MACRO ENVIRONMENT

Macro Environment



Macro Environment

Introduction

The measures announced by the government since the elections, Prime minister Cameron had set the tone. The budget "emergency" June 22 confirmed the return of fiscal discipline in the UK. The Chancellor of the Exchequer George Osborne has presented a plan to reduce the deficit by £ 116 billion (8.2% of GDP) in five years, primarily through a drastic reduction in spending but also through higher taxes including the increase in VAT (already noted in 17.5% in January 2010, after a temporary drop to 15% and introducing a tax on banks in January 2011.

Discussion

During the past three decades consumer expenditure has always been the significant driver of UK economic growth and development, but this boom finally came to an end in the beginning of 2010 when first the hike in oil prices and then the inception of the credit crunch activated a sharp consumer cutback. The peak-to-trough slide in customer expenditures was considerably larger than those witnessed in either of the two preceding UK financial turmoil, and the successive recovery has also been much slower. Prospects for the next years to come are relatively depressing, with household consumers under high pressure. It is probable to be 2013 before customers can start to witness the economic healing (Mark, 2010, 21).

The objectives

Balanced current budget balance in 2015-2016 (for a deficit of 1.2% in the direction of Maastricht);

Decline in the ratio of public debt to GDP from 2014-2015;

£ 116 billion (8.2% of GDP) in savings between 2010-2011 and 2014-2015 from the budget presented by the Labour Party in March, for a consolidation plan that totaled £ 128 billion (9% of GDP).

Decline in spending

Freeze wages for two years in the public (except for employees earning less than £ 21 000);

Acceleration of raising the retirement age to 68 years;

Decline in family allowances: three-year freeze, cancellation of families whose income is above £ 40 000;

Suppression of Health and Pregnancy Grant program for pregnant women;

Indexation of allowances to inflation;

Payment of the allowance for disabled persons under medical assessment from 2013;

Capping of housing benefit to £ 400 per week;

Reduction of tax credits for households earning more than £ 40 000;

Gel £ 7.9 billion per year of the Civil List (public money paid to the Queen).

Reason for the Implimentation of Austerity Measures

Financial crisis of 2009 - 2010 that affected every other Global organization gets considered the worst of all crises since 1929. Because of this financial crisis many of the bankers, hedge fund manager and various other financial officers gets marked guilty (Robert, 2010, 12). Financial regulators are also being questioned that if there were faults in the system then why they did not identify; and eradicate them in the first place. Some of the reasons that were the principle causes of this dreadful crisis get explained below.

Market Instability

One of the major factors for the financial crisis was market instability. It got caused by many factors, but majorly it got caused ...