1. Austerity measures
‘Austerity measures’ are the policies that have been put in place by the government to both pay off the country’s overdraft (the national or sovereign debt), and to reduce our budget deficit (the amount the country overspends each year). At present the government owes over £1trillion and our budget deficit for the year 2011-2012 was £126bn. The measures are a combination of cuts to public spending and increases in taxes, for example, the increase in fuel duty, VAT, taxes on the disabled and pensioners, and reductions in care, education and public services. It is the belief of the government that harsh austerity measures, a short sharp shock, will reduce debt and aid the recovery from the financial crisis. However, it is also argued that the austerity measures have: •
Reduced living standards for the majority of people in the country
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Affected the poorest hardest
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Lead to worsening socio-economic conditions within society
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Reduced the amount of disposable income for most people
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Reduced the amount of consumer spending
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Reduced the demand for goods and services
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Reduced economic activity in the country
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Lead the country back into recession
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Initiated the wrong approach to encouraging recovery 5