Budget
...ce of income, the sick, business and industry, culture, media, the arts or sport. In so doing the government have key economic targets that they are aiming to achieve. These are: · Low unemployment · Stable inflation rates at the target level · Sustainable economic growth (in the sense that growth will not trigger inflation) · A serviceable trade balance The chancellor (secretary of finance) in the U.K. is Gordon Brown who has been at the helm of the UK's public finances since 1997 and whilst rumours continue to circulate that he would rather be in number 10 Downing Street rather than number 11, he remains a largely successful Chancellor in terms of economic performance. This budget however may well be even more crucial than all the others. Mr Brown has prided himself on being a 'prudent' Chancellor who is not willing to take risks with the UK's public finances but in recent months changes have occurred in the UK economy which could force the Chancellor to have to make some (even more) unpopular decisions that could be damaging, given the fact that a general election may be less than two years away. The two fiscal rules of the present chancellor (Gordon Brown) are that borrowing will only be carried out to fund investment projects that will increase the capacity of the UK economy and will not be used to fund 'current spending' on things like nurses and teachers pay rises and so on. The second is the 'sustainable investment rule'; this states that public sector debt will be stable over the period of the economic cycle and will not, in any event, exceed 40% of GDP. Public sector debt is the amount of money the government owe to others, it is essentially where the government have borrowed and are borrowing – things like Treasury Bills, bonds, gilts and so on. A surplus is where government receives more in revenue than they spend – this may allow them to be able to pay back some debt. A deficit id the opposite and may necessitate for the government having to borrow more! Second quarter figures for economic growth showed a rise of 0.9% giving an annual rate of 3.6% according to figures released by the Office of National Statistics (ONS) last week. Gross Domestic Product (GDP) measures the value of output of goods and services in the economy over a given period. It is measures through three approaches, the output approach, measuring the value added through the production of goods and services in the economy, the expenditure approach - the value of expenditure on final goods and services and the income approach which measures the value of incomes generated through the production of goods and services. The main driving forces behind the growth rate was in manufacturing and production industries, where the second quarter growth rate was 1.2% and in distribution, hotels and catering which also saw a rise of 1.2%. Many factors influence the rate of growth in the economy; the government obviously have a large input into overall spending in the economy accounting, as they do, for an estimated 41.5% of total spending. Other factors can also have a significant influence on the figures; world-trading conditions, political events, the weather, major sporting events and, very importantly, expectations about the future economic climate. GDP is also important for the government and for the nation, because it gives an indication of the likely tax revenues that the Treasury will receive and therefore gives the Chancellor the information on which to base spending decisions on health, education, the armed forces, social services, pensions and so on. An annual rate of 3.6% is quite healthy and shows the UK economy to be in reasonable shape in comparison to our main trading partners. The US growth rate for 2003 stands at 3.0%, Japan, 2.5%, France 0.5%, Italy, 0.4%, Spain 2.5% and Portugal -1.2%. That last figure means ...