As the world struggles during this economic crisis, countries have looked to protect their own industries, beleiving that, at least in the short term, this is a justifiable economic policy.
However, in the long term, most countries still agree that free trade is the way forward. Click on the links below to access a number of free trade agreements being discussed this week. This will aid with application and context.
UK and South Korea
USA and South Korea
Canada and Japan
Question for discussion: Consider the macroeconomic consequences of such deals and use this to contrast against the reasons for, and consequences of protectionist strategies. (Basically, this just means what are the advantages and disadvantages of protectionism)
Tuesday, 27 March 2012
Sunday, 25 March 2012
Negative Externalities - Beer Prices
Click here to access a link where two MP's debate the proposal to have a minimum price put on beer and wine.
The piece highlights very simple evaluation which could be used in essays at GCSE and A Level.
The piece highlights very simple evaluation which could be used in essays at GCSE and A Level.
Unit 2,4 & IGCSE: 2012 Budget analysis
As ever, there are loads of sources that you can use to analyse for use in essays. PEEL the answer (each paragraph makes one Point, using Examples with Evidence, offering Evaluation and Linking to the question).
Below are 5 links that are relatively objective. Year 13 - we will be looking at these today and in the weeks lessons, so I suggest you read them....
BBC website: Budget 2012 at a glance, Farewell 50p tax rate, and Over 65-s tax-free income freeze
The Guardian Budget 2012: welfare cuts, tax cuts too, but retreat on child benefit and for the visual learners a nice graphic version: Tax and spending plans visualised
This year’s Budget offers valuable material for many parts of both AS and A2 papers - obviously fiscal policy for both AS and A2, with the opportunity to pick out measures designed to influence the supply side and the demand side of the economy, and evaluate the likely impact on macroeconomic performance. But also for AS micro there are plenty of examples of government intervention aimed at market failures, and for A2 micro there is a strong focus on redistribution of income -
Question for discussion: To what extent to you agree with Ed Miliband’s accusation that this is a ‘Budget for millionaires’, or that it will benefit the young at the expense of the pensioners?
Below are 5 links that are relatively objective. Year 13 - we will be looking at these today and in the weeks lessons, so I suggest you read them....
BBC website: Budget 2012 at a glance, Farewell 50p tax rate, and Over 65-s tax-free income freeze
The Guardian Budget 2012: welfare cuts, tax cuts too, but retreat on child benefit and for the visual learners a nice graphic version: Tax and spending plans visualised
This year’s Budget offers valuable material for many parts of both AS and A2 papers - obviously fiscal policy for both AS and A2, with the opportunity to pick out measures designed to influence the supply side and the demand side of the economy, and evaluate the likely impact on macroeconomic performance. But also for AS micro there are plenty of examples of government intervention aimed at market failures, and for A2 micro there is a strong focus on redistribution of income -
Question for discussion: To what extent to you agree with Ed Miliband’s accusation that this is a ‘Budget for millionaires’, or that it will benefit the young at the expense of the pensioners?
Thursday, 22 March 2012
Unit 2 & 4: Budget 2012 at a glance: George Osborne's key points
The key points of Chancellor George Osborne's Budget on 21 March 2012:
INCOME TAX
From April 2013, the 50p top rate of tax will be cut to 45p.
Personal income tax allowance raised to £9,205 from April 2013, making 24 million people £220 a year better off.
But 300,000 more people will be drawn into the higher rate - 40% - tax band from 2013/14 as the threshold is reduced from £42,475 to £41,450.
New general anti-tax avoidance rule to be introduced.
Pensioners will no longer receive a larger personal income tax allowance than people of working age. Age-related allowances will removed for new pensioners from April 2013, while allowances for those already of pension age will be frozen until the personal allowance catches up.
George Osborne said "no pensioner will lose in cash terms", but HM Revenue and Customs estimates that in 2013-14, 4.41 million people will be worse off in real terms with an average loss of £83.
CHILD BENEFIT
Will be phased out when someone in a household has an income of more than £50,000. It will fall by 1% for every £100 earned over £50,000. It will mean those affected will have to fill out self assessment tax forms.
Only those earning more than £60,000 will lose the entirety of the benefit.
ECONOMY
Independent Office for Budget Responsibility (OBR) revises up UK growth forecast for 2012 to 0.8% - from 0.7%.
Forecast for 2013 is 2%, for 2014 is 2.7%, and in each of the two years after that 3%.
Eurozone growth forecast for this year revised down from 0.5% to -0.3%.
UK inflation forecast to fall from 2.8% this year to 1.9% next year.
BORROWING
Borrowing this year to be £126bn - £1bn less than forecast in the autumn. Predicted to be £120bn in 2012-13 and £98bn in 2013-14. Forecast to fall to £21bn by 2016-17.
Consultation to be held on offering gilts - government bonds - with maturity terms of more than 50 years.
JOBS AND SKILLS
OBR forecasts unemployment to peak this year at 8.7% before falling each year to 6.3% by 2016-17.
One million more jobs to be created in the economy over five years, OBR says.
HOUSING
From midnight, new stamp duty level of 7% for homes worth more than £2m. Any such homes bought through companies will pay 15%.
Consultation on the introduction of "a large annual charge" on properties already held in so-called "corporate envelopes". Treasury sources have suggested up to £140,000 a year on any worth more than £20m, down to £15,000 a year on those worth £2m-£5m.
Extra funding to help construction firms building new homes.
HELP FOR BUSINESS
Corporation tax cut to 24% from next month. By 2014 it will fall to 22%.
Enhanced capital allowances for businesses setting up in new Scottish enterprise zones in Dundee, Irvine and Nigg. A Welsh enterprise zone to be created in Deeside.
Consultation on simplifying the tax system for small firms with a turnover of up to £77,000.
