UK Government's Macroeconomic Policies & Economic Welfare

Assignment

Essay title: "Outline and Explain, with examples, how Governments use Macroeconomic policy to increase economic welfare. How successful have UK Governments been in the last 10 years and what challenges still remain?"

INTRODUCTION

Macroeconomics can be regarded as the branch of economics wherein the studies of behaviours and the performance of the economy are made. Mainly, the main focus of macroeconomics is on the growth rate, inflation, unemployment and more (Abel et al., 2017). Macroeconomics is the way through which the country flourishes and improved its potent factors and opportunity to achieve the objective and improve the overall development achievability. There are varied types of macroeconomics however they deal in some way with how people react and what are they doing around the globe. A country's economic growth can be monitored and controlled in this manner by adjusting the taxes, interest rates and another spending. Significantly, GDP, international finance, unemployment rates, values indexes and others are the topics that involve in macroeconomics that helps in identifying the performance of the nation (Nakamura and Steinsson, 2018). Mainly, the economic well-being could be determined by comparing the surplus of producers and consumers. When it comes to the restricted rules, there are certain laws that pertain to Northern Ireland whereas others may apply to Wales and England. The UK can be regarded as a welfare state along with a liberal bent, also it is a state wherein the government places a great focus on the welfare of residents and community while promoting their economic and social well-being. For instance, a healthy and effective economy is made on various ideals such as fair distribution of wealth, sense of social responsibility, similar access to chances and opportunities and more while a most fundamental feature of any welfare state being a social insurer (Angelini and Foglia, 2018).

This essay would involve a discussion on macroeconomic policy and its total impact on economic welfare, with a significant impact of macroeconomic policies on the UK government in the last 10 years followed by some challenges and issues that the UK government is facing currently.

MAIN BODY

Macroeconomic policy is the way through which the economy of any country can be managed and improved in a subtle way to achieve overall objectivity. Mitchell et al (2019), argued that “macroeconomic policy mainly aims at providing a stable economic environment that is favourable to foster sustainable and strong economic growth. The key pillars for macroeconomic policy can be regarded as the monetary policy, exchange rate policy and fiscal policy”. Apart from this, macroeconomic policy is highly concerned with economic operations as a whole.

Uribe and Schmitt-Grohé, (2017) argue that “Macroeconomics is the study of nature, behaviour, and relationships of combinations of economic quantities. Mainly, macroeconomics deal not only with the total individual quantities such as not with incomes, individual outputs but with the national and domestic output”.

In response to this Jaimovich et al., (2021) found that “Macroeconomics highly concerns with the total dimensions of the economic life. Precisely, macroeconomic factors are the broad characters or indicators of either financial growth or decline that impacts the economy. Mainly, the macroeconomic factors are an environmental, geopolitical, and economic event that may impact the monetary stability related to the overall economy of country or region rather than the definite part of the population”.

Apart from this, Reinsdorf (2020), argues that “Economic welfare can be defined as the procurement and allocation and the potent resources and mainly the goods for promotion of society and individuals. Mainly, this deals with an efficient economic distribution of the resources for the well-being of the people”. In addition, the welfare of economics is mainly the execution of microeconomics theory of Utility. Mainly, the “Theory of Utility” can be defined as the service or products’ ability to satisfy the potent needs and wants of the market and people. Significantly, there is a surplus of producers and consumers in the competitive markets just because of the demand and supply laws. This happens due to the conventional microeconomic theory of “Utility Maximisation” (De Grauwe and Ji, 2019).

Ravallion et al (2016), found that “The goal of economic welfare is to create an effective economic environment wherein the citizens can live in harmony and peace with others. Mainly, economic well-being can be defined as having future and present financial security”. In addition, macro-economic well-being can be emphasized in different ways such as unemployment rates, the growth rate of the GDP (Gross Domestic Product) and inflation rate. Also, macroeconomics also involves the ability to make choices in the economy and feel the sense of security, satisfaction, personal fulfilment with employment searches and personal finances of an individual.

Drazen (2018) argues that “Economic welfare can be regarded as the standard of living and the level of affluence or mainly it refers to the gained utility by the attainment of the services and material goods”. For instance, economic welfare and utility represents the happiness and satisfaction of a consumer-like as when a consumer is willing to pay $10 for a commodity then presumably the consumer get a utility of at least $10 worth from the commodity purchased.

In addition to this, welfare benefits in the UK involve majorly five separate groups of services such as health care, cash benefits, housing, and education with personal social services. Mostly, in the UK widely used form in the nation are cash benefits that makeup around 10% of the GDP (Gross Domestic Product) (Dwyer et al., 2016). Moreover, for older generations in the UK, the state has made various allowances and schemes for the people to better survive. Mainly, pension credits, attendance allowance, personal independence payments and carers allowance for people aged 60 or more. (In reference to appendix.1), the total expenditure of the UK government on economic welfare can be seen as growing year by year. In the year 2019-20, the expenditure was 192 billion GBP whereas it increased by 20 million pounds reaching 212 billion GBP for the year 2020-21.

