2026-10-28 · Guardian Business · English source

Budget 2026: six charts that reveal the economic realities facing the chancellor

Real-world example for IB, A-Level, AP and IGCSE Economics essays: Fiscal policy, Supply shocks, Unemployment and the labour market

What happened

The UK chancellor, John Healey, will deliver his first budget on Wednesday as UK households and businesses face pressure from an economic shock caused by the war in the Middle East.

The economics

A budget is a clear example of fiscal policy: the government uses tax and spending decisions to respond to economic pressure. The Middle East war can be treated as a supply shock that raises costs and dampens output, leaving fiscal policy caught between supporting growth and containing inflation. The lead also mentions a youth jobs crisis, showing labour-market problems are among the budget's targets.

Evaluation

The effect of fiscal policy depends on the nature of the shock: expansionary measures may add to inflation during a supply shock, while austerity may deepen unemployment, so the short-run and long-run trade-offs differ. Whether the budget works also depends on how long the external shock lasts and on business confidence.

Practice question

Using the UK's 2026 budget as an example, discuss the trade-off fiscal policy faces between boosting employment and stabilising prices during a supply shock.

Read the article ↗

Where it fits in the syllabus

  • Fiscal policy: The government changes spending and taxation to influence aggregate demand and economic activity.
  • Supply shocks: A sudden change in supply, such as energy, food or supply-chain disruption, that moves prices and output.
  • Unemployment and the labour market: People willing to work who cannot find a job; it can be cyclical, structural or frictional.

中文版

发生了什么

英国财政大臣约翰·希利将于周三提交其首份预算案,此时英国家庭和企业正承受中东战争引发的经济冲击带来的压力。

经济学角度

预算案是财政政策的典型实例:政府通过税收与支出决策来应对经济压力。中东战争造成的经济冲击可视为供给冲击,推高成本并抑制产出,使财政政策面临稳增长与控通胀的两难。文中还提到青年就业危机,说明劳动力市场问题也是预算需要应对的目标。

评估角度

财政政策的效果取决于冲击的性质:面对供给冲击,扩张性财政可能加剧通胀压力,而紧缩又可能加深失业,短期与长期取舍不同。此外,预算能否奏效还受外部冲击持续时间和企业信心等因素制约。

练习题

结合英国2026年预算案,讨论在供给冲击背景下财政政策在促进就业与稳定物价之间面临的取舍。

More cases on fiscal policy

All cases in the Economics Case Library

Cases are written by AI from the article headline and lead, using only facts from the article; every quoted figure comes from it. Read the original before citing.