1. The control of unemployment. (-1970 low,-1986 high -1990 low, then rising)
2. The control of inflation.(1991 was 5%)main objective of conservatives
3. A favourable balance of payments. (UK was in deficit, north-sea oil helped)
4. Economic growth(1985-1990 higher that Japan, prime objective is steady growth, greens argue against).
5. Aid to less developed countries (suggested 0.7%, UK gave 0.3%, Netherlands 1%)
6. Correcting market failure. (Public goods, Merit goods, externalises, cost-benefit analysis.
There is a conflict between these objectives (unemployment and inflation).
Mainly Taxation And Gov. Spending(Central and local or capital and current expenditure). Must exist, because Gov. spends 40% of GNP.
Corporations' tax, capital gains tax (selling assets), national insurance contributions, inheritance t.(dies)
Fiscal drag - as inflation increases wage, personal allowings get relatively smaller and more tax has to be paid. Now an Act to eliminate that.
If demand is inelastic gov. gets more tax. The extent by which the tax is passed on to consumer will be determined by the elasticities of demand & supply. The more inel. dem. more consumer pays.
-Links direct and indirect tax. That is the difference between public expenditure and income, 1987‑1991 was negative. PSBR creates inflation. Can be reduced by rising taxes&cutting expenditure.
1. Keynesians view
Paid little attention to the monetary aspects and thought PSBR to give the economy a boost.
2. Monetarists view
Think that PSBR increases money supply and inflation.
High National debt is not a problem, but interest is, because money is spent on economy (inflation). Wealthiest people usually receive interest.
a. Interest payments - have remained constant % of GDP, because interest rates rose.
b. Overseas payment- represents a real burden
c. Crowding-out.PSBR might rise interest rates and thus decrease private investment(monetarists)
to raise money for Gov..
to redistribute income and wealth
to change patterns of consumption
a. element of certainty - people should know how much the tax is in advance
b. must be convenient - easy to pay
c. must be cheap to collect
d. must be fair - people in similar situations pay equally
e. should be flexible and not decrease output
Interest rates + supply of money.
Became important in 1970 because of the inflation.
It concentrated to money supply at the beginning, leaving interest rates free. Nowadays vice-versa. Expanding supply of money and lowering interest rate should expand the economy.
6. But: Reduces differentials between people in general.
First in 1945. Was successful till 1950, but collapsed in inflation. Governments promised not to use, but finally had to. In 1980-ies long-term strategy was worked out.
1. Negative income tax(constant marginal tax revenue, no poverty trap, poor will be paid the tax)
2. Wealth tax(only to rich, 1/2%)
3. Reform of Nat. Insurance- weekly basis out of income, combine with income tax, privatisise.
EUUK Parliament Cambridge C.C. Cambridge, Eat-Cambridge, Fenland
1. Most on education
2. Social services (police)
3. Transport(other than major roads)
5. Refuse collection
1. Government mostly
2. Rates - based on a guess at what property would receive if let for a year.
nothing to do with how many people in the house
nothing to do with how much they use local services
nothing to do with the amount of income and no. of people working
criticism from the business, who didn't have a vote
3. Poll tax - based on no. of adults in the house
People living in bigger houses were better off and vice-versa.
Extremely expensive to collect.
Very unpopular and many refusals to pay.
4. The poll tax was changed to council tax, because was expensive to collect and regressive. Firms stayed paying the business rates.
based on market value of property
people living on their own get reduction
does NOT relate to the amount of social services used
5. Service income