Government support for £150m of tax increment financing to help councils promote development and an extra £270m for the Growing Places fund.
Tax relief for the video games, animation and high-end television production sectors.
Government considering enterprise loans for young people to start their own business.
Relaxation of Sunday trading laws on eight Sundays during Olympics and Paralympics, starting July 22.
ARMED FORCES
Cost of operations in Afghanistan to be £2.4bn less than expected.
Money saved will provide an extra £100m to improve military accommodation.
Personnel serving overseas will receive 100% relief on an average council tax bill.
Families welfare grant also doubled.
PUBLIC SECTOR
Government evidence to be published on the case for regional public sector pay.
Option for government departments to move to regional pay structures for civil servants when current freeze ends.
ENERGY
"Major package of tax changes" to boost oil and gas extraction in North Sea, along with £3bn new field allowance west of Shetland.
FUEL, CIGARETTE AND ALCOHOL DUTIES
Continue reading the main story Alcohol & cigarettesEstimate how much beer, wine, spirits and cigarettes you would consume in a normal week.
Pints of beer Glasses of wine
(175ml glass) Glasses of spirits
(50ml doubles) Packs of cigarettes Budget calculator: How are you affected overall? You will be about £0.00 better off in 2012/13
Duty on all tobacco products to rise by 5% above inflation from 18:00 today - the equivalent of 37p on a packet of cigarettes.
No change to existing plans on alcohol duty - meaning the duty will rise 2% above the rate of inflation, putting more than 5p on the price of a pint.
New duty on gaming machines at a standard rate of 20% and a lower rate for low-prize machines of 5% of net takings.
No change to existing plans on fuel duty - a 3.02p per litre increase will go ahead on 1 August. Vehicle excise duty to rise by inflation, but frozen for road hauliers.
Existing fair fuel stabiliser means above-inflation rises in fuel duty will return only if price of oil falls below £45 ($70) a barrel.
PENSIONS
Automatic review of state pension age to ensure it keeps pace with increasing lifespans.
New single-tier state pension for future pensioners to be set at about £140 and based on contributions.
TRANSPORT AND INFRASTRUCTURE
Upgrading the Transpennine route between Manchester and Sheffield. Further improvements to the lines between Manchester and Preston, and Manchester and Blackpool.
Report on the future of aviation in south-east England to be published in the summer.
Funding for superfast broadband and wi-fi in the UK's 10 largest cities.
OTHER TAXES AND ALLOWANCES
Bank levy to be increased to 0.105% from January 2013 "to ensure that corporation tax cuts do not benefit the banks". The levy will raise £2.5bn a year.
New cap on tax reliefs set at 25% of total income for anyone claiming more than £50,000 in a year, but no significant change to pensions relief.
VAT loopholes and anomalies to be removed - including removing exemptions for sports nutrition drinks and hot takeaway products in supermarkets. Self-storage, static caravans and hairdressers' chairs will also no longer be exempt.
Existing VAT exemptions will remain for food, children's clothes, books and newspapers.
Personal tax statement to be sent to 20 million taxpayers from 2014. It will detail an individual's income tax and National Insurance payments and how those contribute to public spending.
GREEN MEASURES
Government to seek "major savings" in the administrative cost of the Carbon Reduction Commitment, and bring forward an alternative environment tax this autumn if such savings cannot be found.
Wednesday, 21 March 2012
Unit 2, 4 and IGCSE: Tax, government spoending and the budget
Click here to access the interactive Gurdian newspaper report on this years budget. It not only makes intersting reading, but also will help you understand the big issues in the UK.
Tuesday, 20 March 2012
Macroeconomic policy: Budget predictions 2012
A 12-point guide to George Osborne's Budget 2012
Confused about the Budget? Perplexed by the speculation? Worried there might be a crackdown on your threshold, or a squeeze on your middle? Well here is a point-by-point guide to the politics of Wednesday's event:
1) The government's basic economic strategy will not change: The one thing the coalition parties have not argued about is the need to keep cutting the deficit at the pace they have set. There will still be many, many billions of spending cuts this year and against them, most of the tax changes announced on Wednesday will pale into insignificance.
2) The basic economic numbers will not change: Few economists are expecting the Office for Budget Responsibility to up or downgrade significantly its basic forecasts: how much the economy is - or is not - going to grow; how much borrowing will rise; what will happen to debt and so on.
3) This will be a fiscally neutral budget: There will be no "unfunded giveaways," to quote the chancellor. Every tax cut will have to be paid for by a tax rise elsewhere. This in itself is a political choice. Labour would probably like to borrow a touch more to do what it would want to do, like cut VAT. Many Tories would like to cut spending more so they could cut business taxes further. But George Osborne will simply make some people pay more so others can pay less.
4) But the politics will change: The two coalition parties are carving out the meat of their offer for voters at the next election. The Lib Dems will claim that it is they who are leading the drive to take millions of lower paid workers out of income tax. The Conservatives will argue that, as well as cutting tax for middle earners too, they are also making the economy more competitive by trimming corporation tax and - maybe - cutting the 50p top rate of tax.
5) The Budget has tested the seams of the coalition: The Lib Dem strategy of negotiating in public has irritated some Tories. But George Osborne has been explicit in making clear that this has been a coalition Budget, and as such will "satisfy a broad range of public opinion". The risk is that it looks like a Budget that has been agreed in the interests of the coalition rather than in the interests of the nation.
6) At the heart of this Budget is likely to be a deal: George Osborne is likely to take more low earners out of income tax and squeeze the rich by making it harder for them to avoid tax and by capping the number of allowances and reliefs they can claim, the so-called "tycoon tax". In return, he has carved himself the political space and cover to start cutting the 50p rate, if that is what he wants to do.
