Effect of the Budget Announcement on the Economy Essay

Effect of the Budget Announcement on the Economy - Essay Example This has occurred as a result of the announcement made on budget day; alcohol was increased by six percent over inflation. Spirits, wine and beer were all affected by this price elevation. (British Retail Consortium, 2008) The speech has also affected the rate of availability of fuel. The chancellor announced a fuel allowance for mature citizens. However, such an allowance had to be compensated by other users of the resource. This announcement actually contributed to the rising fuel costs. Besides that, the chancellor also announced that polluting vehicles would have to pay up higher road taxes than their 'green' counterparts. This would have been a way to offset the allowance given to senior citizens. However, the chancellor asserted that the measures would be implemented in the month of October. This is already starting to cause tax contributors and may continue to do so in the year 2009. Perhaps the major reason for this delay was to appease economists and consumers who were likely to demonstrate over rising fuel costs on the streets. However, environmentalists are not very happy about the chancellor's moves. They feel as though they have been short-changed by his delays. The money market did into improve in any way. Before March, the UK was the country with the highest inflation rate in G7. As if that is not enough, the country also has an extremely high budget deficit. Many analysts assert that the chancellor expressed optimism for the future of the country yet the rate of borrowing within the UK did not give him reasons to be optimistic. This is still the case presently. The latter results could have been heightened by the fact that the budget was extremely tight. Almost all the finances were allocated somewhere. The overall result was that there were no savings or available finances to dispose off. (Meader, 2008) The overall predictions about the economy within the budget speech also came true. The UK is operating within a volatile global market where the economy outside UK is negative. The same has affected the UK too. This is also likely to continue into the next year. However, even that pessimism was still not up to per with the current reality. Chancellor Darling announced that the UK economy would increase by between one point eight and two point two percent. This level has still not been achieved today as borrowing levels have exceeded predictions made earlier. Overly, the budgetary effect seemed to have been offset. This is because the Chancellor was announcing the budget against the following issues; A global credit crisis Public finances that were tight A slow domestic economy The Chancellor was faced with the option of cutting down taxes thus promoting growth or he could have increased taxes and promoted public financing. Each measure would have totally different effects; the former would have caused a lot of discrepancy from financial market stakeholders as it would be detrimental to that sector. Additionally, the latter measure would have derailed the economic process. What the Chancellor decided to do was to reduce taxes in certain areas and increase them in other areas