In the span of the last 10 years, the government of the UK has been successful with macroeconomic policies on well faring the society. Due to the varied change in economy and perception of the people many societal reforms were made in the UK such as Housing Benefits, Non-Dependant Deductions, Council Tax Support, Benefit Cap, Employment and Support Allowance, Personal Independence Payment, Tax Credits, Child Benefits and more. These reforms were made in the span of five years from 2010 to 2015 that somehow impacted the overall expenditure of the UK government. However, there are some initiatives and policies for economic and social welfare that helps the UK government in creating a great response and better service the people. Liberal forms, under this the pension schemes were introduced in the UK that helped elderly people (Fankhauser et al., 2018). In addition, recently, the education and skills reforms were made in the UK with the recent amendments 2019-20. Mainly, from August 2020, the UK government has been outspreading the statuary powers of the Adult Education Budget to fully fund all the adults to improve their basic digital skills. Also, funding to skills and apprenticeships was enhanced by 1.6 billion GBP in the year 2020 Plan for Jobs. Under housing schemes, the UK government has improved the ease of land use regulations to enhance housing supply and competition in construction, environmental and social concerns, balancing resources, and their allocation and more (Crick et al., 2020).

Monetary policy is another policy in the UK for economic development that helps in managing the overall budget and the spending of the people. Mainly, monetary policy changes to interest rates, credit and supply of money while also the changes to the value of exchange rates. The monetary policy has been changed a lot in the recent decade. Mainly, the Bank of England’s monetary policy committee (MPC) sets the monetary policy to meet the target of 2% inflation to sustain employment and growth in the UK (Bankofengland, 2022). Apart from this (In reference to appendix.2), the development and annual growth of GDP in the UK is constantly increasing such as it was at the rate of 7.5% in the year 2021 whereas it lends down to -9.4% due to the COVID-19 pandemic (Statista, 2022).

Also, the UK government has a Build Back Better Plan (BBBP) that covers the wider support from the government that will provide for the social care systems and how the UK government will enhance the integration of social care and health as part of economic welfare policies. Mainly, this plan indicates an overview of how Build Back Better Plan would tackle the electives backlogs presented in the NHS and how NHS will be on its sustainable footing (Gov.UK, 2022). Mainly, this sets out an adult social care in England while including the financial assistance for the substantial assets. Also, it covers the wider support that the government will provide for the social care system, how the government will enhance the integration of social and healthcare. This plan assists the UK government ineffective making a budget for economic welfare and activities to be included to better serve the society and the nation (Gov.UK, 2022).

Moreover, to this, in the recent decade, the UK economy has undergone many changes that have improved the overall achievability of the UK government and enhanced its economic objective. Also, the upshot of Britain’s success for its economy is its high quality of life and diversification of the sectors. Specifically, all credit goes to the changes made country's economic policies such as the change in government in the year 2010 led to the adaptation of the economic policy framework. In addition, the higher exports lower imports, changes in manufacturing patterns, tourism sector support and more has helped the UK in its economic welfare growth (Banerjee et al., 2021). Mainly, in the UK £689 billion of exports was made in the year 2019 which was 31.1% of its GDP that helped the UK government to better make the expansion plan for sectors such as housing, education, healthcare, personal social services and more and enhance the overall objective achievability. Moreover, in the recent decade or the year 2016-17 the changes in the proportion of public services budget on health have been changed due to the latest amendments in the UK government or in NHS (National Health Security) for improving the lives of people. Mainly, the total spending on health by NHS was improved for the year 2016-17 with 30.1% of the total budget (BBC, 2018).

However, with the various amendments and strategies adopted by the UK government to improve the economic welfare in the nation. There are some current challenges and issues that the UK and its government are facing that is impacting the overall delivery of objectives and plans. Mainly, the UK is the home for old age people and as per the latest statistics from Age. In the UK it has been found that there are about 12 million people aged or over 65 in Britain. This is the major challenge the government of the UK and society is facing currently as a whole. This would impact as the state pension bill will arise and the growing number of older people will influence social care provisions and NHS (Carter and Martin, 2016). In addition, improving and operating with greener futures initiative has become another threat to the UK government and the nation into a 25-year plan to improve and protect the environment. Mainly, this initiative started with the 5p charge on plastic bags. Apart from this, protecting the countryside of the UK, reducing car emissions, and building elasticity against the exciting weather associated with the climatic changes while leading international action to improve safety against endangered species (Taylor et al., 2017).