7) A note of caution on income tax: Taking people out of income tax is good for people who are not paying tax any more. It is less good for poor people who do not pay tax already. It is less good for people who have to start paying the top rate of tax as a result. It is also less good for people who only have one earner in the family compared to those who have two earners, both of whom can benefit from the tax cut.
8) The big risk for the Conservatives would be cutting the 50p top rate of tax: The risk is that they will be accused of helping rich people earning more than £150,000, and no amount of a crackdown on tax avoidance by the rich will overcome that. Some Tory MPs think it could put at risk David Cameron's attempts to modernise their party. And if the chancellor cuts the rate from 50 to 45p, will the gain in business confidence really outweigh the political downside. Is a 5p cut really enough of a signal to foreign investors to come and do business in Britain? What is 5p among friends? Surely, if Mr Osborne is going to take the risk, he might as well go the whole hog and abolish the rate entirely so that more rich people stay in Britain - as the argument goes - and pay more tax in the long run.
9) The big risk for the Liberal Democrats would be agreeing to cut the 50p rate: Many of the party's natural supporters struggle to understand why helping rich people should be a priority. Others - like the party's former Treasury spokesman Lord Oakeshott - believe the party should not agree to any cut in the 50p rate unless they get a mansion tax in return. The tricky task for George Osborne will be to try to show that overall the rich will pay more tax and the poor less.
10) Do not think the European problem has gone away just because Robert Peston isn't on the telly talking about it every night: As George Osborne told Andrew Marr: "Just because the European Central Bank is putting a lot of money into the eurozone does not mean some of the fundamental problems have been resolved and you know that remains a major risk to the UK and the rest of the world."
11) Ignore the slogans: A "Budget for working people" can mean a lot of things to a lot of people. Will, for example, Mr Osborne reverse his planned cuts in working tax credits which is, of course, a tax rise for, er, working people?
12) There is a fight that has yet to be had over planning: This divides the Conservatives. Some believe the new planning reforms published this week will help boost the economy, paving the way for a flood of new houses. Others think it will simply be a developer's charter to concrete over beautiful green fields that happen not to be part of the protected green belt. Let battle begin.
1) The government's basic economic strategy will not change: The one thing the coalition parties have not argued about is the need to keep cutting the deficit at the pace they have set. There will still be many, many billions of spending cuts this year and against them, most of the tax changes announced on Wednesday will pale into insignificance.
2) The basic economic numbers will not change: Few economists are expecting the Office for Budget Responsibility to up or downgrade significantly its basic forecasts: how much the economy is - or is not - going to grow; how much borrowing will rise; what will happen to debt and so on.
3) This will be a fiscally neutral budget: There will be no "unfunded giveaways," to quote the chancellor. Every tax cut will have to be paid for by a tax rise elsewhere. This in itself is a political choice. Labour would probably like to borrow a touch more to do what it would want to do, like cut VAT. Many Tories would like to cut spending more so they could cut business taxes further. But George Osborne will simply make some people pay more so others can pay less.
4) But the politics will change: The two coalition parties are carving out the meat of their offer for voters at the next election. The Lib Dems will claim that it is they who are leading the drive to take millions of lower paid workers out of income tax. The Conservatives will argue that, as well as cutting tax for middle earners too, they are also making the economy more competitive by trimming corporation tax and - maybe - cutting the 50p top rate of tax.
5) The Budget has tested the seams of the coalition: The Lib Dem strategy of negotiating in public has irritated some Tories. But George Osborne has been explicit in making clear that this has been a coalition Budget, and as such will "satisfy a broad range of public opinion". The risk is that it looks like a Budget that has been agreed in the interests of the coalition rather than in the interests of the nation.
6) At the heart of this Budget is likely to be a deal: George Osborne is likely to take more low earners out of income tax and squeeze the rich by making it harder for them to avoid tax and by capping the number of allowances and reliefs they can claim, the so-called "tycoon tax". In return, he has carved himself the political space and cover to start cutting the 50p rate, if that is what he wants to do.
7) A note of caution on income tax: Taking people out of income tax is good for people who are not paying tax any more. It is less good for poor people who do not pay tax already. It is less good for people who have to start paying the top rate of tax as a result. It is also less good for people who only have one earner in the family compared to those who have two earners, both of whom can benefit from the tax cut.
8) The big risk for the Conservatives would be cutting the 50p top rate of tax: The risk is that they will be accused of helping rich people earning more than £150,000, and no amount of a crackdown on tax avoidance by the rich will overcome that. Some Tory MPs think it could put at risk David Cameron's attempts to modernise their party. And if the chancellor cuts the rate from 50 to 45p, will the gain in business confidence really outweigh the political downside. Is a 5p cut really enough of a signal to foreign investors to come and do business in Britain? What is 5p among friends? Surely, if Mr Osborne is going to take the risk, he might as well go the whole hog and abolish the rate entirely so that more rich people stay in Britain - as the argument goes - and pay more tax in the long run.
9) The big risk for the Liberal Democrats would be agreeing to cut the 50p rate: Many of the party's natural supporters struggle to understand why helping rich people should be a priority. Others - like the party's former Treasury spokesman Lord Oakeshott - believe the party should not agree to any cut in the 50p rate unless they get a mansion tax in return. The tricky task for George Osborne will be to try to show that overall the rich will pay more tax and the poor less.
10) Do not think the European problem has gone away just because Robert Peston isn't on the telly talking about it every night: As George Osborne told Andrew Marr: "Just because the European Central Bank is putting a lot of money into the eurozone does not mean some of the fundamental problems have been resolved and you know that remains a major risk to the UK and the rest of the world."
11) Ignore the slogans: A "Budget for working people" can mean a lot of things to a lot of people. Will, for example, Mr Osborne reverse his planned cuts in working tax credits which is, of course, a tax rise for, er, working people?
