12Ec - Autumn Statement 2013 Name: George de Fraine

Each Autumn the chancellor announces a ‘mini budget’ to follow on from the main spring budget. It may contain some tweaking of the Spring budget but may also addresses longer term plans e.g. infrastructure, energy etc. Depending on the closeness of the next election there may also be a few ‘goodies’ to temp the elect-orate! The duty to create twice yearly economic forecasts was created by the Industry Act of 1975.· Autumn Statement: Headlines from George Osborne

speech http://www.bbc.co.uk/news/uk-politics-25237331· Autumn Statement: At-a-glance summary of key points

http://www.bbc.co.uk/news/uk-politics-25232742

A budget is ‘a plan for future spending’. Each red box below con-tains high level summaries of key economic points relating to par-ticular aspects of the UK economy.WARNING! I am expecting you to show evidence of researching each question and support with detail and facts. None of these questions must be answered ‘off the top of your head’.There are two links one with a 5 minute video to get you started. This task is designed to extend your knowledge of the UK eco-nomy by searching, investigating and explaining common eco-nomic terminology to ‘get your hand s dirty’!HOMEWORK: Is at the bottom of the sheetDescribe the forecast for Growth using some of the data descrip-tion vocabulary we have been using in class? (rose, fell, fluctuates, trend, range, steady etc)

Generally, from 2013 to 2018 growth rose from 1.4% to 2.7%. However, towards the end of the growth forecasts such as 2017 to 2018 the growth has stayed at the same level of 2.7%.

What does the government expect to happen to borrowing? Ex-plain some ways that it thinks s this may be achieved. (think about where the government gets its income from e.g. Income tax, VAT excise duties etc and how/where it spends it)

The government believe borrowing will fall from 2013 to 2018 from £111bn to £23bn. They think this may be achieved by in-creasing income tax possibly as this means the government do not need to borrow as much, due to increased revenue or by in-creased investment, as this will increase economic growth, pos-sibly increasing the national income in the long term. Also, it means less investment is needed in the future so borrowing will fall.

What do the letters OBR stand for and what is it responsible for? (summarise in your own words) its responsibilities.Office for budget Responsibility. It is responsible for controlling government borrowing and it includes reducing debt to achieve a small surplus.

What is a ‘budget surplus’?When the government receive more income than their expendit-ures.

National debt is to peak at 80% of what? Find out!National debt will peak at 80% of GDP.

How exactly is the 7% unemployment figure calculated? Quote the source of your answer.The number of people claiming benefit (claimant count).

http://www.bbc.co.uk/news/uk-politics-25232742

Explain what is meant by a ‘green levy’A tax imposed by the government on sources of pollution or car-bon emissions. Designed to discourage the use of gas and ineffi-cient sources of energy.

Describe using ‘logical chain of reasoning (e.g. If… this means that… as a result… therefore…) the impact on consumers of the three announcements.If the planned 2p fuel duty rise is scrapped, this means that the cost of living for consumers may decrease, as a result they may have more disposable income to spend on other goods and ser-vices, therefore overall consumption may increase, meaning the standard of living possibly increases.

If average rail fares are to rise in line with inflation, this means that real incomes may fall, as a result the purchasing power of consumers falls and it may mean there are reduced train journeys, due to the increased prices. However, it may also mean that work-ers who have no alternative transport options will have a higher cost of living; therefore they feel worse off and have less dispos-able income.

If there is a £50 saving on energy bills, this means that the cost of living decreases, this means that they have more disposable in-come to spend, as a result people’s consumption rises, therefore peoples standard of living may increase.

Explain the impact (in logical language) of the increase in the state pension.The increase in the state pension may mean that pensioners will receive an increased level of income, which means they can in-crease their consumption, improving their standard of living. How-ever, if the increase in the pension is equal to the inflation rate, they may not be able to increase their consumption as real in-comes remain the same.

Do you think it is realistic for people to continue working till they are 68? Justify your answer with examples.

