Government GBP 11.5bn Austerity Cuts

Government £11.5bn Austerity Cuts.

Fresh new cuts are set to be introduced by George Osborne in 2015 which will pave the way for the general election.

The new spending cuts will save around £11.5bn for a single financial year helping to reduce the deficit.

Certain sectors will be protected from these cuts, such as heath and schools meaning other sectors will be hit harder.

The general election is set for May 15^th 2015 and Labour has already said that all the cuts will be kept if they were elected into power.

Backing this, Mr Osborne will also confirm tomorrow a huge round of government spending in infrastructure and building projects via fiscal policy to increase activity and money flow in the economy.

In perspective - Our view

Britain is overdrawn by over £1 trillion.  This sum equates to around £45,000 per UK Household.

The Government plans to spend around £700 billion this year.  That is around £32,000 per UK household.
These are scary numbers.  The average UK working family in this country therefore receives way more back than what they actually pay in tax.  It is business and higher earners that fund the rest of the population and are overburdened with tax.

The suggested spending this year means the government will again have to borrow more money:

1. A third of government spending goes on welfare
2. A third is spent on health and education (protected from cuts)
3. 20% is spent on Armed Forces and Defence
4. 7% is wasted to meet debt interest payments.

This does not leave a lot for paying the debt down or balancing the books.  Next year we will still be £1 trillion overdrawn.

If Britain was a business, our advice would be to close it down.  Too many liabilities and too many staff that do nothing.

George Osborne is therefore faced with the dilemma that he must cut spending but spend and stimulate the economy.

There is only one way to do this:

Reduce benefits and spend in areas that will drive up inflation i.e. building and infrastructure that will drive up prices and inflation, thereby devaluing the real value of the "overdrawn" debt without ever repaying it.