12) There is a fight that has yet to be had over planning: This divides the Conservatives. Some believe the new planning reforms published this week will help boost the economy, paving the way for a flood of new houses. Others think it will simply be a developer's charter to concrete over beautiful green fields that happen not to be part of the protected green belt. Let battle begin.
Sunday, 18 March 2012
IGCSE & Unit 1: Obesity & Market failure
Call for pre-watershed ban on junk food advertising
Television adverts for food high in fat, sugar and salt should not be shown before the 9pm watershed, according to Scotland's public health minister.
Michael Matheson has written to UK Health Secretary Andrew Lansley asking if he would support a UK-wide ban. It follows recent research which suggests children are still exposed to the same level of junk food advertising despite tighter regulations.
Health groups say further action is needed to tackle the problem.
Broadcasting regulator Ofcom brought in a ban on advertising foods high in fat, salt or sugar during children's programming.
But a study by academics at Newcastle University found 6.1% of adverts seen by youngsters were about junk food before the ban, with the figure at 7% after the ban.
They said young people do not just watch children's programmes, to which the rules apply.
Mr Matheson now wants the regulations to go further.
He said: "According to the UN and Ofcom studies, the restrictions brought in by Ofcom have been adhered to by children's channels and broadcasters showing programmes specifically aimed at children.
"However, a loophole exists that allows HFSS (high in fat, sugar and salt) food adverts to feature during programmes with a high child audience such as soaps and talent shows.
"That's why we want to introduce a pre-watershed ban and are looking to the UK government to support such a move which would carry the additional benefit of encouraging our partners in the food industry to reformulate their produce to lower salt, fat and sugar content."
Scotland's public health minister said such a move would require "co-operation" between the UK and Scottish governments.
He added: "Broadcast advertising influences the choices made by children and can shape their attitudes to food as they grow into adulthood.
"Tackling obesity and encouraging people to make healthier life choices is one of the most important things we can do to improve the health of our nation."
Further consideration
Jane Landon, deputy chief executive of the National Heart Forum, welcomed the call for a pre-watershed ban.
She said: "The existing rules have delivered protections in principle but not in practice."
Dr Sally Winning, deputy chairman of the British Medical Association Scotland, said: "The media has an important role to play in forming attitudes to nutrition and there is scope to harness this potential and further regulate its more harmful impact.
"Whilst the advertising of unhealthy foodstuffs, including inappropriate sponsorship of programmes and events targeted at school children, is already regulated, it should be noted that many of the TV programmes most watched by children are not children's programmes, and so further consideration must be given to addressing this."
Scottish Labour's health spokeswoman Jackie Baillie accused the SNP of "picking a fight" with Westminster.
She said: "At a time when we have lost 2,000 nurses, our hospitals are crumbling and we don't have enough blankets for elderly patients, I am amazed that the SNP government is picking a fight with the UK government about what time we can show McDonald's adverts on television.
"This is the same government which rejected my colleague Richard Simpson's Trans-fats Bill, something they did have the power to do.
"The SNP's obsession with constitutional politics knows no bounds and is distracting from the real problems in our health service."
Project for Y10: In your groups, you need to construct a report that solves the issue of negative externalities in society. There will be several topics to research, including: Too much waste, congestion in towns & Cities, alcohol abuse, addiction to violent computer games, over fishing in the North Sea and deforestation in Brazil.
Your report should include the following:
What the problem is (ie identify the negative externalities).
Policies to solve problem. These could include anything from fines, to taxes, to advertising campaigns.
Potential problems with you policy.
A conclusion.
You should produce a prezzi/ppt/even a video to present to rest of class on Thursday.
Michael Matheson has written to UK Health Secretary Andrew Lansley asking if he would support a UK-wide ban. It follows recent research which suggests children are still exposed to the same level of junk food advertising despite tighter regulations.
Health groups say further action is needed to tackle the problem.
Broadcasting regulator Ofcom brought in a ban on advertising foods high in fat, salt or sugar during children's programming.
But a study by academics at Newcastle University found 6.1% of adverts seen by youngsters were about junk food before the ban, with the figure at 7% after the ban.
They said young people do not just watch children's programmes, to which the rules apply.
Mr Matheson now wants the regulations to go further.
He said: "According to the UN and Ofcom studies, the restrictions brought in by Ofcom have been adhered to by children's channels and broadcasters showing programmes specifically aimed at children.
"However, a loophole exists that allows HFSS (high in fat, sugar and salt) food adverts to feature during programmes with a high child audience such as soaps and talent shows.
"That's why we want to introduce a pre-watershed ban and are looking to the UK government to support such a move which would carry the additional benefit of encouraging our partners in the food industry to reformulate their produce to lower salt, fat and sugar content."
Scotland's public health minister said such a move would require "co-operation" between the UK and Scottish governments.
He added: "Broadcast advertising influences the choices made by children and can shape their attitudes to food as they grow into adulthood.
"Tackling obesity and encouraging people to make healthier life choices is one of the most important things we can do to improve the health of our nation."
Further consideration
Jane Landon, deputy chief executive of the National Heart Forum, welcomed the call for a pre-watershed ban.
She said: "The existing rules have delivered protections in principle but not in practice."
Dr Sally Winning, deputy chairman of the British Medical Association Scotland, said: "The media has an important role to play in forming attitudes to nutrition and there is scope to harness this potential and further regulate its more harmful impact.
"Whilst the advertising of unhealthy foodstuffs, including inappropriate sponsorship of programmes and events targeted at school children, is already regulated, it should be noted that many of the TV programmes most watched by children are not children's programmes, and so further consideration must be given to addressing this."
Scottish Labour's health spokeswoman Jackie Baillie accused the SNP of "picking a fight" with Westminster.
