Tough but fair budget makes UK economy more competitive (2)

15:05, June 25, 2010      

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Short-term pain, long-term gain

Sparkes said that if the government puts the entire burden on reducing spending, then that would mean a lot of job cuts, particularly in the public sector, which the British government decided was not appropriate. The taxes have to go up in the short term, and it is right for countries like the United Kingdom to tackle the budget deficit.

"Our budget deficit has got to a level that is very high indeed. If it got any higher, all our money will just go to pay for interest payments. We will no longer be able to stimulate the economy," Sparkes added.

The United Kingdom is now undergoing structural reform to make national economy more competitive. Moreover, Britain enjoys an independent monetary and currency policy. The Bank of England, the United Kingdom's central bank, will keep interest rates as low as appropriate for as long as necessary to support the recovery.

During the interview the counselor also called on all countries to resist protectionism and open up markets for international trade. All measures the United Kingdom is now taking aim to boost international trade. The global level of demand will grow despite the fiscal consolidation that is happening in the United Kingdom and some other countries.

Finally the counselor also mentioned that the value-added tax will increase. He held that people pay the value-added tax every day, so everyone is going to be hit by the increase. But the fact is that rich people generally spend more than poor people, so the rich will contribute more than the poor to the increase of extra revenue.

The budgetary objective for the British government is to eliminate the structural budget deficit by the end of the five-year parliament to ensure the public debt is falling in terms of its share of the United Kingdom's GDP.

Currently, the British government has put more emphasis on the reduction in corporation taxes on the business tax regime, green stimulus and the reform of the welfare system. What people will see during the coming year is structural reform in the British economy and the government working with international partners to increase global trade opportunities.

By People's Daily Online
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