Paper 1 Hot Topics Flashcards
(10 cards)
Examples of environmental market failure
-Water companies dumping sewage into rivers as a cost cutting measure to avoid investing into proper sewage infrastructure (Talks about renationalising water companies to make them more socially efficient)
-The use of disposable vapes are bad because of the plastic being disposed of
(There are even talks about an outright ban to smoking & in Oct 2026 the UK are enforcing a £2.20 tax per 10ml of vape juice produced)
Examples of market failure (excluding environmental)
-Childcare being too expensive (some parents aren’t working at all)
-Good quality housing has become inaccessible as they’re too expensive (especially after COVID)
-Private dentistry is too expensive; very difficult to access NHS state provided dentistry services
University fees have been slightly increased from £9250 to £9535 by the Labour Party
-High food prices lead to inequity (leading to the government subsidising low income households so their living standards don’t drop)
What are examples of reducing global negative externalities?
-Minimum pricing on Scottish whiskey
-Carbon tax on the UK
Examples of reducing negative externalities (excluding global & environmental)
-To make good quality housing more accessible, the state can enforce rental price control, subsidise construction activity & offer tax incentives to landlords (if they reduce rent for low income tenants)
-Expand state-provided dentistry services
-The government can subsidise low income households so that they can afford basic basic necessities (e.g food & groceries)
-The government can introduce a fat tax (thus discouraging the consumption of unhealthy foods that are high in saturated fats)
Example of monopoly power being regulated?
-The CMA investigated the Vodafone & Three merge: they’re only allowing it if they invest billions to expand 5g network service across the UK
-Until 2028, tech firms and energy manufacturers (e.g Axon, BP, Shell) are facing a windfall tax on their supernormal profits
What is the current state of the UK’s Labour market?
It’s suffering massively from huge labour shortages:
-This has driven up wage growth;
-However this has also led to the shortages of goods & services available (thus affecting consumers’ living standards)
What is the situation of the national minimum wage?
It’s increased by 16.3% (far more than inflation) ;
however tax brackets have been frozen until 2028 (leading to fiscal drag, as more people are being “dragged” into paying tax as there are more people earning more)
How is the Labour Party trying to improve workers’ interests?
-By banning flexible labour contracts (e.g zero hour contracts, banning firing & rehiring)
-Making it easier for trade unions to organise strikes
-Making it compulsory for workers to have flexible work arrangements (e.g people can work from home as well as the office)
Solutions to income & wealth inequality
-Minimum wage increases
-Wealth taxation
-Universal credit provision (UBI)
Evaluate the use of Zero Emission Zones
+Can increase government revenue from taxing the use of petrol cars (can increase the provision of other public goods)
+Can boost electric vehicle production (tax can encourage dynamic efficiency through the innovation for the development of sustainable vehicle technologies)
+Can reduce environmental degradation & prevent health risks
-However it’s a regressive tax so it causes inequalities (as the poor are charged the same tax rate as the rich, so they’ll be affected more)
-Creative destruction may be caused with more electric vehicle manufacturers entering the vehicle market and outcompeting away the petrol & diesel car manufacturers (causing structural unemployment)
