Britain makes deep cuts to government budget

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In the face of a very big deficit, the UK announced serious cuts virtually across all government departments. In fact, on average each department is being cut by almost 1/5th. With a near 20% budget cut, it will also be letting go of almost 500,000 government employees. Cuts of this level are considered very big for any developed country. They believe that this is necessary to save their future economy and feel that it outweighs the risk that the cuts alone can hurt their recovery.

The conservative school of thought on this would agree with this view and are likely supporting this major cut. However, liberal economists believe that this will make the economic situation in Britain far worse. Some are even saying that it will cause a massive recession or even a depression. I won’t get in to the details of the cuts throughout all the departments but, after looking at those figures, I don’t see how these cuts will cause anything close to a depression.

Yes, some departments have very deep cuts, but overall the cuts that are being made should be absorbed by the greater economy as the global recovery continues to grow. It is not like the government and public services will be disappearing. In fact, some key services managed to get an increase in all these cuts. It is possible that the economy will feel a small set back due to these cuts, but that will likely be short lived. Keep in mind that in 2012 London will hold the Summer Olympics which could give a shot in the arm to their economy. Summer Olympics can also go the other way in terms of economic success, but hopefully the UK will be able to turn a profit on it.

For North America, a slower UK recovery or even a small recession there should not be too much to handle. Even though the U.S. and the UK are very close, economically the UK’s influence on America is limited. Frankly, the Chinese economy is far more relevant to the U.S. than that of the UK.

All in all, I think a lot of these cuts are necessary and are likely to be the right decision for the UK government to take.