No, as their health is likely to be below a worker’s desired level, therefore for manual jobs they would be unable to lift heavy loads. Also, their concentration levels are likely to be worse and they may be prone to frequent naps, therefore their productivity is pos-sibly lower. Consequently, I believe since the number of available jobs are low; the older workers should make way for younger members of society.

Explain with examples what is meant by the term ‘welfare cap’ here.

The welfare cap is a cap on the spending on welfare benefits by the government. Examples that are included in the cap would be tax credits, income support and housing benefit, but excludes pensions and jobseekers allowance.

What is Capital Gains Tax? Why has this particular measure for non-UK residents been introduced?Capital gains tax in this instance is a tax imposed on non-UK resid-ents who sell residential property in the UK. This is to try and de-ter too many foreign buyers buying up all the houses to sell, when UK residents require homes and to avoid the housing bubble that it causes.

How exactly will the married couple’s tax allowance work? Find out and explain below.

It will enable people to transfer £1000 of their income tax allow-ance to their partners.

What are business rates? Why have increases been capped?

Taxes, that businesses have to pay for the rent of non-domestic property (shops on high streets etc.)Increases have been capped at 2% because the government want to give small businesses some relief and encourage them to va-cate high-street stores.

What does the £1,000 discount for small retail business relate to?

It relates to a £1000 discount of their business rates bill, cutting the costs of the business and will apply to retail premises, includ-ing pubs, cafes and restaurants, with a rateable value of up to £50,000 for two years.

How might employers respond to the third point? Think about it.

Employers may decide to increase employment of under 21s, as they do not need to pay NI contributions on top of wages for the employee.

Why has the government introduced universal free school meals for the first three years? (research the motivation for this)

To assist hard-pressed families with the increasing costs of child-care, as working families with both parents on the minimum wage with two children, would only be able to provide 83% of their min-imum needs.

What are the extra 30,000 student places?

Extra places at English Universities.

Why abolish the cap on student numbers from 2015?

It will develop a stronger society, improve the lives of individuals, therefore giving employers better potential employees and as a result improving the economy as a whole.

Explain, with the use of examples, what is meant by ‘infrastruc-ture’

The basic physical systems of a business or country, which are crucial to a country’s growth and development. Examples include roads, transportation and communication.

Describe why the government feels it is necessary to provide £1bn to unblock large housing developments.

It is due to some housing developments stalling for private build-ers due to a lack of a local road for example, therefore a loan could then be made in order to fix the problem. This is believed to be able to lead to 250,000 more privately built homes.

What exactly is shale gas? Why does the government feel it is ne-cessary to provide the allowance?

It is methane (natural gas) trapped in impermeable shale rock deep underground and needs hydraulic fracturing the crack the shale rock.

It feels it is necessary to provide a tax allowance of tax rates be-ing 30% of the company’s profits and receiving an allowance of 75% of capital spent on projects because it will provide billions of pounds of investment into the UK economy, as a result creating jobs and improving the UK’s energy security, therefore possibly re-ducing energy bills for households.

Homework: Watch the Video: UK government's infrastructure spending plan unveiled. http://www.bbc.co.uk/news/business-25201064. · Choose/list three infrastructure projects and for each explain their benefits to the UK economy.

Government guarantee to support finance for the development of a new nuclear power station at Wylfa, North WalesThe benefit to the UK economy is that in the short-term jobs are created, so it helps achieve the objective of full employment and means consumption can increase, as people have a source of income (excluding welfare benefits), therefore the standard of living of the general population could increase. Whilst in the long-term, it may improve the UK’s energy security and as a result may lower en-ergy bills.

Improvements to the A14 around the strategically important port of Felixstowe in Suffolk

The benefit to the UK economy is that by improving the A14 road that leads into the important port of Felixstowe, which is the UK’s largest container port, it means transportation of imports and exports from and to the port is easier and more efficient, as products can be transported from one place to another at a faster rate, due to the smoother road.

Target for the sale of corporate and financial assets will be doubled to £20bn between 2014 and 2020, including the government's shareholding in Eurostar

The benefit to the UK economy is that by selling corporate and financial assets, is that the government’s debt may be reduced and also some of the revenue can be invested back into the UK economy e.g. education and training.