George Osborne, the Chancellor of the Exchequer, is expected to announce his upcoming plans to stimulate the economy of UK that has been hit badly by recession.
The government of UK has offered to provide guarantee on a private investment of as much as £50 billion or 78 billion dollars in infrastructure projects and exports as per the Wednesday’s reports state. The plan also known as the U.K. Guarantees has been so designed that it uses the strength of the balance sheet of the public sector of UK. This will result in the accelerating of the major infrastructure projects of UK that have nearly come to a halt as a result of the difficulties faced while accessing the private finance in the midst of tough credit conditions.
The state of Britain:
According to expectations from by Mr. Osborne during his announcement of the plan on Wednesday, the credibility of Britain has been won through a hard way and involved very tough and complex decisions. He should also add that he therefore wishes to ensure the fact that the benefits of it are passed on wholly to the economy of the country. The use of state guarantees is among the very few measures that the government of UK has at its disposal for stimulating the economy of the country. Moreover this step would not even hurt the primary goal of the government that is to tackle the budget deficit. As the economy of UK continues to deteriorate, evident from the fact that it fell back to recession in the first quarter this year, the government has been under constant pressure from the lawmakers supporting the opposition party. Some economists and business groups are also putting pressure on the government to ease some of its measures that depict aggressive austerity.
Point of view of the government:
The government and Mr. Osborne have vowed repeatedly to stay on course to their plans to remove the structural budget deficit of the country of the next five years. This means that their credibility might well be dented if the country lends some more to instigate a tax break or else slow the pace of their spending cuts. The government is therefore hamstrung in their measure of boosting the growth of the company. The U.K. Guarantees plan has come up right after the Bank of England and the Treasury had a launched a joint initiative only last month the offer the banks of UK an unprecedented access to the funds of the central bank if they vow to lend to the business and the households. The government expects that the program of Funding for Lending will cause an extra credit of £80 billion to flow into the economy of UK. Moreover the government is also expected to announce further plans that will ensure usage of the government guarantees in order to help the housing sector of UK sometime around the next week. The coalition government has however made no secret of its views regarding the fact that the creaking infrastructure of UK is a big hurdle to the economic prosperity of the country in future.