'I'm a single mum on £41,000 and limit my weekly shop to £40.' What do you want from the Budget?
Real-world example for IB, A-Level, AP and IGCSE Economics essays: Fiscal policy, Wages and income inequality, Taxes, subsidies and price controls
What happened
The BBC asked people with incomes ranging from £380 a month to £150,000 a year what they want from this year's Budget, including a single mother earning £41,000 who limits her weekly shop to £40.
The economics
The Budget is the central instrument of fiscal policy: through taxes and spending the government changes households' disposable income, and different income groups make different demands, showing how taxation and transfers affect income distribution. Students can use this to explain fiscal policy objectives such as redistribution and stabilisation, and how sensitivity to policy differs by income level.
Figures to quote
- £41,000
- £40
- £380 a month
Evaluation
However, the Budget's effect depends on the mix of measures, and interview demands alone cannot judge whether a policy is good; short-run tax cuts may boost spending but in the long run add to public debt, so equity and efficiency must be weighed.
Practice question
Using the material, analyse how the tax and spending measures in a government Budget may affect the disposable incomes and income distribution of households at different income levels.
Where it fits in the syllabus
- Fiscal policy: The government changes spending and taxation to influence aggregate demand and economic activity.
- Wages and income inequality: How labour markets set wages, and how income and wealth are shared across people.
- Taxes, subsidies and price controls: Indirect taxes, subsidies and maximum or minimum prices that governments use to change market outcomes.
- IB Economics: Fiscal and Monetary Policy, Aggregate Demand and Supply, Government Intervention and Market Failure
- A-Level Economics: Economic Policy, Government Microeconomic Intervention
- AP Macroeconomics: National Income and Price Determination, Long-Run Consequences of Stabilisation Policies
- AP Microeconomics: Factor Markets and Income Distribution, Supply, Demand and Market Equilibrium, Market Failure and the Role of Government
- IGCSE Economics: Government Macroeconomic Policy, The Allocation of Resources, Government Intervention