Healey unveils £100 for energy bills and bank tax in first Budget
Real-world example for IB, A-Level, AP and IGCSE Economics essays: Fiscal policy, Taxes, subsidies and price controls, Supply shocks
What happened
In his first Budget, Chancellor Healey announced £100 of support for energy bills and a tax on banks, aiming to address cost-of-living pressures amid global economic turmoil.
The economics
This is a clear case of expansionary fiscal policy: the government uses an energy-bill subsidy to reduce households' costs directly, while taxing banks to raise revenue and help fund the spending. It also links to a supply shock, since global economic turmoil raises costs such as energy, and fiscal measures are used to cushion the impact on households.
Figures to quote
- £100
Evaluation
The subsidy eases cost-of-living pressure in the short run but may blunt price signals and add to the fiscal burden, and opposition parties argue it is not bold enough; the longer-run effect depends on how long the global turmoil lasts and how the bank tax affects lending and investment.
Practice question
Using this Budget as an example, evaluate the advantages and disadvantages of responding to rising living costs with an energy-bill subsidy and a bank tax.
Where it fits in the syllabus
- Fiscal policy: The government changes spending and taxation to influence aggregate demand and economic activity.
- Taxes, subsidies and price controls: Indirect taxes, subsidies and maximum or minimum prices that governments use to change market outcomes.
- Supply shocks: A sudden change in supply, such as energy, food or supply-chain disruption, that moves prices and output.
- IB Economics: Fiscal and Monetary Policy, Government Intervention and Market Failure, Demand, Supply and Elasticity, Aggregate Demand and Supply
- A-Level Economics: Economic Policy, Government Microeconomic Intervention, Supply and Demand, Aggregate Demand and Supply
- AP Macroeconomics: National Income and Price Determination, Long-Run Consequences of Stabilisation Policies
- AP Microeconomics: Supply, Demand and Market Equilibrium, Market Failure and the Role of Government
- IGCSE Economics: Government Macroeconomic Policy, Government Intervention, Demand and Supply