Currently the UK economy has a greater expenditure than income with £720 billion being spent and only £612 billion coming in with an additional £108 billion being borrowed. The current debt in the UK economy is £500 billion which has an interest per year of around £20 billion. For the past 2 years the GDP growth has been fairly consistent staying at around 0.5%. Inflation has fallen from 5% in 2012 to around 0% currently in 2015. Unemployment is currently falling along with Jobseeker’s allowance. Overall the economy is in a bad state and needs to have more money coming in and less going out.

A fiscal policy to reduce government spending and raise taxation would be one way to help try and reduce the current debt. If the government were to reduce Job seekers allowance it would mean that there would be less money being claimed. Also as the Unemployment graph shows, as jobseekers allowance falls so does unemployment. With unemployment also falling less people would need to claim jobseekers allowance and those that do wouldn’t be getting as much therefore reducing the government spending. Also this would bring more money into the economy as more people would be working which would increase the rate of economic growth.
In the short run this strategy would work as it would reduce unemployment however in the long run it probably wouldn’t be as effective as it would lead to an even greater divide between rich and poor people. Also this solution would be that it would have a huge impact on lower income families as if they couldn’t find a job it would make it hard for them to live as the current job seeker’s allowance is only just enough to live on as it is so although it would reduce the overall debt it would probably be morally wrong to do it.

A more suitable way to solve the problem would be to use taxation in the form of a mansion tax on properties over £2m. By