Dave Does Drag

Yesterday’s Conservative party conference threw up some lovely economic policy proposals for students and teachers to get stuck into. They certainly grabbed the headlines today with David Cameron’s proposals to increase the personal allowance and 40p tax thresholds. Sky News have some decent coverage which can be used to spark a good discussion.

Check out the videos in this article here: http://news.sky.com/story/1345467/cameron-pledges-...

(I used the videos titled 'Cameron on Basic Rate Tax' and 'Cameron on 40p Tax Rate' with Ed Conway''s analysis titled 'Can Cameron Deliver On His Pledges'

A good way of looking at this with students might be to ask them to draw the effects on aggregate demand and the economy as a whole and then evaluate the effectiveness of the policies. Examples include the time lags (the increases are to be spread out over the next parliament), what will be the effect in real terms and also how much will it cost the government. It's also worth pointing out the political motives here as he attempts to woo the middle class voters.

Sky’s Economics Editor Ed Conway, does some excellent analysis of the proposals and even drops in the term ‘fiscal drag’ into his speech. However, I did feel obliged to comment on his co-presenter’s question “What does this mean in real terms?”.