Spending Review - More Spending Cuts.

Here is a link to a BBC article outlining the planned contents of the Government's public spending review. http://www.bbc.co.uk/news/uk-politics-23053693 . There are lots of themes here for AS and A2 Economists. It is of course vital that students can link the theory they have studied to real world examples such as these.

George Osborne is slashing another £11.5bn in cuts as the government seeks to eliminate the structural deficit by 2018. The article can be used to stimulate discussion of why we should seek to eliminate the deficit and whether this is best achieved by cuts to spending or achieving higher tax revenues. At AS level, students can be asked to consider what the cuts in spending might mean for macroeconomic performance and at A2 level students might look to apply concepts such as crowding out, Ricardian equivalence and the Laffer curve. Classical v Keynesian interpretations of the economy are, of course, also relevant here.

The Labour critique of the Coalition's austerity policy becomes more confusing by the day. They are against austerity, but won't commit to further borrowing. Is it time that Ed Balls properly argued the case for a significant further fiscal stimulus based on house building and infrastructure projects?

Medical metaphors seem all the rage these days. In the article, George Osborne likens the UK's current plight to a patient just out of intensive care, on the mend, but in danger of a relapse without continued treatment. Paul Krugman, on the other hand, compares Osborne's austerity to a mediaeval doctor who bleeds a patient and then, when the patient becomes more unwell as a result, bleeds them some more.

Another interesting question that you can link with Public Choice Theory is why there are certain departments with ringfenced budgets, such as overseas aid, whilst others are having to make huge savings? Are politically-motivated decisions hampering our ability to make effective economic policy?