She said: "At a time when we have lost 2,000 nurses, our hospitals are crumbling and we don't have enough blankets for elderly patients, I am amazed that the SNP government is picking a fight with the UK government about what time we can show McDonald's adverts on television.
"This is the same government which rejected my colleague Richard Simpson's Trans-fats Bill, something they did have the power to do.
"The SNP's obsession with constitutional politics knows no bounds and is distracting from the real problems in our health service."
Project for Y10: In your groups, you need to construct a report that solves the issue of negative externalities in society. There will be several topics to research, including: Too much waste, congestion in towns & Cities, alcohol abuse, addiction to violent computer games, over fishing in the North Sea and deforestation in Brazil.
Your report should include the following:
What the problem is (ie identify the negative externalities).
Policies to solve problem. These could include anything from fines, to taxes, to advertising campaigns.
Potential problems with you policy.
A conclusion.
You should produce a prezzi/ppt/even a video to present to rest of class on Thursday.
Unit 1 & IGCSE: Negative Externalies & beer consumption
In the lead up to the 2012 Budget, this short BBC news video clip looks at the cost of a pint of beer and claims that some brewers have weakened their beer to avoid the higher excise duty on higher-strength drinks. There is a neat explanation of the breakdown of beer costs and students may be surprised to find out the amount of tax they pay if they drink a pint! About 95p from every pint goes to the government.
Higher taxes have been one factor bringing down consumption levels. There has been a 13 per cent decline in alcohol consumption per head in Britain since 2004. The percentage of men aged 16-24 who drank more than 21 units per week has fallen from 32 per cent to 21 per cent from 2005 to 2010
Here is the link And here is the related article from the BBC’s John Moylan
The UK beer industry including the very active British Beer and Pub Association is lobbying the government for a reversal of the planned increases in beer duties. The UK alcohol duty escalator, which increases tax on beer (and other alcoholic drinks) by 2 per cent above the rate of inflation, has been in place since 2008 and will mean a 6-7% rise in average beer prices this year. A bitter blow for drinkers.
Here is some background data from their recent press release campaigning for an end to beer duty rises
Beer duty – key facts
• 950,000 British jobs depend on the UK beer and pub sector
• There are now 900 breweries in the UK – a vital part of Britain’s manufacturing mix
• £13 billion is paid in wages in the sector
• Brewing and pubs are worth £19.4 billion to the UK economy (Gross Value Added)
• The beer and pub sector contributes over £11 billion in tax revenues
The British Beer & Pub Association is the UK’s leading organisation representing the brewing and pub sector. Its members account for 96 per cent of the beer brewed in the UK and around half of Britain’s 52,000 pubs.
Higher taxes have been one factor bringing down consumption levels. There has been a 13 per cent decline in alcohol consumption per head in Britain since 2004. The percentage of men aged 16-24 who drank more than 21 units per week has fallen from 32 per cent to 21 per cent from 2005 to 2010
Here is the link And here is the related article from the BBC’s John Moylan
The UK beer industry including the very active British Beer and Pub Association is lobbying the government for a reversal of the planned increases in beer duties. The UK alcohol duty escalator, which increases tax on beer (and other alcoholic drinks) by 2 per cent above the rate of inflation, has been in place since 2008 and will mean a 6-7% rise in average beer prices this year. A bitter blow for drinkers.
Here is some background data from their recent press release campaigning for an end to beer duty rises
Beer duty – key facts
• 950,000 British jobs depend on the UK beer and pub sector
• There are now 900 breweries in the UK – a vital part of Britain’s manufacturing mix
• £13 billion is paid in wages in the sector
• Brewing and pubs are worth £19.4 billion to the UK economy (Gross Value Added)
• The beer and pub sector contributes over £11 billion in tax revenues
The British Beer & Pub Association is the UK’s leading organisation representing the brewing and pub sector. Its members account for 96 per cent of the beer brewed in the UK and around half of Britain’s 52,000 pubs.
Friday, 16 March 2012
Unit 2 & 4: Seasonal & Structural Unemployment
Click here to access a news video from the BBC which focuses on a man who has been out of work for over two years in the seaside town of Weston-super-mare, a town dominated by tourist businesses where employment is highly seasonal. It provides a strong short case study in the problems of people who have been out of paid employment for a long time.
Channel 4 news have a special section on the unemployment crisis in the UK economy. Check out t
he clip below...what does it take to create one job?
Channel 4 news have a special section on the unemployment crisis in the UK economy. Check out t
he clip below...what does it take to create one job?
Wednesday, 14 March 2012
Unit 4: Video clips on the crisis facing Europe and the Eurozone.
Here is a selection of news video resources that I have been using when teaching the economics (and politics) of the Euro Zone crisis
Looking back at the turbulent global economy in 2011
Greece on verge of historic debt swap deal (March 2012) - The Greek Hair Cut
Are Greek’s Euro days numbered?
Greeks sceptical despite bailout deal (February 2012)
The Size of Greek National Debt
The One Trillion Mark Note - Symbol of Germany’s Inflation Fears
Looking back at the turbulent global economy in 2011
Greece on verge of historic debt swap deal (March 2012) - The Greek Hair Cut
Are Greek’s Euro days numbered?
Greeks sceptical despite bailout deal (February 2012)
The Size of Greek National Debt
The One Trillion Mark Note - Symbol of Germany’s Inflation Fears
Monday, 12 March 2012
Unit 4: Trade deficit for China!
China reports large trade deficit as imports surge
Demand for fuel in China has been rising as its economy continues to expand
China posted its largest trade deficit in at least a decade in February, after imports of commodities jumped as companies built up supplies.
The deficit was $31.5bn (£20bn) after imports rose 39.6% from a year earlier and exports rose 18.4%, the customs bureau said.
Analysts said the widening trade gap may signal deeper economic issues that China will need to address.
