public-sector-debt-ons

UK National Debt

The UK national debt is the total amount of money the British government owes to the private sector and other purchasers of UK gilts. In April 2015, public sector net debt excluding public sector banks (PSND ex) was £1,487.7 billion (80.4% of GDP) Source: (page updated June 1st 2015) Budget deficit – Annual Borrowing This is the amount the government has to borrow per year. In 2012/13 net borrowing was £115bn (7.4%) (Excluding Royal mail and transfers) In 2013/14 net…

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Diverted profit tax

Firstly, sorry for the low levels of blogging recently. I am working on a new site, waiting for some outside developers. Secondly I am working on completely new Revision Guides for the new economic syllabus coming out soon. It meant I didn’t do much blogging around the general election – which is perhaps a blessing in disguise. It still annoys me it is so hard to separate fact from political spin (e.g. Government spending under Labour government)- but that’s life. I do try to be ‘balanced’…

Government Spending under Labour

Government Spending under Labour

During the years 1997-2007, there was a significant rise in government spending, though as a % of GDP the rise was less marked. Source: ONS Public Sector Finances MF6U – October 2014 Government spending as a % of GDP A more meaningful comparison is to look at the share of government spending as a % of GDP. In 1996-97 – Government spending as a % of GDP 40% In 2007/08 – Government spending – 41% of…

The effect of tax cuts

The effect of tax cuts

Question: What are the effects of reducing tax? Let us take the example of a cut in the basic rate of UK income tax from 20% to 18% In this case, workers will see an increase in their discretionary income. With lower income tax rates, they would keep more of their gross income, so effectively they have more money to spend. In this case, we could expect to see a rise in consumer spending because workers are better off. (AD=C+I+G+X-M). Because consumers spending is a component of…

An end to globalisation?

An end to globalisation?

Readers Question: Why doesn’t WTO make into law that all manufactured goods should either be assembled or made in the continent where its been sold? There is so many reason why this should be put in place in our globalised world I don’t agree. The benefits of a globalised world are that we can benefit from goods and services produced in many different continents. If Japan is…

inflation-base-rates-since-03

Different ideas of tight monetary policy

Readers Question: I only recently discovered your site, which is spectacular, and have been reading every article since then. However, I found that two of your articles are contradicting. In your article “Problems of Deflation” you state that the current monetary policy of the EU is tight due to 0.5% inflation and interest rates. In your article about tight monetary policy though, you state that tight monetary policy could include open market operations and rising interest rates. I was hoping that you would help me solve my misunderstanding. It is…

Economic issues for the UK General Election

Economic issues for the UK General Election

I’m off to New York on Wednesday, I’m tempted to stay until May 8th, so I can miss the UK General election campaigning, which so far has been quite depressing for the poor quality of economic debate. This is just an outline of some issues for consideration. I may expand upon these in the coming weeks. Whose fault was the 2008/09 economic crash? – Essentially a global financial crisis, exacerbated by weak financial regulation. But, who was advocating much stricter regulation of the banks pre 2007? See: who is to blame…

Types of deflation

Types of deflation

Readers Question: I have just been reading your opinion on deflation. You say generally it’s bad unless it is caused by  production and technology improvement. My question is this, how would the consumer know the difference ? Consumers wouldn’t really notice the difference why prices are falling. The key thing is what happens to their nominal wages – and therefore their effective purchasing power. If we have ‘good’ deflation – due to a big increase in productivity, lower costs – then in theory firms will be able to…