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Macroeconomics: UK economy, IB Economics

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onto Macroeconomics: UK economy, IB Economics

January 23, 2024 5:06 AM

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From www.bbc.co.uk - January 23, 2024 2:12 AM

Graham Watson's insight:

The latest public finance data is good news for the government, with government borrowing substantially down, to £7.8bn December, more than £8bn down on the same month last year.

What's driven this improvement? Easy. Falling inflation has reduced interest payments on government debt. That said, total borrowing for the year so far is still £119.1bn and the national debt remains high, £2.67 trillion, equivalent to 97.7% of GDP, and at a level not seen since the 1960s.

For those of you in Year 12, these may sound like alarming numbers. So how would you go about determining whether they are a concern or not?

For those of you in Year 13, thinking about forthcoming examinations you might think about trying to counter the Chief Secretary to the Treasury's view that "...it is right that we pay back these debts so future generations are not left to pick up the tab." Is it helpful to see government finances as equivalent to a household budget?

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Economy

Macroeconomics: UK economy, IB Economics

A brief overview of relevant articles for IB and A-Level all relating to the UK economy

Curated by Graham Watson

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Scooped by Graham Watson

Today, 3:23 PM

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Abolishing stamp duty won’t solve Britain’s housing crisis – but this radical property tax just might | Josh Ryan-Collins | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it

From www.theguardian.com - Today, 7:21 AM

Graham Watson's insight:

The recent round of party conferences has seen both the Conservatives and Reform state that they'd reform Stamp Duty - in the case of the former abolishing it on first residences. However, both policies make no economic sense and will simply serve to drive up house prices, something that's only going to widen income and wealth inequality and is ultimately likely to make housing even less affordable.

This article suggests another approach that would actually look more closely at linking taxes on housing to the value of property and even having a Proportional Property Tax, instead of Stamp Duty and Council Tax.

Tim Leunig's proposal is that all such taxes on houses worth less than £500,000, with a minimum payment of £800, should be controlled by local government, but that there should be a 0.5% levy on houses worth more than £500,00 and a 0.8% levy on houses worth more than £1,000,000 which went to central government.

The author, Josh Ryan-Collins thinks that not only would this be progressive, but it would also discourage investment in property as an asset and increase investment elsewhere, potentially increasing productivity. However, as he notes, homeownership is a bit of a 'sacred cow' in British politics.

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Today, 3:04 PM

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Rachel Reeves says higher taxes on wealthy ‘part of the story’ for November budget | Economic policy | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it

From www.theguardian.com - Today, 2:15 PM

Graham Watson's insight:

Taxes are going up - especially on the wealthy - it would seem. And I have to say that I agree with the Chancellor's assessment that there's been a lot of scaremongering about VAT on schools and changes to non-dom status...

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October 14, 11:02 AM

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From www.theguardian.com - October 14, 4:35 AM

Graham Watson's insight:

My Year 12 economists have had an introductory look at unemployment and we focused on youth unemployment. Thus, it's nice to see an article that substantiates some of my teaching and endorses the view that youth unemployment is often the most affected broad category of unemployment when the labour market softens, with young people being the first to be fired.

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October 14, 3:32 AM

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From www.bbc.co.uk - October 14, 2:21 AM

Graham Watson's insight:

The latest labour market data suggests that the three months to August has seen an uptick in unemployment to 4.8% and a corresponding slowing of wage growth to 4.7%. It suggests a cooling of the labour market - which is a mixed signal. Growth might be slowing, but there'll also be correspondingly less inflationary pressure too.

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October 11, 11:59 AM

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Rachel Reeves looks for extra headroom in budget to insulate UK economy against bond market | Budget | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it

From www.theguardian.com - October 11, 2:00 AM

Graham Watson's insight:

Another pre-Budget article looking at the Chancellor's commitment to meeting her own fiscal rules and thus her need to create 'fiscal headroom' - the difference between government spending and tax receipts - in this year's Budget.

The current situation is that she's thought to have £10bn of headroom - a historically low level - and thus there's a decision about whether, or how much, to raise taxes, not least to assure bond markets of their commitment to adhering to their fiscal rules.

