tutor2u | Fiscal Austerity

Student Videos

Fiscal Austerity

Level:
AS, A Level, IB
Board:
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Last updated 26 May 2018

In this short revision video I try to explain some of the key arguments for and against the policy of fiscal austerity being carried out by the conservative government in an attempt to cut the budget deficit and control / reduce the scale of government debt as a share of GDP. It is essentially a debate between fiscal conservatives and Keynesian economists!

(2018 Update) Fiscal austerity in the UK since 2008

Since the 2007-08 financial crisis, increases in revenues and, to a greater extent, reductions in public spending have contributed to the deficit falling by 7.5 percent of national income by 2016/17. Revenues increased by 1.7 percent of national income and spending decreased by 5.9 percent of national income between 2009/10 and 2016/17.

The UK government tends to favour the issue of longer term bonds to finance their borrowing. The longest dated bond of recent issue was a 55-year bond issued in 2013, on which interest will still be paid up to 2068.

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