China has an export-led economy, but global economic growth remains slow.
Meanwhile, prices for many of the raw materials that China needs to fuel its growth are climbing.
Faced with these problems, many analysts are now predicting that China will have to do something to stimulate its domestic demand.
Anticipation
Last week, China said it was expecting its economy to grow by 7.5% in 2012, the lowest target it has set since 2004.
At the same time, it set an inflation target of 4%.
Price growth has been one of the biggest problems facing China over the past few years, not least because it imports most of the oil and commodities it consumes.
That is why, with crude oil climbing to close to $125 per barrel on the international exchange, many companies are stockpiling fuel in order to protect themselves from future price rises.
According to the trade figures released over the weekend, crude oil shipments hit a record-high of 5.95m barrels per day. China's imports of copper and iron ore also rose during the month.
"Imports were strong in February partly due to restocking among manufacturers in anticipation of rising commodity prices," said Hua Zhongwei of Huachuang Securities in Beijing.
'Slowly recovering'
Continue reading the main story “Start QuoteEurope and the US are slowly recovering. We should not be too pessimistic about China's exports”
End Quote Hua Zhongwei Huachuang Securities
While China is looking to stoke domestic demand and give its economy better balance, it still relies heavily on its export and manufacturing sector.
But problems in its key markets such as the US and eurozone have raised fears about whether Beijing can sustain its export-led growth.
There have been concerns that the debt crisis in the eurozone and the high rate of unemployment in the US may hurt consumer sentiment and dent demand for Chinese goods.
However, analysts said while those fears still exist, there were signs that things were improving.
Data released last week showed that the US economy created 227,000 jobs in February, while the unemployment rate stayed at 8.3%, the lowest level in nearly three years.
At the same time, Greece struck a deal with banks and other lenders on Friday to restructure its debt, an important step in winning a final approval of its second bailout.
"Europe and the US are slowly recovering. We should not be too pessimistic about China's exports," said Mr Hua of Huachuang Securities.
"We will have a trade surplus for the whole year."
Demand for fuel in China has been rising as its economy continues to expand
China posted its largest trade deficit in at least a decade in February, after imports of commodities jumped as companies built up supplies.
The deficit was $31.5bn (£20bn) after imports rose 39.6% from a year earlier and exports rose 18.4%, the customs bureau said.
Analysts said the widening trade gap may signal deeper economic issues that China will need to address.
China has an export-led economy, but global economic growth remains slow.
Meanwhile, prices for many of the raw materials that China needs to fuel its growth are climbing.
Faced with these problems, many analysts are now predicting that China will have to do something to stimulate its domestic demand.
Anticipation
Last week, China said it was expecting its economy to grow by 7.5% in 2012, the lowest target it has set since 2004.
At the same time, it set an inflation target of 4%.
Price growth has been one of the biggest problems facing China over the past few years, not least because it imports most of the oil and commodities it consumes.
That is why, with crude oil climbing to close to $125 per barrel on the international exchange, many companies are stockpiling fuel in order to protect themselves from future price rises.
According to the trade figures released over the weekend, crude oil shipments hit a record-high of 5.95m barrels per day. China's imports of copper and iron ore also rose during the month.
"Imports were strong in February partly due to restocking among manufacturers in anticipation of rising commodity prices," said Hua Zhongwei of Huachuang Securities in Beijing.
'Slowly recovering'
Continue reading the main story “Start QuoteEurope and the US are slowly recovering. We should not be too pessimistic about China's exports”
End Quote Hua Zhongwei Huachuang Securities
While China is looking to stoke domestic demand and give its economy better balance, it still relies heavily on its export and manufacturing sector.
But problems in its key markets such as the US and eurozone have raised fears about whether Beijing can sustain its export-led growth.
There have been concerns that the debt crisis in the eurozone and the high rate of unemployment in the US may hurt consumer sentiment and dent demand for Chinese goods.
However, analysts said while those fears still exist, there were signs that things were improving.
Data released last week showed that the US economy created 227,000 jobs in February, while the unemployment rate stayed at 8.3%, the lowest level in nearly three years.
At the same time, Greece struck a deal with banks and other lenders on Friday to restructure its debt, an important step in winning a final approval of its second bailout.
"Europe and the US are slowly recovering. We should not be too pessimistic about China's exports," said Mr Hua of Huachuang Securities.
"We will have a trade surplus for the whole year."
Saturday, 10 March 2012
Evaluate the possible economic effects of the introduction of a single currency by a trading bloc.
Mark Scheme......(evaluative comments in italics)
Effects include:
Elimination of transactions costs
But these are usually only a small proportion of GDP.
Price transparency.
But price differences are likely to remain because of differences in costs.
Easier trading for firms within the trading bloc.
But many of the countries with fastest growing exports are not members of trading blocs.
Loss of independent monetary policy
But greater macroeconomic stability.
Loss of exchange rate flexibility against other countries win the bloc, but greater certainty and stability.
Transition costs.
Mark Scheme......(evaluative comments in italics)
Effects include:
Elimination of transactions costs
But these are usually only a small proportion of GDP.
Price transparency.
But price differences are likely to remain because of differences in costs.
Easier trading for firms within the trading bloc.
But many of the countries with fastest growing exports are not members of trading blocs.
Loss of independent monetary policy
But greater macroeconomic stability.
Loss of exchange rate flexibility against other countries win the bloc, but greater certainty and stability.
Transition costs.
Unit 4: EU Enlargement
Here are some links to video resources on prospects for further enlargement of the European Union single market.
