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Thursday 21 January 2016

Drowning In It

The UK government's projected deficit for the 2015/2016 budget is £69 billion.

Projected revenue is £673b - that is, the income the government takes. Meanwhile, the government's spending is projected to be £742b. The debt is owed toward a wide variety of individual funds, 35% of which are overseas; debt is an asset, and so it gets passed around and sold just like any other financial instrument.

Let's be real. These kind of numbers are big. They're not global-fiscal big but they are big nonetheless.

Government finances don't work the same as personal finances - something that a lot of people who advocate austerity and cuts don't realise.

You see, in your personal life, if your expenditure outweighs your income - then something has got to give, because no person has access to a near-limitless source of fiscal stimulus to buy themselves out of trouble. You reduce your expenditure, and you increase your income, and just like that - your deficit goes away. Therein is the acumen of austerity. Cut costs and increase income as best as possible.

Of course this is sometimes easier said than done. There's a certain amount of minimum spending that any human being has to do - guy's gotta eat. Just acquiring more income isn't that easy, either. As of right now the job market is still suffering, especially in my corner of these sceptered isles, and businesses (who are also still suffering) are trying to cut their costs as much as possible, so pay raises and extra hours aren't ten-a-penny.

If one could lay hands on a certain amount of resources, mind, then this would become easier - and not just in a sense of paying for bills that the income isn't covering. Many people have debts that can be paid off (and thus reduce monthly costs) - many people could make investments in business, especially those that are self employed (and thus increase monthly income). People just can't, very often, count on that cash injection.

As previously mentioned, however...government finances don't work the same as personal finances.

So perhaps I can forgive those that might think that austerity cuts are truly the best way to repair an economy. Perhaps. Up to a point. There are those that should know better - if they don't, they shouldn't be working where they are, or governing us.

This country's debt has been increasing steadily (as a percentage of our GDP) since 2001 - slowly and steadily until 2007, then rapidly and vastly increased by the global financial crisis. It is still increasing now, despite the savagery of the cuts that have already been doled out.

The fact of the matter is - just decreasing cost to make the deficit go away won't actually solve problems. A country's economy is an elastic thing, and it is a thing that can be nurtured as well as atrophied. We can emerge from this crisis with no deficit and an economy that is shot to hell, or we can look at our recovery as more long-term - and actually recover.

But that's just me.

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