The tax rises in question appear to involve charging National Insurance on rental income, reforming Capital Gains Tax and increased gambling taxes in the hope that this will resolve the issue once and for all.

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October 8, 5:03 AM

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Rachel Reeves given extra £3bn for budget after VAT error fixed | Government borrowing | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it

From www.theguardian.com - October 8, 4:20 AM

Graham Watson's insight:

It seems as though the Chancellor has a tiny fraction more wiggle room - or slightly less to worry about - because the ONS has revised down the level of government borrowing by £3bn because the amount of VAT being collected hasn't been accurately reported.

It's another instance where ONS data has been called into question and imperfect information makes policymaking harder.

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October 7, 3:12 PM

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From www.bbc.co.uk - October 7, 3:59 AM

Graham Watson's insight:

This story illustrates some of the themes associated with the international trade theory that I've been teaching. In this case, a UK petrochemical refiner, Ineos, has been forced to lay-off 60 workers in Hull because it cannot compete with lower priced imports.

The company argue that UK energy costs are making it uncompetitive, and that there's also been evidence of dumping that have driven it out of business. They're calling on the government to intervene; however, given the wealth of Ineos' owner, Sir Jim Ratcliffe, I fear that the government won't - rightfully - take any notice of this.

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October 5, 3:01 PM

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Rachel Reeves’s second budget needs a narrative of fairness to justify tax rises | Heather Stewart | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it

From www.theguardian.com - October 5, 5:08 AM

Graham Watson's insight:

This Guardian editorial looks at Rachel Reeves' Budget and the choices that she faces. It highlights the state of the public finances, the fact that tax rises are seemingly inevitable, but that the difficulty is going to be spinning them in such a way that makes the narrative more positive.

She advocates for a return to core Labour values, and focusing on social justice, child poverty and reducing inequality on the basis that voters don't always mind paying more tax if they can see a coherent case for doing so.

In my experience, I'm not entirely convinced that this is the case.

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October 2, 2:07 PM

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UK and EU poised to strike deal sparing British business from carbon border tax | Foreign policy | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it

From www.theguardian.com - October 2, 12:24 PM

Graham Watson's insight:

Evidence of closer UK/EU co-operation, with a deal close to being struck to exclude UK steel producers from the EU's new carbon border adjustment mechanism (CBAM). It will provide the sector with very welcome relief and would help boost growth and give the UK and the EU to align their schemes.

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October 2, 1:45 PM

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From www.bbc.co.uk - October 2, 5:42 AM

Graham Watson's insight:

The CEO of the UK's largest grocer, Tesco, has suggested that the Chancellor should not look to increase business taxes further in the Budget. He argues that the double whammy of higher employers National Insurance contributions, which cost Tesco £235m over the past year and the £90m cost of the Extended Producer Responsibility (ERP) programme, mean that retailers cannot afford further tax increases.

However, whilst stating this, Mr. Murphy also announced that the UK's largest supermarket upgraded its profit forecast for the year, and its combined profit for the last two years was £4.5 billion, so I think he might want to keep things in perspective.

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October 1, 3:27 AM

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From www.theguardian.com - September 30, 12:00 PM

Graham Watson's insight:

More Budget gossip - a mere seven weeks before it's due - with speculation mounting that Labour is going to find a way to scrap the two-child benefit cap because it's seen as the best way to tackle rising child poverty. Simultaneously, it seems as though there are also going to be attempts to reduce economic inactivity and get people back into active labour force participation.

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September 29, 3:35 PM

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From www.bbc.co.uk - September 29, 12:36 PM

Graham Watson's insight:

Faisal Islam on the Chancellor's address to Conference, highlighting the inevitability of either tax rises, spending cuts or both. It seems as though there are some hard choices ahead.

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September 29, 2:19 AM

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From www.bbc.co.uk - September 28, 7:46 PM

Graham Watson's insight:

This Simon Jack article looks at whether the government can regain the confidence of business, noting that business confidence measures have diverged and there's a sense that people are waiting for things to happen.