Can you read the links, watch the videos and answer the following question:
The EU is the largest trading bloc in the world. What are the economic effects for the UK of being a member of this 'Club' and will further enlargement be beneficial to the UK? (30)
Serbia moves closer to EU membership (March 2012) (see also: EU leaders grant Serbia candidate status)
Croatians vote in EU referendum (February 2012) (see also: Croats remain sceptical about EU membership)
Inside Story - Turkey’s bid to join the EU (November 2010)
Iceland sees signs of economic recovery (December 2011)
Can you read the links, watch the videos and answer the following question:
The EU is the largest trading bloc in the world. What are the economic effects for the UK of being a member of this 'Club' and will further enlargement be beneficial to the UK? (30)
Serbia moves closer to EU membership (March 2012) (see also: EU leaders grant Serbia candidate status)
Croatians vote in EU referendum (February 2012) (see also: Croats remain sceptical about EU membership)
Inside Story - Turkey’s bid to join the EU (November 2010)
Iceland sees signs of economic recovery (December 2011)
Thursday, 8 March 2012
Unit 4: The Eurozone in graphics
Click here to access a really useful graphic which compares Eurozone countries in graphic form. Excellent for analysis, application and evaluation of the Euro.Wednesday, 7 March 2012
Unit 4: House Passes Bill to Address China Subsidy
WASHINGTON — The House voted on Tuesday to ensure that the United States could impose duties on subsidized goods from China and Vietnam, overwhelmingly rejecting a conservative group’s attempt to portray it as a tax increase.
The bill, which was passed 370 to 39 and addresses a court ruling, now goes to President Obama, who is expected to sign it into law. The Senate passed the bill on Monday.
“China distorts the free market by giving enormous subsidies to its producers and exporters, and our companies and workers should not be expected to compete against the deep pockets of the Chinese government,” Dave Camp, a Michigan Republican who is chairman of the House Ways and Means Committee, said during debate.
The Obama administration helped draw up the bipartisan bill after an appeals court ruled in December that the Commerce Department did not have authority to impose countervailing — or antisubsidy — duties on goods from “nonmarket economies.”
The decision endangered countervailing duties on about two dozen goods from China and Vietnam worth more than $4 billion in trade, and potential new duties in cases involving solar panels and turbine towers from China.
Supporters say current duties protect 80,000 American jobs. They cover steel, aluminum, paper, chemicals, other products from China and plastic shopping bags from Vietnam.
The vote gave both Republicans and Democrats a chance to show they are being tough on China, which many Americans see as an unfair trader. Last year, United States imports from China totaled a record $399.3 billion.
Unit 4: US and India at the WTO
US challenges India poultry import ban at trade body
The US authorities have accused India to trying to protect its domestic poultry industry
The US has dragged India to the World Trade Organization challenging its ban on imports of American poultry.
India has banned shipments of US farm products, including poultry meat and chicken eggs, since 2007 to prevent the spread of avian flu.
US authorities said India had imposed the ban to protect local industry and that it violates global trade rules.
The move comes just days after the US created a new panel to crack down on unfair trade practices by its partners.
Ron Kirk, US Trade Representative, said that India's ban was "clearly a case of disguising trade restrictions by invoking unjustified animal health concerns".
"The United States is the world's leader in agricultural safety and we are confident that the World Trade Organization will confirm that India's ban is unjustified."
Key market
India is the world's second most populous country and the demand for poultry products has been growing in the Asian nation.
According to some estimates, the Indian poultry market is expanding at an annual rate of between 8% to 10%.
The US, which is the world's largest producer of poultry meat, is keen to tap into this fast-growing market.
Industry experts said US exports to India could touch $300m (£190m) annually, if India lifted the ban on US poultry goods.
"As the middle class in India continues to expand, and the market moves more toward commercial poultry, the United States should be afforded the opportunity to compete fairly with our products in this growing market," said Mike Brown, president of the US National Chicken Council.
The US has dragged India to the World Trade Organization challenging its ban on imports of American poultry.
India has banned shipments of US farm products, including poultry meat and chicken eggs, since 2007 to prevent the spread of avian flu.
US authorities said India had imposed the ban to protect local industry and that it violates global trade rules.
The move comes just days after the US created a new panel to crack down on unfair trade practices by its partners.
Ron Kirk, US Trade Representative, said that India's ban was "clearly a case of disguising trade restrictions by invoking unjustified animal health concerns".
"The United States is the world's leader in agricultural safety and we are confident that the World Trade Organization will confirm that India's ban is unjustified."
Key market
India is the world's second most populous country and the demand for poultry products has been growing in the Asian nation.
According to some estimates, the Indian poultry market is expanding at an annual rate of between 8% to 10%.
The US, which is the world's largest producer of poultry meat, is keen to tap into this fast-growing market.
Industry experts said US exports to India could touch $300m (£190m) annually, if India lifted the ban on US poultry goods.
"As the middle class in India continues to expand, and the market moves more toward commercial poultry, the United States should be afforded the opportunity to compete fairly with our products in this growing market," said Mike Brown, president of the US National Chicken Council.
Tuesday, 6 March 2012
Unit 3: Mergers in action
A fabulous example of some of the challenges and potential problems that arise when a merger of two substantial, similar businesses is finally completed…
This short news clip highlights the nature of the change facing management and employees working to merge United Airlines and Continental Airlines as the final stage of the merger - a transfer of booking systems - took place.
This short news clip highlights the nature of the change facing management and employees working to merge United Airlines and Continental Airlines as the final stage of the merger - a transfer of booking systems - took place.
Power in the media...please watch!
Thanks to Mr Cave for this exceptional Guardian advert which highlkights the power of the media. Not Economics as such, but thought provoking none the less.....
Monday, 5 March 2012
Y13 students should become familiar with the term 'Sovereign Wealth Funds'. Essential knowledge in the study of global economics, trade, investment and currency developments. As you will see, we are famous here in the UAE as we have the oldest & biggest SWF in the world!
