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January 24, 2014 / politicsbitesize

Austerity Britain

IMFimgIn a report published this week, the International Monetary Fund (IMF) revised its forecast for the UK economy. Gross Domestic Product (GDP) is expected to be 2.4% in 2014 rather than 1.9% as previously predicted.  In 2012, Christine Lagarde, the IMF managing director, expressed concerns that growth levels in the UK economy might be stunted due to the government’s austerity drive.  She urged George Osborne to consider a Plan B and slow the pace of public spending cuts if the UK’s economy remained weak.

But given this revised forecast, it seems that the Chancellor’s confidence in his Plan A was not misplaced. The Treasury was keen to enjoy the moment to the full and soon after the IMF’s calculation was released it issued a statement saying that the, ‘report provides further evidence that the government’s long term economic plan is working’.

A positive prediction for the economy is welcome news, but what exactly is GDP and how will it affect the living standards of ordinary workers in the UK?  Economic theory defines GDP as representing ‘the market value of all officially recognized final goods and services produced within a country in a year, or other given period of time. GDP per capita is often considered an indicator of a country’s standard of living but it is not a measure of personal income’.

So, whilst GDP measures the overall well-being of a country at a macroeconomic level, it doesn’t reflect the income or the financial circumstances of each individual.  The Chancellor’s Plan A may have gone some way to clearing down government debt and raising GDP forecasts, but what effect has it had on British citizens?

According to the People’s Assembly, George Osborne’s austerity measures are hitting the poorest in the community the hardest.  His continued assaults on the welfare budget and cuts to local councils and to NHS funding mean that the standard of living and budgets of fundamental public services have declined.  Hard working people are facing cuts to existing benefits, such as council tax and housing, which means that incomes have to stretch that bit further than before.

The cost of everyday items has risen, but wages have stagnated and because of this it is difficult to see, on a microeconomic level, that the austerity measures the Chancellor has implemented are in any way positive.

The IMF may have predicted an increase in the levels of the goods and services that the UK produces as a whole, but the individuals who work hard to generate this productivity are still facing difficult economic times.

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