economics

The effect of tax cuts

The effect of tax cuts

Lower income tax rates increase the spending power of consumers and can increase aggregate demand, leading to higher economic growth (and possibly inflation). On the supply side, income tax cuts may also increase incentives to work – leading to higher productivity. However, the effect of tax cuts depends on how the tax cut is financed, the state of the economy and whether low tax rates actually increase productivity and the willingness to work. The effects of reducing income tax rate Increased spending. Workers will see an increase in their

The decline of Yellow Pages

The decline of Yellow Pages

For those born in the digital age, a paper copy of business listings may seem something of an anachronism. Why leaf through a telephone directory, when you can search online and get more information at the tips of your fingers? Yellow Pages have announced that their paper directory will cease publication in 2019, and it will be replaced solely by a digital service. I received a copy through the post yesterday. It is very thin compared to the directories I remember…

UK Budget Deficit

UK Budget Deficit

The budget deficit is the annual amount the government has to borrow to meet the shortfall between current receipts (tax) and government spending. Net borrowing for the UK 2016/17 is £45bn or 2.3% of GDP National debt or public sector net debt –  is the total amount the government owes – accumulated over many years. See: UK national debt (Sep, 2017 – £1,737 billion equivalent to 86.5% of GDP) UK Borrowing Budget deficit – annual borrowing This is the amount the government has to borrow per…

UK Debt Interest Payments

UK Debt Interest Payments

Debt interest payments are the amount the government need to pay to holders of government bonds. It is the cost of servicing public sector debt. In 2016/17 the OBR forecast £49.1bn – approx 2.5% of GDP In 2017/18, the OBR forecast UK debt interest payments will be £55bn The level of debt interest payments depends on: Outstanding levels of government debt. In 2017, UK national debt was £1,737 billion equivalent to 86.5% of GDP. Interest rates on debt. Bond yields can rise or fall depending on economic situation. In…

Sugar tax debate

Sugar tax debate

Excess consumption of sugar is linked to several health problems, such as obesity, diabetes, and tooth decay. Consumption of sugar imposes costs on individuals (lower life expectancy) and the rest of society (higher health care costs + lower productivity). A tax on sugar would discourage consumption and raise tax revenue to fund improved health care. Yet, critics argue that it is a regressive tax which takes more from those on low incomes.   Arguments for a sugar tax 1. External costs. Sugary drinks…

Impact of Immigration on UK Economy

Impact of Immigration on UK Economy

In the past two decades, the UK has experienced a steady flow of net migrants into the economy. This net migration has had a wide-ranging impact on UK population, wages, productivity, economic growth and tax revenue. To what extent does net migration benefit the UK economy? International Migration ONS In 2016, Net long-term international migration was estimated to be +248,000 in 2016. Immigration was estimated to be 588,000 and emigration 339,000. 9,634…

Price controls – advantages and disadvantages

Price controls – advantages and disadvantages

Readers Question: what are the pros and cons of price control? Summary Price controls can take the form of maximum and minimum prices. They are a way to regulate prices and set either above or below the market equilibrium: Maximum prices can reduce the price of food to make it more affordable, but the drawback is a maximum price may lead to lower supply and a shortage. Minimum prices can increase the price producers receive. They have been used in agriculture to increase farmers income. However, minimum prices lead to over-supply…

Economic Growth UK

Economic Growth UK

Economic growth measures the change in real GDP (national income adjusted for inflation; ONS call it chained volume measure of GDP) In 2016 the UK economy grew by 1.8% –  (compared to 2.2% in 2015. In the first half of 2017, the economy has grown by just 0.5% (annualised growth of 1%) Q1 0.2% | Q2 0.3% The peak to trough fall of the economic downturn in 2008/2009 is now estimated to be 6.0% Figures for Q2 2017 show the economy is reliant on consumer spending, with…