Just as a matter of principle, the UK should not be running deficits. It is unconscionable for any 1st world nation, especially one with so many gifts, to NOT spend within it’s means.
Running deficits year in and year out, is the kind of undisciplined behavior we expect from the most primitive undeveloped economies, not the UK, for goodness sakes!
Legislation should be passed in the UK (and independently in all other 1st world nations) banning deficit spending by the federal government except during wartime, or other significant emergencies.
Whether it is affordable or not, is irrelevant as it is simply morally wrong to mismanage, when sound management would suffice.
Every pound that is borrowed when in deficit, and then later tacked onto the federal debt of a nation, takes food out of the mouths of the citizens – as each individual pound borrowed carries with it a borrowing cost (compound interest) which, any banker can tell you will end up costing you very many pounds in compound interest.
Which would be almost fine, I suppose, if that interest was staying in the country. But it’s not.
International lenders carry shiploads of money out of the UK and other Western economies every single year in the form of interest paid on government deficits and accumulated deficits (debt) from years and decades gone by.
It is a travesty and it’s immoral to give away the wealth of a nation in slow motion. That money is gone forever.
For now, to solve the immediate problem, the UK as it is sovereign in it’s own currency, should print more than enough money to pay the deficit — PLUS 20% — and that 20% could be used as a stimulus fund on “shovel ready” infrastructure money in the highest unemployment regions of the country.
Instantly, that money would begin working to return the economy to a better place and through taxation (employed people spend more and pay more income-tax) lift the government’s revenues.
Not only would the government save the cost of the compound interest for this year’s deficit, they would receive much of it back through various taxation, further removing stress from the government’s accounts. Let alone continuing to pay interest on it for a decade or two, before finally getting this year’s deficit paid off.
And while they are at it, they should invoke a slight devaluation of the pound, to enhance exports, to further stimulate the economy, adding jobs in the process, which means adding more taxpayers to the government revenue stream.
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