In addition, the UK also leads the world incapable to decrease greenhouse gas emissions by 0% by the year 2050. It is an exercise that would cost the nation around £1 trillion, thus is regarded as a potent challenge for the nation to effectively implement the changes and achieve profitability. In addition, future-proofing society is another issue that the UK government is facing in the current scenario. For instance, the UK has taken major projects such as infrastructure, from broadband to sewers and more that were put on hold, leading to massive issues nationwide (Baboukardos, 2017). The north of England has been found hit hard thus the UK significantly needs higher investments in its cities and towns, infrastructure, housing, clean energy and more. Mainly, with the population hit by 75 million by 2050, precise impacts are made about reliability, capacity and the performance of the core transport networks of the UK (Baboukardos, 2017).

Apart from this, there is a record of SMEs (Small and Medium-size Enterprises) 5.8 million in the UK. Mainly, SMEs in the UK accounts for ¾ of employment and half of the total private sector turnover. Apart from this, out of the world's key 20 tech business companies, 11 are from the USA and nine are from China. No company are from the UK or continental Europe; thus, this impacts the overall recognition of the UK in the world market. In order to reduce this impact, the UK has to focus on scale-up businesses in the areas as diverse such as robotics, life sciences, renewable energy and Artificial Intelligence (AI) and more thus the ability to hire staff, access to reliable infrastructures like as broadband and networks and more would be a factor that would cost the UK government high on service providence (Grant, 2016). (In reference to the appendix.4), In March 2022, 50% of people in the UK thinks that the economy was one of the top three challenging issues facing the country. Moreover, 35% of people that that health was one of the top three issues in the country. Mainly, due to the Russian invasion of Ukraine, at the February end, the largest issue in the month was the defence that surged from being one of the least important issues in the month of February to be a significant concern of third of Britons (Statista, 2022).

Moreover, COVID-19 is again a top issue in the UK impacting many predictions and plans made by the UK government. Mainly, as the health crisis increased, the economic impact of COVID-19 on the UK quickly became a more significant issue as it was seen as the potent challenge by the respondents to the survey made in September 2020. Similarly, Brexit is currently a significant challenge that the UK government is facing right now and around 71% of British people found that it is one of the potent issues that the country is facing (Statista, 2022). This issue started to grow after COVID-19 due to which Brexit regulations have started impacting the economic policies and the structure of the nation. Due to the trade negotiations difficulties among the UK and the EU (European Union), the import-export policies have been impacted significantly (Statista, 2022). In addition, there are various other challenges too that potentially impacts the overall economic policies and the potential welfare practices which further directly challenge the UK in attaining the overall objective with the economic policy.

CONCLUSION

From the analysis and discussion, it can be said that the economic policies and macroeconomics is the backbone of any nation for improving the economy. Through the analysis, it has been found that there are varied factors that impact the overall delivery of economic success and growth. Macroeconomics helps in increasing the real GDP with an increase in the rate of income, national outputs, and expenditures. Significantly the main benefit of economic growth is that it promotes high living standards, higher real incomes, the ability of devotion to more factors and resources to areas such as education and healthcare.

This essay identifies the significance of macroeconomic policies in the economic growth of the UK. Mainly, the essay has discussed the macroeconomic policy and its total impact on economic welfare, with significant influence of macroeconomic policies on the UK and its government in the last 10 years. With the help of varied examples and policies underuse in the UK, the core learning of the macroeconomic concept was effectively managed and analysed to better understand the significance of regulations imposed with their total impact. In addition, some challenges, and issues that the UK government is facing currently have also been analysed. Mainly, it has been found that the rise of older age people in the UK, carbon gas emission norms, SMEs advancement and adaptation of technology, Brexit impact, COVID-19 regulation follow up and more than potentially impacts the overall policies of the nation. Apart from this, the government of the UK has the objective of levelling up and uniting the people of the country, enhancing the everyday life of the communities throughout the UK and making sure that everyone can be successful. In addition, the Build Back Better plan is also discussed in this essay to better identify how the UK government is facing the challenges and enhancing the overall achievability of its total goal and objective of economic policy.

At last, it can be said that the management of money and flow of cash is significantly important in the field of economics and for effectively managing government policies. Macroeconomics provides extensive aspects that help in effectively managing the overall rates, policies, regulations and taxes in the country to better improve the overall achievability of economic policy goals. Macroeconomics is the field where abilities, capabilities and the potent resources of an economy are churned out in ways to enhance the national income, create job opportunities, and boost productivity to enhance an economy in terms of monetary development.