However, I'd flip this on its head. Should business really be operating on this short a timeframe? And why aren't they taking a longer term view, perhaps considering how austerity hollowed out public services and noting the lack of investment in the previous decade?

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Today, 3:06 PM

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Rachel Reeves says tax rises and spending cuts on budget agenda, citing Brexit impact | Budget 2025 | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it

From www.theguardian.com - Today, 5:33 AM

Graham Watson's insight:

More pre-Budget material, if you can face it, and the chance for the Chancellor to spin a narrative, as well as a prospective use for AI. Summarising the planning application for the Lower Thames Crossing.

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Today, 3:41 AM

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The Guardian view on the IMF’s warning: Britain’s economy runs hot for profits, cold for pay | Editorial | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it

From www.theguardian.com - October 14, 1:59 PM

Graham Watson's insight:

This Guardian editorial is interesting because it could apply to much of the last 30 years which has seen a redistribution of income away from labour in favour of capital. This has meant that firm owners' profits have increased at the expense of workers' pay and no government has thought to tackle this.

And to be fair, they are right: globalisation has rewarded those operating in global markets, not least the myth of the "global market for talent" among CEOs, and technological change has also discriminated against the low skilled. Theoretically, the better-off should have been able to compensate those made relatively worse-off - an application of sorts of the Hicks-Kaldor criterion - but this simply hasn't happened.

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October 14, 3:35 AM

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From www.theguardian.com - October 13, 7:02 PM

Graham Watson's insight:

The sense that growth is slowing is confirmed by the latest British Retail Consortium (BRC) data that report a slowing of retail sales, something further supported by credit card spending data provided by Barclays.

Retailers are still fearful of the Budget, having only just digested higher costs in the form of employers National Insurance contributions in the last Budget.

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October 13, 3:24 AM

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From www.bbc.co.uk - October 12, 7:21 PM

Graham Watson's insight:

The Institute for Fiscal Studies has published its Green Budget and is advocating for tax reform to be the centrepiece of this year's Budget. Given the existing fiscal rules and the government's manifesto pledge not to increase income tax, National Insurance and VAT for working people, the IFS reckons that it's time to reform both Council and Capital Gains Tax, with the former, in particular seen as regressive and outdated.

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October 9, 2:01 PM

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From www.bbc.co.uk - October 9, 10:36 AM

Graham Watson's insight:

Yesterday's announcement by Kemi Badenoch, proposing the abolition of Stamp Duty garnered some headlines, and was trailed as helping people get on the housing ladder. Has it really come to this? It's back to the early 1980s Thatcherite era. If only we had more council homes to privatise, to bribe the electorate, let's crack on.

As it is the abolition of Stamp Duty is a regressive move - with the greatest gains going to those buying the most expensive houses, and it's also likely to push house prices up, meaning that the poorest - and those who the rhetoric will portray as being 'helped' by this move will still be unable to afford housing.

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October 8, 2:17 AM

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Lifetime of earnings not enough for UK workers to join wealthiest 10%, report says | Inequality | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it

From www.theguardian.com - October 7, 7:01 PM

Graham Watson's insight:

The Resolution Foundation flags the extent of wealth inequality in the UK noting that it would take the average worker 52 years, saving all their income to accumulate enough wealth to be in the wealthiest 10% of the population.

Is this too high a level of inequality? And what causes such wealth disparities? It's worth thinking about because the answer isn't that one group work exceptionally hard and the other group are just lazy.

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October 7, 2:13 AM

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From www.bbc.co.uk - October 6, 8:25 AM

Graham Watson's insight:

No surprises here, but Aston Martin, the luxury car maker, are reporting that profits are likely to be lower as a result of President Trump's tariffs. This shouldn't be unexpected. But the question is "Who's gaining?"

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October 4, 3:37 AM

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Rachel Reeves urged to break manifesto pledges to avoid ‘pasty tax’ budget | Budget 2025 | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it

From www.theguardian.com - October 4, 1:00 AM

Graham Watson's insight:

It looks like the Budget is, as ever, going to be a series of compromises, with the main concern being whether the government's manifesto pledges are going to hamstring its ability to formulate policy.

