An analysis of uk economic perfomance in third quarter 2012 Essay

An analysis of uk economic perfomance in third quarter 2012 - Essay Example The recent riots in the streets of the capital, London and other major cities are an example of that. Several economic strategies have been employed to arrest the slide with little success. In the midst of all these despair, the government led by Prime Minister David Cameron has even sought to convince the people that economic growth is not the only indicator of prosperity. He has sought to use the ‘happiness index’ as a marker that the economic situation is improving. However, preaching this new gospel to a generation that has been obsessed with growth has been akin to preaching to the converted. This paper shall seek to analyze the economic woes facing the U.K, look at the remedies the government has put in place, suggest more effective policies and even explore the likely positive or negative reactions of the economy to these measures. The fourth quarter of the year 2012 ran from October to December; and during this period the UK economy contracted by 0.3 %. This is a ccording to a report by the National Institute of Economic and Social Research (Anon 2013b). The same report went on to blame such slide on the unrealistic expectations raised by the economy in the third quarter. This is when the Olympics took place, and there was an economic revival caused by large numbers of incoming foreigners. This in essence means that the UK did not witness any period of growth over the last four quarters. However, amidst all this economic gloom, the service sector, the biggest in the country, actually grew although at a marginal rate of 0.1% in the month of October (Elliott 2012). This slide in the last quarter also intensified fears that the economy was on track for its third recession in almost as many years. There was also increased fear that the UK was headed for a triple-dip recession. Amidst all these angst the government was, as expected, defensive at the suggestion that its policies were not working. The Chancellor cited the crisis in the Eurozone as a contributory factor and even suggested that huge public debt built under the previous administration was to blame (Anon 2013a). As all this happened, the credit rating agencies were watching waiting to pounce. Any downgrade in the status of the UK’s credit rating would be the final blow. The government has over the last few years tried different measures which have had varied amounts of impact in the course of the recession. Among the most prominent have been the Treasury’s Deficit Reduction Program, raising taxes, cutting spending on welfare and ‘raising the axe to capital spending programs (Kirby 2012). All these shall be discussed below. Their initial objectives shall be analyzed, their current successes or failures shall be looked at, and finally I shall suggest alternative means to push for these policies or suggest new alternative policies altogether. Deficit reduction is indeed the most prominent among all the policies that have been instituted by the go vernment. The government put this program in place soon after taking over. and in 2010 it held some promise, even drawing praise from the IMF. Under this program, the government sought to reduce the public debt that had ballooned under the previous Labor administration. By August 2012, the deficit stood at 14 billion pounds (Anon 2013a). The deficit is already rising and so the Chancellor shall have to abandon the program