The UK as a country, are accustomed to living beyond their means. The Great Britain runs a large budget deficit. The money a country cannot raise from taxation needs to be borrowed and especially in UK where people are receiving benefits (e-g Health NHS, Pensions and home support etc) . This is when the Budget Deficit occurs. The Budget Deficit means the amount which Government spending exceeds its income over a particular period of time this is when the economy goes into recession .It is the opposite of budget surplus .Budget surplus is when the governments expenditure is less than the Governments income . The Damaging effects of Budget deficit are Inflation i-e high prices of goods and Unemployment .
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The budget deficit leads to unemployment i-e the number of people gaining jobs is less than the number of people losing jobs. This occurs when an economy is in a recession . The employers are not willing to take a risk during recession so they don’t employ youngsters. Because in a recession there is inflation i-e high prices of goods and services so the sales are not at their peak so they don’t employ youth staff because of their expenditure and high prices of goods and services during recession .
The unemployment rate in UK now is 7.8 % i-e 2.50 million .The Unemployed people increased by 49,000 over the quarter to reach 2.50 million. Male unemployment reached 1.48 million while female unemployment reached 1.02 million. The unemployment rate of people of age 16-24 increased by 1.0 on the quarter to reach 20.3 %, the highest since 1992.There are several damaging effects of unemployment to economy if the people are jobless than there are less tax payers in the economy .This is not because the person cannot find him/herself a job it can be due to any reason.It could be due to cyclical , strutural , seasonal or strucural unemployment .The Government has to find a way , Because if people are jobless or unemployed then there are less tax payers and thus the improvement in the economy could be marginal.The Government should provide support to the unemployed people and to the companies as well which are struggling at the moment to get them going because if the comppany gain profits then they can pay the income tax .CBI (Confederation of buisness industry ) estimates that the unemployment rate in Britain will reach 8.4 percent in 2011 , up from 7.9 % last yearr and that it will remain unchanged in 2012.
The budget deficit also leads to inflation which means higher prices of products , the Government can impose high taxes on products and higher income taxes . The Government can reduce inflation in many ways . They can do it by wage control which again might lead to frictional unemployment because mostly the employees are not happy with low wages or salaries . The other way of reducing inflation is monetarism controlling inflation through controlling money supply . But both ways of controlling inflation leads to youth unemployment . Therefore the Government must try for stable low inflation . 0 % inflation is not feasible in an economy because of the Government spending or expenditure .The other policies that can be used to control inflation is by slowing down the growth of aggregate demand or boost the rate of growth of aggregate supply .
If the Government continued cutting budget , then unemployment would keep on rising. so they have to borrow a limited amount of money .There should be an availability of funds to small and medium enterprises so that the enterprises employs more youngsters so that the people getting jobs could pay the tax again . They can do this by helping someone in building a firm or an entreprise financially and the Government should also encourage other people to build firms because for some people it is a gamble or a risk , People want to do it but the situations don’t let them do it e-g during a recession ,Nobody is willing to take a risk as it will lead to failure . So the Government should encourage them so that they can build a firm and start doing business and the business cannot be run without labour so they would employ young guns so that would decrease youth unemployment. During the recession, When the unemployment is at its peak the enterprises or firms pay low wages. When the enterprises need employees or staff, and there are many people that need work especially youngsters , than open positions, the enterprises select those persons that request the lowest salaries but when the entreprise is struggling to find new employees then the entreprises offer high new wages to get the employees they need , It means wages and salaries are low during high unemployment .
Youth Unemployment can also be decreased by regenerating businesses. Many businesses opt to close after a suffering a great loss in a business or there is less productivity or the employees are not happy with their salaries and wages so businesses then opt to close. But if the Government could help them financially in starting up or regenerating that business again then there is a chance of a decrease in youth Unemployment.
Sometimes Fiscal policy can help in reducing youth unemployment .According to Keynesian Fiscal policy means “the revenue collected through taxation” . By using the fiscal policy the Government can increase the aggregate demand which will result in higher output and which will lead to the creation of many jobs and the youth unemployment can be decreased but that will give birth to another disease i-e inflation which means higher prices of goods and services .
The UK Government should increase the exports to other countries i-e sending UK-made products to other countries . It is a very good way of income and unemployment can decrease because of the income the Government might not implement major budget cuts mostly due to which unemployment occurs and there should be a decrease in imports. The interest rates of the banks should be kept low. Making local market competitive abroad by devaluing currency .
The Government should encourage overseas investors because they are a boost to the economy by allowing businessmen from other countries to invest in the UK and because of that people are going to get jobs in those firms and moreover the overseas investor brings money to a country which is a good sign for an economy . This is one of the best way to avoid budget deficit in an economy .
The Government should also discourage asylum seekers because the Government spends a lot on the asylum seekers. The Government should try to expand their International Market they should discover specialised UK products. Politicians in the G20 nations must ensure that progress is sustained, but in the UK the Government should not flinch from taking additional prudential measures. we have to rethink our approach to the economic consequences of our now rapidly ageing society. have to reshape the structure of public finance, and not limit the debate to “this tax or that tax” or the scale of efficiency savings. A root and branch restructuring of the tax and benefit system, to include cutting benefits paid to the better-off and anachronistic tax breaks and subsidies that benefit companies, could generate billions of pounds in revenue.
To conclude , There are many ways in which a Government can reduce unemployment but it totally depends on the Government i-e which policy to use at what time ?.
Firstly they should keep control on their spending and stop the budget deficit from happening