• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

The UK fiscal policy.

Extracts from this document...

Introduction

THE UK FISCAL POLICY Alleyn and Viny (Wang xiao yang) (Liu xing) CN: GZ-02-029 GZ-02-0 Instructor David 2003 June 30th Table of contains 1 Abstract 1 Introduction 2 Result and analysis 2 Taxation 2 The direct tax 4 The indirect tax 4 Government spending 5 Recommendation and conclusion 6 References Abstract Fiscal policy was relatively popular during the 1940s and 1970s. Generally, it is the use of taxation and government spending to manage the economy. In the UK today, the rate of direct taxes have been brought down over the past two decades, though the field was paradoxically increased, and there is a shift of the balance of taxation from direct tax to indirect tax. Also, the government spending has been increasing, which is well illustrated by the increasing PSBR (public sector borrowing requirement). Generally, the main reason of these changes will be shown in the paper. Generally, government usually has conflicting objectives be using the fiscal policy. For example, keeping balance of payment equilibrium may suppress the proper economic growth. Also, there may become technical problems. As a result, fiscal needs adjusting. ...read more.

Middle

Actually, the direct tax takes up an important part of the total tax revenue. As shown in the table below, (in billion pounds), the income tax and corporation tax together took up as much as 43% of the total tax yield on average from 1990 to 1997. (Advanced Economies Through Diagram). Historically, the direct tax rate in the UK was extremely high. Notably the income tax rate once reached 84% in the 1970s (understanding the economy). This is the result of the post-war Welfare State policy and other social benefits, which were the main part of the government spending in the 1950s and 1960s. However, the situation began to change since Mrs. Thatcher came into power. With the will to improve the efficiency of the UK economy, she brought down the rate for the direct tax, which may destroy the incentive for entrepreneur to create opportunities. Even after Tony Blair took office in 1997, the policy was still kept. In other words, there was a trend to reduce the tax rate on direct tax. According to statistic from the Inland Revenue, the tax highest rate is 40% in 2003. ...read more.

Conclusion

Here the problem is the conflict between full employment and inflation. For the UK government responding to this, it ought to deflate the economy, by giving a suspension to economic growth and an increase in employment. Besides of this, there are also technical problems as the reasons of time lag in the economy. The time lag contains of recognizing these problems the UK government should accelerate its handle speed by improving abilities of staffs and the level of techniques. Although despite with these problems, there are still some issues in the nature and application of fiscal policies here we not mention them all but just main ones. In summary, fiscal policy, which is well carried out in the UK, is, acing large contributions to the UK economy in recent years. And particularly to taxation changes, which made by UK government, supported the government to regular the level of the economic fluctuation efficiently and directly. The general trends of taxation now are turning from direct taxation mainly to the indirect taxation side. And besides this, the quantity of government spending is rising, and the scope pf it is also being enlarging. Fiscal policy is gradually becoming a mature, dependable and suitable measure to solve the economic problems happen in the UK. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Macroeconomics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Macroeconomics essays

  1. Peer reviewed

    Compare the effectiveness of the fiscal and monetary policy with some reference to supply ...

    3 star(s)

    For example weak governments and third world countries may not be able to control these policies and will let it out of control which will cause even more problems for that economy. Fiscal policy alone can cause a lot of damage unless prepared, if governments started spending as much as

  2. the limitations of Fiscal Policy

    in one day because of the limited sources that are available such as labour, time, steel and concrete. Furthermore, another limitation of fiscal policy is that it is politically influenced in the economy (Wyplosz, 2001).For example, liberal party that has ruled a country for 20 years and during the reelections,

  1. Budget 2004-05 and Economic Analysis of Pakistan

    11667 19173 Food Aid 0 577 0 TOTAL 159129 144820 156355 PROVINCIAL SHARE IN FEDERAL RECEIPTS In pursuance of the NFC Award, 1996 effective from 1st July, 1997, the divisible pool consists of the following: * Taxes on IncomeTaxes on Income * Wealth Tax.Wealth Tax * Capital Value Tax *

  2. To what extent does the government budget/statement reflect current government priorities?

    In the 2007 budget report, the government announced that investment in education and skills would rise to �90bn by 2010/2011. In a clearer spectrum, there is a �4bn increase from 2006 to 2007 then a �5bn increase from 2007 to 2008 and therefore proves that the government is gradually increasing the percentage increase spent on education annually.

  1. Unemployment Report.

    is the rate of unemployment where the labor market is in equilibrium. At a given wage rate the supply of labor will equal the demand. The NRU is also often referred to as the level of full employment. However, this does not mean zero unemployment in the economy.

  2. Indian Economics

    Capitalist biased, advanced countries are subject to trade cycles. Trade cycles especially recessionary and depressionary phases causes cyclical unemployment in these countries. The backlog of unemployment at the beginning of FYP-1 was 3.3 million to which were added 9.0 million new entrants during this period. The Plan provided additional employment to 7.0 million, thus leaving a back log of 5.3 million at the beginning of the FY-2.

  1. Using Fiscal Policy to Improve Employment.

    These statistics are evidence of the need for a reform in our government's unemployment assistance. Who pays when people remain unemployed? The unemployed could be producing goods and services and if they are not, then GDP is lower than it could be.

  2. Governments set economic objectives - Discuss the relative importance of each of these objectives ...

    The Government can raise indirect tax rates or reduce subsidies which will increase prices. Keynesian economists have argued that a cosh push spiral can develop with leads to a long term cycle of inflation. Consider a developed economy with zero inflation and a few natural resources.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work