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The weekend newsletter from the Institute of Economic Affairs has this 2-minute video about the regressive impact if indirect taxation on those with the lowest incomes. The message comes very much from the free-market perspective of the IEA, which may or may not be to your taste, but serves as a very good stimulus to discussion and analysis. The data that supports their argument for a reduction in indirect tax can be found in a report titled Aggressively Regressive.
When the government still has to borrow an extra £90bn per year, in spite of all their efforts to cut spending, then the rate of interest they need to pay in order to get access to that borrowing has got to be very important. George Osborne certainly thinks so; a key reason for his deficit-reduction strategy is to retain the confidence of the bond markets, so that bond-buyers are prepared to lend to the UK at low rates. This week, that rate touched a historic low of 1.396 per cent on 10-year bonds, and as the FT report, longer term 30-year gilt yields, considered particularly reflective of the country’s inflation prospects, also dropped to a record low of 2.102 per cent.read more...»
Inequality is on the rise. Not so much between countries as within them. There is some worrying indications, reported this week, that the gap between Britain’s best performing and worse performing regions remains thoroughly entrenched.read more...»
CPI inflation has slipped well below the lower limit of the Monetary Policy Committee's target, to 0.5% - that is far lower than it fell during the recession, and the lowest level since May 2000. So, as Mark Carney prepares his letter to the Chancellor to explain how this has happened, and what the Bank of England intend to do about it, the BBC have published an article which examines why we need some inflation. It is one of those articles which is truly useful - probably more so than a text book as it is based on real, current context. Highly recommended to AS students learning about inflation for the first time, and A2 students who need to revise the basics.read more...»
Two reports published in the last 48 hours provide some really useful background for teaching about policies to address the issues of poverty and inequality in developed economies. The Report of the All-Party Parliamentary Inquiry into Hunger in the United Kingdom was published yesterday, and concluded that because of falling real incomes, delays in paying benefits which people are legitimately entitled to, and sharp rises in fuel bills, many families are "one unexpected bill away from financial crisis".read more...»
I love a story that really can resonate with students and get them 'irked'. It struck me yesterday that reading about a recent Bristol University research paper that claims that school admission policies lead to greater inequality might strike a chord with some young people.
The study suggests that the common policy in the UK of prioritizing admission places in primary and secondary schools based upon how close a student lives to that school continues a cycle of inequality. The argument is that, wealthier people are more able to afford to move to areas with higher performing schools and so are more inclined to do so. People without that facility have less choice in where to send their children and may have to stick with local schools despite their relative poor performance. So the cycle continues ..... poorer people receive a poorer quality education and are therefore less equipped to get the necessary qualifications to earn higher wages.read more...»
Yesterday’s Conservative party conference threw up some lovely economic policy proposals for students and teachers to get stuck into. They certainly grabbed the headlines today with David Cameron’s proposals to increase the personal allowance and 40p tax thresholds. Sky News have some decent coverage which can be used to spark a good discussion.
If you are one of the thousands of drivers who has just spent up to 13 hours online, trying to renew your car tax, you may not find this quiz so entertaining. However, for the rest of us, the BBC have a quiz about some of the changes to finances which have just come into effect on 1st October. What do you, and your students, know about the history of vehicle excise duty, new National Minimum Wage rates, changes to pension arrangements and new limits on how much mortgage lending the banks can do? Find out here!
Sitting watching Alex Salmond acknowledge the results of the Scottish referendum, there is a great example of the speed with which the foreign exchange markets respond to news. Sterling fell significantly in value over the last two weeks, with polls suggesting that the 'Yes' campaign was much closer to a win than had previously been expected. However, as the vote closed on Thursday evening, exit polls were indicating a win for the 'No' vote, and, as the chart from Bloomberg above shows, the global 24-hour foreign exchange market showed an immediate and dramatic response in demand for the pound, as the uncertainties associated with Scottish independence were removed.read more...»
London's New Year's Eve fireworks display is to be limited to a viewing area of 100,000 ticketed spectators for the first time. The event's popularity made it "untenable" to strain the transport and safety infrastructure with a larger number, the Mayor's office says. Hence the decision to charge £10. This poses a question about the nature of public goods.read more...»
A hat tip to Hannah Thomas who has spotted a new info graphic on human capital produced by the Office for National Statistics. You can find it here http://www.ons.gov.uk/ons/rel/wellbeing/human-capi... with more supporting detail and explanation here http://www.ons.gov.uk/ons/dcp171766_374868.pdfread more...»
Here is a link to a video report produced by the IMF as part of their annual assessment of the UK economy. Overall, the IMF is considerably more optimistic than it was in 2013 about prospects for near term recovery of output and continued reductions in unemployment.