A sovereign wealth fund is a government or state run investment fund usually created by supernormal profits from natural resources such as oil, gas or minerals.
Here is some brief background on them:
The oldest SWF is the UAE-Abu Dhabi Fund established in 1976, one of the most recent is the one created by Russia in 2008.
The largest sovereign wealth fund (measured by the US $ value of assets under management) is the Abu Dhabi Investment Authority with $627bn. The Chinese Investment Corporation (CIC) has $410bn and the Kuwait Investment Authority had $296 under management at the end of 2011.
Sovereign wealth fund investment in the UK has grown rapidly over the years - it attracted $68 bn of total SWF investment in the six years to the end of 2011. Here are some high profile examples:
1/ Thames Water (9.9% stake bought by China Investment Authority)
2/ BAA Airports Group (17.7% owned by GIC of Singapore)
3/ Sainsbury’s (26% stake owned by Qatar Investment Authority)
4/ London 2012 Olympic Village (100% owned by Qatar Investment Authority)
From investment in corporate bonds and equities, real estate, infrastructure projects, government debt and hedge funds / private equity - the increasing financial muscle and influence of state investment funds is a key development to be aware of. There is rising pressure for these funds to be more transparent in their dealings - in the past they have been highly secretive.
Do you consider their impact to be positive for the UK economy at this crucial stage of the economic cycle? To what extent is the expansion of SWF power a reflection of the changing centre of gravity in the world economy?
Qatar looks to diversify away from gas
Q's for discussion: In light of the above information, assess the advantages & disadvantages of SWF for the UK.
A sovereign wealth fund is a government or state run investment fund usually created by supernormal profits from natural resources such as oil, gas or minerals.
Here is some brief background on them:
The oldest SWF is the UAE-Abu Dhabi Fund established in 1976, one of the most recent is the one created by Russia in 2008.
The largest sovereign wealth fund (measured by the US $ value of assets under management) is the Abu Dhabi Investment Authority with $627bn. The Chinese Investment Corporation (CIC) has $410bn and the Kuwait Investment Authority had $296 under management at the end of 2011.
Sovereign wealth fund investment in the UK has grown rapidly over the years - it attracted $68 bn of total SWF investment in the six years to the end of 2011. Here are some high profile examples:
1/ Thames Water (9.9% stake bought by China Investment Authority)
2/ BAA Airports Group (17.7% owned by GIC of Singapore)
3/ Sainsbury’s (26% stake owned by Qatar Investment Authority)
4/ London 2012 Olympic Village (100% owned by Qatar Investment Authority)
From investment in corporate bonds and equities, real estate, infrastructure projects, government debt and hedge funds / private equity - the increasing financial muscle and influence of state investment funds is a key development to be aware of. There is rising pressure for these funds to be more transparent in their dealings - in the past they have been highly secretive.
Do you consider their impact to be positive for the UK economy at this crucial stage of the economic cycle? To what extent is the expansion of SWF power a reflection of the changing centre of gravity in the world economy?
Qatar looks to diversify away from gas
Q's for discussion: In light of the above information, assess the advantages & disadvantages of SWF for the UK.
Friday, 2 March 2012
Unit 4: Deflation in the EU
A predictable, but nevertheless depressing, event is to see Europe slipping into deflation.
Monthly inflation in the EU area was -0.8% in January 2012. (EU Stat) The 12 month inflation figure was 2.6%, which includes some cost-push inflation. Inflation will continue to fall over the coming months However, there are few signs of economic recovery. Countries in the periphery of the EU are at greater risk of deflation because of the continued austerity, high exchange rate and fall in economic confidence. The ECB has been debating whether to pursue quantitative easing, but there is a deep-seated reluctance to pursue this unorthodox monetary policy.
The problem is that even quantitative easing can take a long time to have an effect on economic activity. The experience of the UK and US is hard to judge, but it has had an effect in preventing a deeper and longer lasting recession. Any fears of inflation resulting from quantitative easing seem hard to justify as the economies struggle along.
A short reminder of the timeline of the current economic crisis
How Will Deflation Affect the Eurozone?
Monthly inflation in the EU area was -0.8% in January 2012. (EU Stat) The 12 month inflation figure was 2.6%, which includes some cost-push inflation. Inflation will continue to fall over the coming months However, there are few signs of economic recovery. Countries in the periphery of the EU are at greater risk of deflation because of the continued austerity, high exchange rate and fall in economic confidence. The ECB has been debating whether to pursue quantitative easing, but there is a deep-seated reluctance to pursue this unorthodox monetary policy.
The problem is that even quantitative easing can take a long time to have an effect on economic activity. The experience of the UK and US is hard to judge, but it has had an effect in preventing a deeper and longer lasting recession. Any fears of inflation resulting from quantitative easing seem hard to justify as the economies struggle along.
A short reminder of the timeline of the current economic crisis
How Will Deflation Affect the Eurozone?
- Increase Debt to GDP ratios. Falling nominal GDP will increase the debt to GDP ratio. Even if countries like Greece and Portugal manage a primary budget surplus (which is very hard to imagine), they would still see rising debt to GDP ratios, and probably a continuation of higher bond yields
- Decline in consumer Spending. Deflation plays a key role in delaying spending decisions. Faced with falling prices, people tend to delay spending, waiting for goods to become cheaper.
- Higher real Interest Rates. With deflation, real interest rates are effectively higher.
- Higher unemployment. With continued deflation and lower growth, EU unemployment will remain high.
- More on economic costs of deflation.
Thursday, 1 March 2012
Unit 4: The Euro
A useful presentation on the single European currency....
Question for Homework: Evaluate the possible effects of the introduction of a single currency by a trading bloc. (30 Marks)
Question for Homework: Evaluate the possible effects of the introduction of a single currency by a trading bloc. (30 Marks)
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