Transcript Government and the UK Economy File

Government and the UK
Economy
Starter:
Think of three words that
you would use when
talking about the UK
economy – what do they
mean?
Hopefully by the end of
this lesson you will have
lots more!
Be prepared to share them.
The trade cycle
• When employment is rising and consumer
incomes are also on the increase we call this a
period of economic growth.
• When employment levels are decreasing
along with falling consumer incomes we call
this a period of recession.
The trade cycle
Government spending and its effect on
business
• The government can change
the way businesses work
and influence the economy
either by changing its own
spending.
• For example:
– Extra government spending
can result in more demand
in the economy and lead to
higher output and
employment.
What do you think
the Government
spends its money
on?
Write a list – lets see
how many you get
right.
e.g. benefits
Task
• In your table decide on the following:
– 3 areas you think the government are spending
too much on.
– 3 areas you think the government are not
spending enough on.
– Be able to justify your views.
Government taxation and its effect on
business
• HM Revenue & Customs collects tax to pay for
public services.
• Each year the Chancellor's Budget sets out
how much it'll cost to provide these services
and how much tax is needed to pay for them.
• Key taxes that individuals may have to pay
include: Income Tax, Capital Gains Tax,
Inheritance Tax, Stamp Duty, Value Added Tax
and certain other duties.
VAT – for business
The standard rate of VAT
increased from 17.5 per cent
to 20 per cent on 4 January
2011.
For any sales of standardrated goods or services that
you make on or after 4
January 2011 you must
charge VAT at the 20 per cent
rate.
BBC analysis of the
VAT rise
4 mins
Has the VAT
increase
Pushed up the
cost of living?
Interest rates
• Base rate set by Bank
of England.
• Interest rates is the
cost of money.
• How much you will
pay to borrow or earn
by saving.
• What is the current
base rate?
• What are the
government looking
to achieve by this?
Interest rates and inflation
Interest rates up
•
Demand for good is reduced
•
Cost of mortgage or borrowing will go
up
•
May effect a business’s plan to mass
produce – will make it more expensive
as more interest has to be paid back
•
A business may have to increase prices
•
A business may have to make staff
redundant
Interest rates go down
• Demand for goods increases
(everyone wants more stuff
because it costs less)
• People can take on more debt
because it costs less to
borrow
• Businesses will see increased
sales
• Businesses will be able to take
more staff on to cope with
demand – think of
unemployment impact!
Rising and falling consumer incomes
and its effect on business
• Lower consumer incomes
– less money coming in to the house
– May be down to unemployment
– May be down to paying increased tax
• Less disposable income
– Each household buys less stuff (demand falls)
– Businesses sell less because people are buying less
– Business forced to cut costs
Disposable income
What a family has left
after they pay for
this...
And this....
And this....
And this....
Unemployment
• Statistics indicate the
economic health of the
country
• Unemployment
increases in a recession
– lack of demand for
good leads to
businesses shedding
jobs to cut costs – to
survive
Unemployment Video
Watch the video: what is happening in the public and private sector?
Unemployment – as at Jan 2015
• Current rate of unemployment 0.82 million (claiming jobseekers)
• How does that compare with previous years? (stats no use on their own)
Changes in the population and its
effect on business
Life expectancy is on the increase
People living longer will need a
range of products to help them
take care of themselves and stay in
their own home - increased
demand for services (like cleaner,
Gardner etc) 1.3 million people
aged 85 or over!
UK population density increased
may rise to 70 million in 2 decades,
will put a strain on housing and
public services e.g Doctors
Play Flash population
interactive
More about population
• 1in 10 people in the country were
born in another country and have
come to live here
• 1 in 4 births are to women who
were born in another country
• Population baby boom mainly
due to number of migrants who
are women of child bearing age –
what would you sell?
Sky news on the
baby boom
Supply
• Issue: Increasing foreign competition
• Question: How can UK firms increase their
chances of success now it is easier than ever
for businesses from abroad to trade in the UK?
Supply
• Inward investment
• When a business sets up in the UK they may
inwardly invest meaning that they may buy
materials and supplies from within the UK and
they may employ UK citizens. This creates a
multiplier effect.
• Question: What is a multiplier effect?
Supply
• See the table provided to show how the
government can help UK business compete
better.
Supply
• To improve the supply of goods and services
the UK can focus more on education and
training.
• How do you think this will help make UK firms
more competitive?
Supply
• Immigration can have a positive effect on UK
firms being able to supply their goods and
services.
• How do you think this will help make UK firms
more competitive? What cost does it come at?
Supply
• With people living longer in the UK what
impact is this having on the supply of goods
and services?
1. What are your new
words and phrases?
2. How many have you
got?
3. How does that match
with the class average?
4. Can you talk about
Holden and the UK
economy now?