Politics Homework Help

Why does the Coalition Government believe that deep cuts are necessary in public spending?

Why are these cuts opposed by opposition politicians, pressure groups and trade unions?

Many Thanks.

Reply 1

strawberryjellybaby

Original post by Anrel

Why does the Coalition Government believe that deep cuts are necessary in public spending?

Why are these cuts opposed by opposition politicians, pressure groups and trade unions?

Many Thanks.

1) Well, it's down to economics really. We are currently operating at a budget deficit i.e. the government is spending more than it is taking in taxes. The problem with this is that the extra spent that is not got through taxes has to be borrowed. This is then subject to being charged interest, currently £42.9 billion was owed in interest on government debt in 2010. The options are either to raise taxes or cut spending, which the coalition did both to work towards reducing debt payment.

2) This is opposed firstly because government cuts means job losses within the public sector which of course trade unions would be against because they should be representing workers. The opposition in the form of the Labour Party see a more Keynsian theory side to economics, namely that you should spend your way out of a recession.

It is a little complicated but if you have ever heard of the multiplier effect, essentially if the government spends money on say, building a new hospital this increases employment as workers have to build the hospital. These workers then have increased disposable income and go out and spend it on this such as British cars. The people who make cars then have confidence in the economy and invest in new technology to make more cars. Thus, the economy grows.

The problem with this is that as seen in the USA by the stimulus package, it doesn't work if there is no confidence in the economy and people tend to save if they think they are likely to lose their job in the future.

Hope that helps!