Risks to macro stability are also considered, namely weak productivity growth and high housing pricesread more...»
An important landmark for the UK economy? Britain’s economy is finally larger than it was before the financial crisis six years ago. FT economics editor Chris Giles analyses the data and warns that continuing weak productivity means output growth will be slower than before the crisis - an excellent analysis of the key macro indicators suitable for all A level economics students.
I have added some charts on the UK drawn from the latest IMF world economic outlook.read more...»
A new online comedy series launches on Thursday 24th July!
The series tells the story of Scott and Adrian, two lovers on the verge of break up. Scott runs an oil company – bath oils that is – and Adrian spends their money as if it’s his own. Will they work things out or will Scott go it alone? All will be revealed when the series launches this August in time for the Scottish independence referendum.read more...»
The UK economy is doing well. Even so, it is not often that we are placed unequivocally at the top of a world ranking of any kind. But a team of economists led by Nicholas Gruen of Lateral Economics in Melbourne has done just that. In their recent report on the economic potential created by the concept of open data, it turns out that the UK government has been leading the world. On the Open Data Index, we score 100 compared to America’s 93. There is then a big gap to the next group, Australia, Canada and Germany, placed in the high 60s.read more...»
In London and much of the South East, the recovery has been well under way for a considerable time. House prices boom and restaurants are packed. The economic data for the UK as a whole looks just as encouraging, with employment being at its highest ever level.read more...»
This interview with Jurgen Maier of Siemens is well worth reading on several different levels. It challenges the conventional wisdom that UK will always lag behind Germany in terms of high value added manufacturing; it refers to the economics risks of Brexit (Britain leaving the EU) and it also stresses the importance to the UK of foreign investment from German businesses many of which have been in the Uk since well before the first World War - Siemens and Bosch are two well-known examples.read more...»
The UK Financial Conduct Authority has announced direct interventions in the market for payday loans - the high cost short term loans market which has expanded rapidly in recent years led by businesses such as Wonga. The decision is the result of a detailed assessment of the industry which had flagged up a number of market failures.read more...»
Here is a short video featuring Mike Kitson from Cambridge University explaining the role universities play in knowledge exchange with businessesread more...»
In these short interviews with the Financial Times, economist Gerard Lyons highlights some of the key drivers of the global economy and he paints a fairly positive picture of the prospects for developed countries in an ever-changing world economy. In the second interview, Gerard Lyons, 'The Consolations of Economics' author, discusses with John Authers whether the system is safely retuned, and whether it can boldly go into a universe of greater growth opportunities.
Observer review (3 August 2014): http://www.theguardian.com/books/2014/aug/03/conso...
Independent review (July 2014): http://www.independent.co.uk/arts-entertainment/bo...
Evening Standard: http://www.standard.co.uk/comment/gerard-lyons-lon...read more...»
Here is your starter for ten. What do the Uber app and David Ricardo have in common? Ricardo, I hear you ask. Scarcely known outside academic economics, he ranks equal with Adam Smith and Keynes as the greatest ever British economist. His classic Principles of Political Economy was published in 1816. He made millions of pounds on the stock market, at a time when a million was a vast amount of money.read more...»
Question six for the RES competition in 2014 is bound to produce a large number of answers. Labour migration is an important economic, social and political issue and many students will have clear views on the issue. So what will make an essay stand out from the crowd?read more...»
Drawing on data from the 2013 Human Development Report, here are the 24 countries in the 2014 World Cup ranked according to the Human Development Scoresread more...»
This question gives students a superb opportunity to explore the debate surrounding economic growth in in the leading advanced nations of the global economy. It ties in well with research into the effects of globalisation and the legacy from the financial crisis. I have put together some reading and short video clips that might be relevant to the discussion:
Secular stagnation: (or .... growth pessimism!)
"Secular stagnation refers to the idea that the normal, self-restorative properties of the economy might not be sufficient to allow sustained full employment along with financial stability without extraordinary expansionary policies. The idea was put forth first by Alvin Hansen in the late 1930s." (Source: http://www.washingtonpost.com/blogs/wonkblog/wp/20...)
One common interpretation is that - if we are in an age of secular stagnation - and this is an idea that might just be wrong! Maintaining demand often requires extensive periods of ultra loose monetary policy which in turn can create fresh bubbles in property and equity markets.
Is the secular stagnation argument too pessimistic? Can advanced economies rev up the engine of growth once more perhaps by using structural reforms to boost their competitiveness and drive new investment?read more...»
You may have already seen my blog/tweet sharing the 'Higher or Lower' game. Below you will find a brand new version of the game featuring the 32 countries taking part in the FiFA World Cup starting tomorrow.
