Friday, August 9, 2019

What factors account for the current level of public indebtedness in Essay

What factors account for the current level of public indebtedness in the UK and what economic and fiscal measures can the UK Government use to reduce that level of debt in the next 5 years - Essay Example Even in the countries with no major affected of the financial crisis, the national debt rose approximately 20% in 2007 to 2009. United Kingdom is one of the five countries with systaltic financial crisis. In these countries the national debt is approximately 75%. Like the rest of the world, UK is greatly affected by the financial crisis that led to an increased budget deficit and public debt. The situation was alarming as the public sector total debt was  £1, 231 .7 billion by the end of November 2013, equal to 76.6% of GDP (ONS public sector finances, 2013). During the global financial crisis from mid 1990s, public sector debt fell to 29% of GDP. UK national debt witnessed an increase of 37% of the GDP from 2002 – 2007. Even during the long period of expansion the public debt in the country kept on increasing. The main reason for this was considered to be the countries increased spending on health and education (ONS public sector finances, 2013). Not only that the spending on social security was raised as well (Ecomincs Help, 2013). In UK the other reason behind the sharp increase in public debt are: The rescission 2008-2013 particularly affected the housing industry resulting the falling of house prices, low taxes and unemployment. The country has seen a sharp decline in the income tax receipt and corporation tax. These factors later exposed the structural deficit. Many financial institutions bailed out that included Northern Rock, RBS, Lloyds and other banks. Debt is considered to be a two edged sward. It is its use and application that can minimize its adverse effect. If utilized wisely it can no doubt be a support in the rough times, but if not it can result in a disaster. Still the importance of borrowing cannot be ignored in the present times. The role of borrowing at the public level has gained importance after the great recession and the public borrowing globally has increased

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