The commitment not to increase income tax, National Insurance or VAT - which make up 75% of tax revenue - means that there's a concern that any tax increase are going to be bitty and not coherent. However, breaking the manifesto pledges would come at high political cost.

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October 2, 2:04 PM

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Rachel Reeves could raise £45bn in taxes and keep promises, report says | Economic policy | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it

From www.theguardian.com - October 2, 1:28 PM

Graham Watson's insight:

The Chief Economist of Morgan Stanley reckons that the Chancellor could find around £45bn in taxes without breaking her manifesto pledges. It seems as though freezing tax thresholds, a gambling tax, taxing the banking sector and reform of pension taxation could all raise this sort of revenue and wouldn't be as damaging to growth as some other taxes.

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October 1, 3:33 AM

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The Guardian view on child poverty: the scrapping of the two-child benefit cap can’t come soon enough | Editorial | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it

From www.theguardian.com - September 30, 1:42 PM

Graham Watson's insight:

Today's Guardian editorial on the abolition of the two-child benefit cap notes that it's a start as far as tackling child poverty is concerned, but that the government needs to go further in raising the incomes of the poorest families and providing better quality public services too.

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October 1, 3:24 AM

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UK business confidence falls to record low amid rising employment costs | Business | The Guardian | Macroeconomics: UK economy, IB Economics | Scoop.it

From www.theguardian.com - September 30, 7:01 PM

Graham Watson's insight:

The latest survey of business confidence by the Institute of Directors suggests that it is at a record low level, driven by higher labour costs and persistently high energy prices.

It seems this uncertainty is also a part of MPC discussions, with MPC members unsure as to the persistence of inflation, and you should know that greater uncertainty implies lower levels of economic growth.

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September 29, 3:32 PM

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From www.bbc.co.uk - September 29, 9:55 AM

Graham Watson's insight:

I'll leave this here...it's fairly self-explanatory...

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Macroeconomics: UK economy, IB Economics

Abolishing stamp duty won’t solve Britain’s housing crisis – but this radical property tax just might | Josh Ryan-Collins | The Guardian

Rachel Reeves says higher taxes on wealthy ‘part of the story’ for November budget | Economic policy | The Guardian

Young people are biggest victims of UK’s fragile jobs market | Economics | The Guardian

Wage growth slows slightly over summer

Rachel Reeves looks for extra headroom in budget to insulate UK economy against bond market | Budget | The Guardian

Rachel Reeves given extra £3bn for budget after VAT error fixed | Government borrowing | The Guardian

Ineos announces job losses at East Yorkshire petrochemical plant

Rachel Reeves’s second budget needs a narrative of fairness to justify tax rises | Heather Stewart | The Guardian

UK and EU poised to strike deal sparing British business from carbon border tax | Foreign policy | The Guardian

Tesco boss warns Reeves against further business taxes

Rachel Reeves to lift two-child benefit cap in November budget | Child benefits | The Guardian

Faisal Islam: Rachel Reeves pre-emptively justifies tax rises

Can Labour reverse 'desperate loss of faith' from business?

Rachel Reeves says tax rises and spending cuts on budget agenda, citing Brexit impact | Budget 2025 | The Guardian

The Guardian view on the IMF’s warning: Britain’s economy runs hot for profits, cold for pay | Editorial | The Guardian

UK retail sales growth cools amid fears over budget tax rises | Retail industry | The Guardian

Rachel Reeves should avoid 'half-baked' tax fixes in Budget, says IFS

Stamp duty: Five ways abolishing the tax could change the housing market

Lifetime of earnings not enough for UK workers to join wealthiest 10%, report says | Inequality | The Guardian

Aston Martin in profit warning amid US tariff woes

Rachel Reeves urged to break manifesto pledges to avoid ‘pasty tax’ budget | Budget 2025 | The Guardian

Rachel Reeves could raise £45bn in taxes and keep promises, report says | Economic policy | The Guardian

The Guardian view on child poverty: the scrapping of the two-child benefit cap can’t come soon enough | Editorial | The Guardian

UK business confidence falls to record low amid rising employment costs | Business | The Guardian

Rachel Reeves warns of harder choices to come as she hints at tax rises