The aim of the resource is to get a feel and understanding of some of the important statistics relating to the economic performance of the countries. In this addition, students can attempt to work out whether the 'higher' or 'lower' statistic relates to predicted GDP growth, unemployment, inflation and Government debt alongside the country's FiFA world ranking.
Teams are presented with the name of a country and its statistic in their chosen category. They are also presented with the name of a second country. They must say whether the second country has a higher or lower statistic. This is repeat a further three times allowing the team to score a maximum of 4 points per round.
Have some fun and get a feel for countries statistics at the same time! Is there any correlation between economic and football performance?
Click here to download the file.
Note: The economic statistics accredited to England are those of the entire UK. Sorry, I was unable to find the statistics relating to just England!
Here is the recording of Geoff's webinar from 8 June 2014 to support students preparing for their A2 macro exams.read more...»
Students preparing for unit 4 on Tuesday might spend half an hour or so analysing this report of the IMF’s update on the UK economy. Here are some key points worth noting:read more...»
The Office for National Statistics (ONS) has just increased the size of the British economy by nearly £10 billion, a figure equivalent to around 0.7 per cent of the economy as a whole. George Osborn has not waved a magic wand. We have not suddenly become more productive. The reason is that, for the first time, estimates of the value added by drugs and prostitution have been included. These activities are included in an economic sector called ‘miscellaneous goods and services’, which, as an indicator of its diversity, already contains things like life assurance and post office charges.read more...»
Trams have been experiencing a revival in a number of towns and cities in the past few decades. Edinburgh is the latest city to invest in trams, and hopes they will boost local economy. But do the benefits outweigh costs? Manchester, Sheffield, Blackpool, Nottingham, Newcastle and Croydon have all installed trams / light rail and others are considering investment.
The Edinburgh trams at running (at last) but the jury will remain out for a long time about their net impact on economic activity, traffic congestion and the broader health of Edinburgh and the local environs.read more...»
The Office for National Statistics has, for the first time, included estimates of the impact of prostitution and illegal drugs in the national accounts. By the ONS’ reckoning they add about £10bn to the British economy. The assumptions used in making the calculations have been the subject of some criticism. I have summarised below the assumptions behind the estimated spending / income and output effects of including prostitution:read more...»
The fracking debate continues apace, with the announcement by the British Geological Survey that there are over 4 billion barrels of oil in the shale rocks of the South of England. The government has proposed new rules of access to land in order to speed up the exploitation of this oil, with payments of £20,000 being made to those living above the land where fracking takes place.read more...»
New Bank of England research adds further weight to the view that central bank asset purchases (‘quantitative easing’ or QE) can affect government and corporate bond yields. In particular, the study, which is published in the May 2014 issue of the Economic Journal, finds evidence that QE works by reducing the supply of government bonds remaining in the private sector – what are known as ‘local supply effects’.read more...»
Just in time for the unit 2 exam, and in good time for unit 4 students, this week's Deloitte Monday Briefing looks at the reasons behind the rapid recovery of growth in the UK. The Monday Briefing always makes very good reading, and often features analysis which is written with great clarity by Ian Stewart, their Chief Economist in the UK - to subscribe and receive an email every week, visit www.deloitte.co.uk/mondaybriefing
Below, I have copied much of this week's briefing with a little additional comment to emphasise the role of monetary and fiscal policies, and to look forward in order to consider how these may be evaluated in order to assess the contribution they may make in the near future.read more...»
Here is a 25 question general knowledge quiz on the UK economy - great for last minute revision! Good luck!read more...»
There has been huge interest in the new book by Thomas Piketty entitled "Capital in the 21st Century". This blog entry will link to some reviews, news articles and short videos on Piketty's ideas and policy prescriptions. In "Capital," French economist Thomas Piketty explores how wealth and the income derived from it magnifies the problems of inequality. At the heart of it is a simple equation R > G - the rate of return on capital is higher than the rate of economic growth. Naturally there is a fierce debate about the data and his methodology!
Recent news articles:
Are we living in the second gilded age? (Linda Yueh, BBC)
Review of "Capitalism in the Twenty First Century"(The Independent)read more...»
This Channel 4 news report looks at va growing protest movement among food industry workers campaigning against zero hours contracts and persistent low pay. Zero-hours contracts do not guarantee a minimum number of hours of employment. It has been estimated that 583,000 people, around 2% of the UK workforce, were employed on zero-hours contracts between October and December 2013. The actual figure is likely to be substantially higher than that.read more...»
With the European Parliament elections on the near horizon there is plenty of discussion about the merits and de-merits of continued UK membership of the European Union.
The Centre for Economic Performance (CEP) has just launched a new report in its series of CEP Policy Analyses: ‘Brexit or Fixit? The Trade and Welfare Effects of Leaving the European Union’ by Gianmarco Ottaviano, Joao Paulo Pessoa, Thomas Sampson and John Van Reenen. Here are their main findings:read more...»