REFERENCES

Abel, A. B., Blanchard, O. J., Bernanke, B., and Croushore, D. (2017). Macroeconomics. Pearson UK (Handbook)

Angelini, E., and Foglia, M. (2018). The relationship between IPO and macroeconomics factors: An empirical analysis from UK market. Annals of Economics and Finance, 19(1), 319-336.

Baboukardos, D. (2017). Market valuation of greenhouse gas emissions under a mandatory reporting regime: Evidence from the UK. In Accounting Forum (Vol. 41, No. 3, pp. 221-233) (Handbook)

Banerjee, A., Kouretas, G. P., Papadopoulos, A. P., and Tavlas, G. S. (2021). Ten years after the start of the euro crisis: lessons for financial markets and macroeconomic policies. Oxford Economic Papers, 73(4), 1392-1403.

Bankofengland, (2022) Bank rate increased to 0.25% (Online) Available at: https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2021/december-2021 (Accessed on 15th March 2022)

BBC, (2018) the history of the NHS in charts (Online) Available At: https://www.bbc.com/news/health-44560590 (Accessed on 15th March 2022)

Carter, P., and Martin, G. (2016). Challenges facing Healthwatch, a new consumer champion in England. International journal of health policy and management, 5(4), 259.

Crick, T., Knight, C., Watermeyer, R., and Goodall, J. (2020, September). The impact of COVID-19 and “Emergency Remote Teaching” on the UK computer science education community. In United Kingdom & Ireland Computing Education Research conference. (pp. 31-37).

De Grauwe, P., and Ji, Y. (2019). Behavioural macroeconomics: theory and policy. Oxford University Press (Handbook)

Drazen, A. (2018). Political economy in macroeconomics. Princeton University Press (Handbook)

Dwyer, P., Fenger, M., Hudson, J., and Needham, C. (2016). Citizenship, conduct and conditionality: sanction and support in the 21st century UK welfare state. Social Policy Review, 28, 41-62.

Fankhauser, S., Averchenkova, A., and Finnegan, J. (2018). 10 years of the UK Climate Change Act. Policy Paper. London School of Economics and Political Science, Grantham Research Institute on Climate Change and the Environment, Centre for Climate Change Economics and Policy. http://www. lse. ac. uk/GranthamInstitute/publication/10-yearsclimate-change-act.

Gov.UK, (2022) Build Back Better Plan (Online) Available At: https://www.gov.uk/government/publications/build-back-better-our-plan-for-health-and-social-care (Accessed on 15th March 2022)

Grant, W. (2016). The challenges facing UK farmers from Brexit. EuroChoices, 15(2), 11-16 (Handbook)

Jaimovich, N., Saporta-Eksten, I., Siu, H., and Yedid-Levi, Y. (2021). The macroeconomics of automation: Data, theory, and policy analysis. Journal of Monetary Economics, 122, 1-16.

Mitchell, W., Wray, L. R., and Watts, M. (2019). Macroeconomics. Macmillan International Higher Education (Handbook)

Nakamura, E., and Steinsson, J. (2018). Identification in macroeconomics. Journal of Economic Perspectives, 32(3), 59-86.

Ravallion, M., Himelein, K., and Beegle, K. (2016). Can subjective questions on economic welfare be trusted?. Journal of Economic Development and Cultural Change, 64(4), 697-726.

Reinsdorf, M. M. B. (2020). Measuring economic welfare: what and how?. International Monetary Fund (Handbook)

Statista, (2022) GDP growth in UK in the past decade (Online) Available At: https://www.statista.com/statistics/281734/gdp-growth-in-the-united-kingdom-uk/ (Accessed on 15^th March 2022).

Statista, (2022) Government expenditure on economic benefits in the UK (Online) Available At: https://www.statista.com/statistics/283954/benefit-expenditure-in-the-uk/ (Accessed on 15^th March 2022).

Statista, (2022) Most important issues facing Britain 2019-2022 (Online) Available At: https://www.statista.com/statistics/886366/issues-facing-britain/ (Accessed on 15^th March 2022).

Taylor, M., Marsh, G., Nicol, D., and Broadbent, P. (2017). Good work: The Taylor review of modern working practices (p. 11). London: Department for Business, Energy & Industrial Strategy.

Uribe, M., and Schmitt-Grohé, S. (2017). Open economy macroeconomics. Princeton University Press (Handbook)

APPENDICES

Appendix.1

Figure: Government expenditure on economic benefits in the UK

Source: (Statista, 2022).

Appendix.2

Figure: GDP growth in UK in the past decade

Source: (Statista, 2022).

Appendix.3

Figure: change in Public services budget on UK/NHS

Source: (BBC, 2018)

Appendix.4

Figure: Most important issues facing Britain 2019-2022

Source: (Statista, 2022).