingdom – Country Profile – Nations Online Project. [online] Nationsonline.org. Available at: https://www.nationsonline.org/oneworld/united_kingdom.htm [Accessed 10 Jan. 2019].
- BBC News. (2019). Economic effects of Brexit – BBC News. [online] Available at: https://www.bbc.co.uk/news/topics/cv0kerlpjwvt/economic-effects-of-brexit [Accessed 11 Jan. 2019].
- Butler, P. (2019). ‘Two-child policy’ cuts benefits of more than 70,000 families. [online] the Guardian. Available at: https://www.theguardian.co.uk/society/2018/jun/28/two-child-policy-costs-families-thousands-financial-support-figures-show [Accessed 12 Jan. 2019].
- Arestis, P. and Sawyer, M. (2006). The Intertemporal Budget Constraint and the Sustainability of Budget Deficits. [online] ResearchGate. Available at: https://www.researchgate.net/publication/255660903 [Accessed 11 Jan. 2019].
- Pelinescu, E. (2000). Sustainability of Public Debt and Budget Deficit. [online] Academia.edu. Available at: http://www.academia.edu/3108465/Sustainability_of_Public_Debt_and_Budget_Deficit [Accessed 11 Jan. 2019].
- Bloom, D. (2018). 13 Tory government policies taking force in 2018 that could affect you. [online] mirror. Available at: https://www.mirror.co.uk/news/politics/13-tory-government-policies-taking-11776099 [Accessed 11 Jan. 2019].
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