theme 2 and 4 application general Flashcards
removal of bankers caps
The decision is viewed as a strategy to boost the UK’s financial competitiveness in the post-Brexit landscape. By removing the bonus cap, the government aims to attract more investment and ensure that London remains a global financial hub, especially as it competes with financial centers in Europe and the US.
- Increases income inequality
- increases moral hazard
UK GDP growth
➡️ UK GDP growth was just 0.1% in Q4 2023 and fell into a technical recession
➡️ Shows weak aggregate demand → low consumer confidence & global uncertainty
unemployment rate UK
➡️ As of early 2024: 4.4%
➡️ Near “full employment” levels but youth unemployment (~14.6%) remains a concern
inflation rate UK
➡️ 11.1% peak in Oct 2022 → down to 2.6% in March 2025
➡️ Still above 2% target → cost of living squeeze, especially on low-income households
Bank rates UK
4.5%
UK government debt
➡️ Public sector net debt: ~95.8% of GDP
➡️ Up from ~85% in 2019 → partly due to COVID, energy subsidies, and inflation-linked interest
Green Investment Push
➡️ Labour pledges £28bn green investment (scaled back)
➡️ Could help structural unemployment, boost long-term growth & meet net-zero goals
- this plan has been ditched but still good to use in essays as a potential SSP!
UK productivity stagnation
➡️ UK productivity growth is 0.5% in 2024, much lower than historical average (2%)
➡️ Often blamed on underinvestment, Brexit, and poor infrastructure
how was the UK affected by the GFC
A severe recession, with GDP shrinking by 6.3%.
A massive collapse in its banking sector, requiring state intervention.
A housing market crash and sharp rise in unemployment, Unemployment peaked at 8.4% in 2011, with over 2.5 million people unemployed at its highest point
Government debt ballooning due to bailouts(70% of GDP),➡️ RBS required a £45 billion bailout, and the UK government also took control of Northern Rock in 2008, nationalising it to prevent collapse. ➡️
The slowest economic recovery post-crisis among G7 countries, , with GDP growth not returning to pre-crisis levels until 2013
UK QE
➡️ Context: In response to the 2008 Global Financial Crisis, the Bank of England (BoE) introduced Quantitative Easing in March 2009 to stimulate the economy. ➡️ Action: The BoE initially committed to purchasing £75 billion in government bonds, later expanding the program to over £450 billion by 2012. ➡️ Objective: QE aimed to lower long-term interest rates, encourage lending, and stimulate investment and consumption.
- QE During the COVID-19 Pandemic
➡️ Context: When the COVID-19 pandemic hit the UK in 2020, the BoE again used QE to support the economy amid lockdowns and rising unemployment. ➡️ Action: The Bank increased the QE target to £895 billion by 2021, purchasing both government and corporate bonds. ➡️ Objective: With interest rates already near zero, QE was used to inject liquidity into the financial system, prevent a credit squeeze, and support businesses and households.
UK responses to GFC
Bank Bailouts: The UK government bailout £45 billion to Royal Bank of Scotland (RBS) in 2008 to prevent collapse.
Interest Rate Cuts: The Bank of England slashed interest rates to 0.5% in March 2009, the lowest in history.
Quantitative Easing (QE): The Bank of England initiated £375 billion of QE by 2012 to stimulate the economy.
Bank of England Support: The Bank provided £100 billion through liquidity support to banks to ease the credit crunch.
Fiscal Stimulus: The UK introduced a £20 billion fiscal stimulus in 2009, focusing on infrastructure and public spending.
Public Sector Spending Cuts (Austerity): Post-2010, the government implemented austerity, reducing public spending by £12 billion by 2015.
Nationalisation of Northern Rock: In 2008, the UK government nationalised Northern Rock, injecting £1.4 billion to stabilize it.
Housing Market Support: The government introduced schemes like Help to Buy in 2013 to support housebuyers after the housing market slump.
Unemployment Benefits: The government increased unemployment benefits in 2008 and 2009 to support those affected by job losses.
Tax Cuts: VAT was reduced from 17.5% to 15% in 2008 to stimulate consumer spending.
Tackling Banking Risk: The government introduced the Banking Act 2009 to prevent future financial crises by improving financial regulation.
Economic Growth Recovery: By 2013, the UK economy started growing again, with GDP growth reaching 1.7% in that year.
income tax bands
£12,570 0%
£12,571 to £50,270 - 20%
Higher rate : £50,271 to £125,140 - 40%
Additional rate:over £125,140 - 45%
income tax revenue 2023 - 24
around 28% of govt revenue
July - Sept CA deficit
2.8% of gross domestic product (GDP)
Teacher vacancies
More than six teaching posts in every 1,000 were left unfilled last year
