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10 Things To Know About UK Fiscal Policy

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10 Things To Know About UK Fiscal Policy

The government in any country use fiscal policy as a tool to regulate the spending levels and tax rates. In this way, the government can influence the economy. Monetary policy is a vital part of the fiscal policy implemented by the government. It allows the government to influence the money supply by using the central bank. The fiscal policy should be in line with monetary policy to achieve economic goals.

During the pandemic, the fiscal policy of countries has experienced significant changes. These changes state an attempt to cope with the adverse effects of the pandemic. This article provides vital information about fiscal policy principles. The UK government have adopted these principles in the latest UK fiscal path. The UK government issued this document on June 29th, 2020. This document sets out ten principles of the fiscal path in the UK. The title of the document is “Coronavirus (COVID-19): UK fiscal path – a new approach”. It suggests principles to support the economy and public finances in the UK.

  1. Austerity implies political and economic policies focused on reducing government deficits. Austerity suggests government spending cuts and tax increments. This document suggests avoiding austerity in the coming period. To taper off the effects of the recession, a more flexible set of fiscal rules must be adopted. Fiscal policy changes shift the focus from deficit reduction to facilitating economic growth. In this regard, the aim should be to scale down the inequality in the economy. It can help in full recovery from the economic recession.
  2. This document also provides information about financial facilitation through fiscal policy changes. So, this document presents a proposal for a fiscal stimulus package. It suggests dedicating 4% of the GDP or £80 billion to stimulate recovery in terms of investment. This fiscal stimulus can help with accelerating the transition of the economy.
  3. The tax rate is one of the main components of fiscal policy. thus, certain changes in the tax rates can bring desirable changes to the economy. Thus, one of the ten principles is to reduce the VAT, like value-added tax state tax on products and services. A 15% reduction will enable economic progress (Stiglitz, 2021). The VAT can be applied, once the restriction is lifted across the UK. Besides, the VAT in the hospitality sector should be reduced to 5%.
  4. As green investment practices are on a rise, it is important to use these opportunities. In this regard, major investments in green projects like low-carbon are proposed. Alongside, investments in energy-efficient projects can be helpful for economic growth. Aside from that, facilitating projects like the digital infrastructure is proposed. These investments can maintain fiscal sustainability in the economy.
  5. Scotland is an independent state from the UK. It should be enabled to shape its own response to the effects of the pandemic. Yet, furthering the process in Scotland, the focus should be on providing investment opportunities. Therefore, certain fiscal flexibilities should be offered to Scotland in good faith.
  6. The purpose of these principles is to understand the need for changes in fiscal policy. Thus, the fiscal policy is used to support other institutions in the economic landscape of the country. The workforce has really got a hit because of the pandemic. In this context, public money is supposed to be used to support the labour market. Government can ensure support schemes leading responsiveness, generosity and accessibility. This can be achieved using the UK welfare safety net. Thus, this welfare safety net should be used to support people falling in and out of work.
  7. The fiscal policy implementation can support the labour market. The current situation is not supporting job security. The fiscal policy should allow a job guarantee scheme. In addition, fiscal policy should consider more training and sector-specific employment schemes. The business support schemes should stay intact. These schemes will provide continuous support for businesses.
  8. As mentioned before, monetary policy is a vital part of fiscal policy. Thus, monetary policy can pose as a support for the labour market. In this regard, this document proposes that the fiscal policy must focus on reducing labour costs. So that, there can be more jobs in the market. Monetary policy changes like cutting employers’ National Insurance Contributions can achieBesidesl. In addition, the costs of the apprenticeship levy can also be reduced to create new jobs in the economy.
  9. Debt is another important part of fiscal policy. Debt can impact the economic landscape of any country. Thus, in the UK, a national debt plan can support the businesses, households and banking system. The national debt plan can change the monetary policy, hence, economic growth. In addition, debt recovery is another important aspect of fiscal policy. It should be focused on the fiscal policy under the pandemic influence.
  10. Monetary policy aims at supporting the labour market in the UK as well as economic growth. The monetary policy has an indirect effect as a part of the national fiscal policy. Interest rate and the money supply are two components of monetary policy. These components work through the banking system in the UK. The system considers monetary policy as a tool for the circulation of money in the economy.
  11. Thus, to cope with the adverse effects of the Covid-19 impact, the monetary policy should be reset. The bank of England should focus on evaluating the MP objective. It can help the long-term economic growth and inequality in the system by changing the direction of the fiscal policy.

The impacts of coronavirus have been detrimental over the two years. It has affected the economy in the worst possible ways. The impact of coronavirus has resulted in an economic recession. The Scottish Government presents these principles. It believes that the fiscal policy must incorporate the effects of the coronavirus. It is vital to set out the economy on the path of recovery after the recession.

Tyler Archer is a renowned article at the UK Essay Writing Services firm. He writes mostly about Assignment writing services in most top-rated UK firms.

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