Hi to you all,
I would like to start by thanking you for buying my new book titled "Reading and Understanding Economics". I really hope you like it and that you find it useful or just fun to read. The publishers have once again done a great job with coming up with a superb design which I hope you like as much as I do.
To support the book they have also developed a very active web-based support which is available on this site.
The main resource is my blog where I will be able to discuss current issues in the economy as well as enabling me to update some of the analysis/cases. You can also download and listen to podcasts for each article and get hints to help them answer the questions that are in each section. For lecturers I have produced some sample exam-type questions that you are free to use for next summer’s paper.
In the near future we intend to add some video content. The team at Pearson's plan to come and record some of teaching sessions at Kingston. More news to follow on this soon!
If you have any questions, comments or suggestions please e-mail me at:
k.boakes@kingston.ac.uk
Once again I hope you like the book and enjoy visiting the website.
Best regards,
Kevin
Saturday, November 29, 2008
Government's billion pound gamble!
In Topic 11 of "Reading and Understanding Economics" I look at Fiscal policy. The section is titled "saying goodbye to Prudence as the public debt spirals". If things looked bad when I wrote this article they have just got much worse....
I feel reluctant to admit to just how many Budget Statements I have listened to over the years. When I worked in the city in the 1980s it was always the April Budget that was the centrepiece of the government's economic strategy. I can still remember the infamous Lawson Budget of 1988 where the top rate of income tax was slashed from 60% to 40%. One of my lasting memories is the sound of the cheers that rang out right across the dealing room as the high earning bankers planned what they would be spending their extra thousands of pounds on.
These days the action centres much more on the November pre-Budget Statement. Last week's announcements from Alistair Darling were without doubt the most important since those Thatcher Budgets of the 1980s. As I listened to his various proposals I could not help but feel a growing sense of unease. In case you missed it the key points were:
1) VAT to be cut from 17.5% to 15% from the 1/12/08 to the 31/12/09.
2) A new higher income tax rate of 45% to be introduced from 1/4/11.
3) An economic forecast that showed economic growth slowing from an expected positive 2.75% in 2009 to a fall of between 0.75% and minus 1.25%. Inflation is also forecast to come down sharply to just 0.5% by the end of next year. The economy is expected to recover in 2010 with growth of between 1.5% and 2%.
4) The most disturbing aspect of the Statement was the borrowing numbers. Government borrowing will reach £78bn this year compared to a £43bn prediction made earlier in the year. And next year it hits £118bn which is 8% of GDP. This leaves the UK's net debt as a percentage of GDP at over 40% this year and rising to nearly 60% a few years out.
Make no mistake these are quite staggering figures.
This amounts to the biggest economic gamble that any Government has taken in my lifetime. If it fails to stimulate the economy we will all be left with a painful legacy. If you are a student due to graduate next summer with already massive personal loans you now face the prospect of many years ahead of having to pay higher taxes to service the Government's mounting debts. These are worrying times.
I feel reluctant to admit to just how many Budget Statements I have listened to over the years. When I worked in the city in the 1980s it was always the April Budget that was the centrepiece of the government's economic strategy. I can still remember the infamous Lawson Budget of 1988 where the top rate of income tax was slashed from 60% to 40%. One of my lasting memories is the sound of the cheers that rang out right across the dealing room as the high earning bankers planned what they would be spending their extra thousands of pounds on.
These days the action centres much more on the November pre-Budget Statement. Last week's announcements from Alistair Darling were without doubt the most important since those Thatcher Budgets of the 1980s. As I listened to his various proposals I could not help but feel a growing sense of unease. In case you missed it the key points were:
1) VAT to be cut from 17.5% to 15% from the 1/12/08 to the 31/12/09.
2) A new higher income tax rate of 45% to be introduced from 1/4/11.
3) An economic forecast that showed economic growth slowing from an expected positive 2.75% in 2009 to a fall of between 0.75% and minus 1.25%. Inflation is also forecast to come down sharply to just 0.5% by the end of next year. The economy is expected to recover in 2010 with growth of between 1.5% and 2%.
4) The most disturbing aspect of the Statement was the borrowing numbers. Government borrowing will reach £78bn this year compared to a £43bn prediction made earlier in the year. And next year it hits £118bn which is 8% of GDP. This leaves the UK's net debt as a percentage of GDP at over 40% this year and rising to nearly 60% a few years out.
Make no mistake these are quite staggering figures.
This amounts to the biggest economic gamble that any Government has taken in my lifetime. If it fails to stimulate the economy we will all be left with a painful legacy. If you are a student due to graduate next summer with already massive personal loans you now face the prospect of many years ahead of having to pay higher taxes to service the Government's mounting debts. These are worrying times.
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