3. 2:18:10 PM
“If we don't get a grip on government
spending, there will be no growth.”
George Osborne, 2011
4. 2:18:10 PM
“If we don't get a grip on government
spending, there will be no growth.”
George Osborne, 2011
“The danger of having no growth, or little
growth, for a long time is high; you get a
number of vicious cycles which come into
play…You're playing with fire when you
get to low growth rates”
6. Discuss the effectiveness of cuts in government
spending as a means of meeting the
government’s macroeconomic objectives
• Scrapping investment projects – job losses, impact on
potential GDP, negative multiplier effects
Argument 1: Depends on where cuts are made
• Will other components of AD help to compensate? E.g.
Exports? Consumer spending?
Argument 2: Depends on how deep cuts are
• Euro economy is in crisis?
• Government has already lost AAA credit rating despite cuts
in government spending
Argument 3: Depends on external economic events
2:18:10 PM
7. Discuss the effectiveness of cuts in government
spending as a means of meeting the
government’s macroeconomic objectives
• Scrapping investment projects – job losses, impact on
potential GDP, negative multiplier effects
Argument 1: Depends on where cuts are made
• Will other components of AD help to compensate? E.g.
Exports? Consumer spending?
Argument 2: Depends on how deep cuts are
• Euro economy is in crisis?
• Government has already lost AAA credit rating despite cuts
in government spending
Argument 3: Depends on external economic events
2:18:10 PM
8. Discuss the effectiveness of cuts in government
spending as a means of meeting the
government’s macroeconomic objectives
• Scrapping investment projects – job losses, impact on
potential GDP, negative multiplier effects
Argument 1: Depends on where cuts are made
• Will other components of AD help to compensate? E.g.
Exports? Consumer spending?
Argument 2: Depends on how deep cuts are
• Euro economy is in crisis?
• Government has already lost AAA credit rating despite cuts
in government spending
Argument 3: Depends on external economic events
2:18:10 PM
9. To what extent would tax reductions help to bring
about stronger growth in the UK economy?
2:18:10 PM
To what extent
Requires good evaluation
Lots of uncertainty at the moment
Evaluate the point
you are making in
each paragraph!
10. To what extent would tax reductions help to bring
about stronger growth in the UK economy?
2:18:10 PM
To what extent
Requires good evaluation
Lots of uncertainty at the moment
Tax reductions
1/ Which taxes might be cut?
2/ Consumer or business taxes?
Evaluate the point
you are making in
each paragraph!
11. To what extent would tax reductions help to bring
about stronger growth in the UK economy?
2:18:10 PM
To what extent
Requires good evaluation
Lots of uncertainty at the moment
Tax reductions
1/ Which taxes might be cut?
2/ Consumer or business taxes?
Stronger growth
1/ Context – weak recovery
2/ Short term growth?
3/ Long term growth? Evaluate the point
you are making in
each paragraph!
12. To what extent would tax reductions help to bring
about stronger growth in the UK economy?
2:18:10 PM
To what extent
Requires good evaluation
Lots of uncertainty at the moment
Tax reductions
1/ Which taxes might be cut?
2/ Consumer or business taxes?
Stronger growth
1/ Context – weak recovery
2/ Short term growth?
3/ Long term growth?
Different tax cuts for short and
long term growth aims?
Evaluate the point
you are making in
each paragraph!
13. To what extent would tax reductions help to bring
about stronger growth in the UK economy?
2:18:10 PM
Consumer spending
• Cuts in VAT or income tax to boost demand
Business investment
• Lower corporation tax to increase investment
Lower employment taxes
• Reduced national insurance taxes
Reductions in fuel / carbon taxes
• Lower costs for businesses, less inflation
14. To what extent would tax reductions help to bring
about stronger growth in the UK economy?
2:18:10 PM
Low confidence – tax
cuts likely to be saved
Consumer spending
• Cuts in VAT or income tax to boost demand
Business investment
• Lower corporation tax to increase investment
Lower employment taxes
• Reduced national insurance taxes
Reductions in fuel / carbon taxes
• Lower costs for businesses, less inflation
15. Direct tax cuts and AD
General
Price Level
Real National
Output (Y)
SRAS1
AD1
Y1 Y2
P1
P2
Will tax cuts boost
demand?
2:18:10 PM
AD2
16. To what extent would tax reductions help to bring
about stronger growth in the UK economy?
2:18:10 PM
Low confidence – tax
cuts likely to be saved
Businesses might
invest overseas instead
Consumer spending
• Cuts in VAT or income tax to boost demand
Business investment
• Lower corporation tax to increase investment
Lower employment taxes
• Reduced national insurance taxes
Reductions in fuel / carbon taxes
• Lower costs for businesses, less inflation
17. To what extent would tax reductions help to bring
about stronger growth in the UK economy?
2:18:10 PM
Low confidence – tax
cuts likely to be saved
Businesses might
invest overseas instead
Skills shortages limit
employment creation
Consumer spending
• Cuts in VAT or income tax to boost demand
Business investment
• Lower corporation tax to increase investment
Lower employment taxes
• Reduced national insurance taxes
Reductions in fuel / carbon taxes
• Lower costs for businesses, less inflation
18. To what extent would tax reductions help to bring
about stronger growth in the UK economy?
2:18:10 PM
Low confidence – tax
cuts likely to be saved
Businesses might
invest overseas instead
Skills shortages limit
employment creation
Consumer spending
• Cuts in VAT or income tax to boost demand
Business investment
• Lower corporation tax to increase investment
Lower employment taxes
• Reduced national insurance taxes
Reductions in fuel / carbon taxes
• Lower costs for businesses, less inflation
Conflicts with
environmental policies
19. Lower taxes for businesses
General
Price Level
Real National
Output (Y)
SRAS1
AD1
Y1 Y2
P1
P2
2:18:10 PM
SRAS2
20. Can tax changes drive LRAS higher?
General
Price Level
Real National
Output (Y)
SRAS1
Y1 Y2
P1
2:18:10 PM
LRAS1 LRAS2
AD1
AD2
Y3
21. Good evaluation approaches
2:18:10 PM
Evaluate the point
you are making in
each paragraph!
Tax cuts on their own are
insufficient in the current
UK economic context
Which tax cuts will boost
short term growth?
Which tax changes might
help long term
competitiveness?
Consequences for other
macro objectives?
22. Good evaluation approaches
2:18:10 PM
Evaluate the point
you are making in
each paragraph!
Tax cuts on their own are
insufficient in the current
UK economic context
Which tax cuts will boost
short term growth?
Which tax changes might
help long term
competitiveness?
Consequences for other
macro objectives?
23. Good evaluation approaches
2:18:10 PM
Evaluate the point
you are making in
each paragraph!
Tax cuts on their own are
insufficient in the current
UK economic context
Which tax cuts will boost
short term growth?
Which tax changes might
help long term
competitiveness?
Consequences for other
macro objectives?
24. Good evaluation approaches
2:18:10 PM
Evaluate the point
you are making in
each paragraph!
Tax cuts on their own are
insufficient in the current
UK economic context
Which tax cuts will boost
short term growth?
Which tax changes might
help long term
competitiveness?
Consequences for other
macro objectives?
25. 2:18:10 PM
Remember to include a short reasoned conclusion
at the end to boost evaluation marks
26. 2:18:10 PM
Remember to include a short reasoned conclusion
at the end to boost evaluation marks
“On balance I feel the strongest argument is for
targeted tax cuts for businesses to boost jobs in
the short term and investment in the long run.”
