UK Economy: Small Growth Rate with Big Questions

The latest economic figures from the United Kingdom brought some relief with a growth of 0.2 percent in August. After two months without economic progress, the narrative that the economy had stalled was slightly brightened. In August, political voices were still loudly speaking of a dismal state of the British economy. Although this positive development is welcome, the question remains whether this small growth is indeed a cause for celebration. Long-term development counts, and although forecasts for the UK economy have significantly improved since the beginning of the year, the country remains far behind the necessary growth rates. These are needed to fulfill the promises currently made by politicians to the citizens. The "Green Budget" report by the Institute for Fiscal Studies (IFS) provides further reason for skepticism. To maintain the targeted growth in public spending, the new Chancellor of the Exchequer, Rachel Reeves, requires additional tax revenues amounting to 25 billion pounds. The fiscal situation, highlighted by the IFS, was evident before the elections, yet it remained uncommented on by political parties. Given the already strained budget situation, the Labour government, which has made promises of growth and increased spending, may be forced to make unpopular decisions. While there is talk of promoting growth and cutting taxes, concrete measures and reforms are lacking to offset initial losses and address the deficit in the medium term. A look at the past shows that both currently and during the Conservatives' leadership, expensive promises were made that are not realistically funded. The desire for high spending while simultaneously relieving taxpayers ultimately led to an economic dilemma that now needs to be resolved.