In remarks made when launching the new quarterly inflation report (May 2014), the Governor of the Bank of England, Mark Carney, has signaled that policy interest rates set by the MPC are likely to remain at historically low levels for some time to come. The first rise in rates is probably less than a year away and some economists have penciled in early New Year 2015 for a rate hike. But what are some of the arguments for raising interest rates now?read more...»
England's odds of winning the World Cup are about 30-1 - which reflects a rather low level of confidence that we have a realistic chance. However, the Governor of the Bank of England seems to think that a safer bet would be to back the recovery of the UK economy, judging by Mark Carney's launch of the latest Inflation Report yesterday. He likened the path the economy has to follow to that of England's task in Brazil, and said that the Bank's priority was to steer the economy through the opening rounds, all the way to victory.read more...»
CEP Director, John Van Reenen, explains the reasons why inequality in the UK has been rising. For more films covering aspects of economic policy we recommend you take a look at the Facebook page - Click here! https://www.facebook.com/EconFilmsread more...»
Here is an updated revision presentation covering aspects of market imperfections / market failure in the UK housing industry.
I have also linked to a recent presentation on the economics of rent controls.read more...»
Britain’s crisis of housing affordability is nothing to do with foreign speculators, according to Paul Cheshire writing in the Spring 2014 issue of CentrePiece magazine. Rather, it is a result of decades of misguided planning policies that constrain the supply of land and turn houses into something like gold or artworks. Houses have been converted from places in which to live into people’s most important financial asset.
The prospects of significant wage increases for typical UK workers are bleak, according to Professors David Blanchflower and Stephen Machin writing in the Spring 2014 issue of CentrePiece magazine from the London School of Economics.
It is quite clear that the economy is still well below full employment and there is a large amount of slack in the labour market, they say. There is little evidence of widespread skill shortages, which would push up wages; and public sector pay freezes with continuing redundancies continue to push down on workers’ bargaining power.read more...»
Income and wealth inequality in the UK are higher than most people think they are and higher than they think they should be. These are among the messages of a new online infographics film:read more...»
New data suggests that China will soon overtake the United States with the largest GDP adjusted for purchasing power parity. This short Financial Times video from Chris Giles looks at the new data which are being driven by fresh estimates of what money can buy - i.e. the volume of goods and services that are produced in different countries and what one dollar can buy in one country compared to another. The data finds that poorer countries are cheaper than economists thought they were and richer countries are more expensive.
China barely breaks into the top one hundred of the countries of the world in terms of GDP per capita (PPP) - it is a large country but not rich!
The 2011 gross domestic product (GDP) of the European Union, the United States and China together accounted for half of the world GDP in 2011. In 2011, the GDP of the 28-nations EU represented 18.6 percent of the world's GDP, expressed in Purchasing Power Standards (PPP). It was followed by the United States with a share of 17.1 percent and China with 14.9 percent.read more...»
Here is a streamed version of a revision presentation on the Crossrail project, a good example to use when teaching transport economics and the main principles and issues governing a cost benefit analysis approach to infrastructure investment appraisal. It is designed for use with AS and A2 economics students.read more...»
In the year to March 2014, consumer prices in Sweden fell by 0.4 per cent. This has prompted the central bank, the Riksbank, to abandon the normally cautious language used by such institutions. Over the same period, inflation was negative in a further seven European countries, such as Greece, Portugal and Spain. In eight other countries, inflation was still positive but very low, running at an annual rate of less than 0.5 per cent.
The Riksbank argues that these very low, often negative, rates of inflation are caused by a ‘very dramatic tightening’ of monetary policy. There is a definite risk of a slide into a prolonged depression similar to that of the 1930s.
Surely low inflation is a good thing? Well, up to a point.read more...»
In recent months the external value of the pound has been rising quite strongly. Indeed it has outperformed a cluster of other countries even though we have seen a rise in the UK's current account deficit on the balance of payments. Stephanie Flanders, chief market strategist at JPMorgan Asset Management, talks to the Financial Times about the sterling's out-performance and what impact the strong pound is likely to have on the UK economy.read more...»
The BBC's Robert Peston looks at the broader issue of heavy debt in the UK economy and whether it is holding back economic growth.read more...»
Nominal weekly wage growth is now running at approximately the same pace as consumer prices inflation hinting that a long period of declining real wages might be coming to an end. The precise measurement of whether real wages are no longer falling is open to doubt, what matters more is the longer run context. The UK has seen a persistent decline in real wages and this has undoubtedly affected the strength of the economic recovery from the 2008-09 recession.
As this short FT video shows, younger workers have seen the steepest declines in real wages.read more...»