Austerity is defined as a set of policies which seek to reduce spending in public services and benefits as part of a deficit-cutting measure that a government may pursue. If we apply this to the UK, this is demonstrated in the recent cuts to public services e.g. the police, the NHS and the armed forces in light of the economic recession which has blighted the UK economy since 2008.
The theory behind financial austerity is that of the “Expansionary Fiscal Contraction” theory, which suggests that a major reduction in government spending that alters expectations of taxes, will therefore increase consumption, leading to economic growth as part of the GDP formula:
Has austerity worked? Is cutting valuable public services which people pay for (through tax and National Insurance contributions) really the way forward to rebooting Britain’s economy? What about cutting the salaries of MPs for a start? I’ll let you be the judge of that.
Guest Post by Clement Chew