Will the budget deliver ‘growth in every postcode’?
Real-world example for IB, A-Level, AP and IGCSE Economics essays: Fiscal policy, Economic growth and the business cycle, Development economics
What happened
The chancellor set out what is described as the biggest wave of devolution in a generation, but large parts of the country are left out.
The economics
Devolution is a form of fiscal policy: handing spending and tax decisions to local mayors lets local government allocate resources to local conditions, which in theory targets investment and growth more precisely. Students can trace the chain from central government transferring fiscal powers, to local spending of billions of pounds, to effects on regional output and jobs.
Evaluation
The outcome depends on local capacity and the size of the funding, and excluded areas may widen regional development gaps; whether short-run spending becomes long-run growth is uncertain.
Practice question
Using fiscal policy and regional development theory, evaluate how effective devolution is in promoting growth across UK regions.
Where it fits in the syllabus
- Fiscal policy: The government changes spending and taxation to influence aggregate demand and economic activity.
- Economic growth and the business cycle: Long-run growth in real GDP and the short-run swings between expansion and recession, when output falls below potential.
- Development economics: How low-income and emerging economies grow, reduce poverty and raise living standards.
- IB Economics: Fiscal and Monetary Policy, Measuring Economic Activity, Aggregate Demand and Supply, Development Economics
- A-Level Economics: Economic Policy, Macroeconomic Objectives, Aggregate Demand and Supply, International Economics
- AP Macroeconomics: National Income and Price Determination, Long-Run Consequences of Stabilisation Policies, Economic Indicators and Business Cycle
- IGCSE Economics: Government Macroeconomic Policy, Macroeconomic Objectives, International Trade and Globalisation