The History About The United Kingdoms Economy

Published Date: 02 Nov 2017

The UK economy has been stumbling in recent years following the late 2000s global recession, and following the 2008-2009 economic crisis. In this essay we will distinguish the different policies set out by each goverments.

The main aims of each government was to trigger an economic growth and maintain it, control inflation and reduce the The Public Sector Net Cash Requirement (PSNCR) deficit .

From all the type of economic policies which were regulated by each goverments some include Environmental Policies, Fiscal Policies, Monetary Policies.

Investment spending in construction has a strong relationship to the rate of economic growth and future prospects of the government. When growth is rising, demand for construction will be rising as well, when growth fall and the economy heads toward recession, firms will start cutting back on new construction projects and the construction industry face a slowdown.

Business Life Cycle

Businesses usually go through phases of expansion, recession and recovery. Monetary and fiscal policies can affect the timing and length of these cycles. In the expansion phase, the economy grows, businesses add jobs and consumer spending increases. At some point, known as the peak, the economy kicks off and the government then increases interest rates to keep inflation in control. Interest rates negatively affect the industry, some small companies and factories cannot prove to be profitable thus some factories shut down, job losses rise steadily and overall business sales for other companies in the same line decreases. The government will decide to decreases the interest rates, control taxes or inject more money, through public spendings. Gradually the economy starts to recover, businesses see the positive actions and thus business cycle then resumes with a new expansion phase.

Fiscal Policy

Fiscal policy usually involves changes in taxation and spending policies. Lower taxes mean more money for consumers to spend and more cash for businesses to invest in plants, machinery, equipment and in skilled labour.

Stimulus-spending programs, which are short-term in nature and often involve infrastructure projects, such as new road works, motorway maintenance.

Increasing income or other PAYE taxes usually mean less disposable income for the general public worker, which, over time, can decelerate business activity

Corporate Tax:

The government announced that the main rate of corporation tax would be set at 28 per cent for the financial year 2008- 09. The small companies’ rate will be set at 20 per cent for the financial year 2007-08; 21 per cent in 2008-09; and 22 per cent in 2009-10.

The corporate tax rate for small companies and other bigger construction companies would only mean that those companies would be reluctant to invest at this stage where the economic crisis was showing its impact.

Capital allowances for plant and machinery investment will be reduced from 25 per cent to 20 per cent from April 2008

Capital allowances for long-life plant and machinery investment will be increased from 6 per cent to 10 per cent from April 2008

Monetary Policy

Bringing changes in short-term interest rates can influence long-term interest rates, such as mortgage rates. Low interest rates mean that businesses spend a much lower amount on interest in their trading period. The public on the other hand would have much more money in hand to spend than rather to put in the bank. This combination usually means that businesses will make higher sales and profits.

Lower mortgage rates may be an incentive for more home-buying activity. Lower rates also mean the refinancing of existing mortgages to adequate rate/amount. Consumers will have more money in hand to spend elsewhere.

High interest rates can have negative impact for businesses: the higher interest are, the higher expenses would add up and subsequently lower sales and lower profits.

Environmental Policy

It is also essential that new homes are constructed to high standards of sustainability. In December 2006, the Department for Communities and Local Government introduced the Code for Sustainable Homes which, building on the higher energy efficiency standards introduced in April 2006 through building regulations, sets out new national standards for sustainability in homebuilding and challenges developers to go further in meeting these standards .

To ensure that the planning system plays an appropriate role in reducing carbon emissions, the Government has consulted on a new Planning Policy Statement (PPS) on Climate Change to be published later in the year 2007

Surface transport is the second largest source of carbon dioxide emissions in the UK. UK transport emissions are primarily priced through a taxation framework – mainly through fuel duty – which provides incentives to individuals and business to drive less and use other modes of transport. In setting fuel duty rates, the Government also takes into account other external costs of motoring, such as congestion and air pollution, and the need to maintain sound public finances.

An increase in fuel duty rates of 2 pence per litre (ppl) from 1 October 2007, and increases in the next two years of 2ppl and 1.84ppl respectively; this means construction companies which highly rely on transport and equipment hire would have to increase their prices, this will subsequently affect the prices paid for building new houses, as it’s an extra direct cost.

The government announced an increase in the aggregates levy rate to £1.95 per tonne from 1 April 2008. Again construction companies had to review their budget and bear an additional costs of the levy.

The construction industry generates a lot of waste annually. Therefore the government in 2007 announced an increase from 1 April 2008 in the standard rate of the landfill tax by £8 a tonne per year, until at least 2010-11; and an increase in the lower rate of the landfill tax from £2 per tonne to £2.50 per tonne from 1 April 2008.

This measure would only mean that when starting up a new building project, builders have to think about the waste that it will generate from discarded materials, debris from daily construction activities, final site clean-up etc. So whether the company itself sends wastes to landfill or sub-contract to other cleaners, the price to pay would only increase to reflect the landfill taxes.

.

Employment:

delivering employment opportunity to all, to provide everyone who is able to work with the support they need to move into work as quickly as possible; • extending employment opportunity to those groups and regions which have faced the greatest barriers to work; • enhancing skills and mobility, to ensure that everyone can fulfil their potential in the labour market and that business has access to the skilled workforce they need to compete in the global economy; and • making work pay, through the National Minimum Wage and tax credits which create a system of support that provides greater rewards from work, improving incentives for individuals to participate in the labour market.

maintaining macroeconomic stability, ensuring the fiscal rules are met and that inflation remains low;• raising the sustainable rate of productivity growth, through reforms that promote enterprise and competition, enhance flexibility and promote science, innovation and skills; • providing employment opportunity for all, by promoting a flexible labour market which sustains a higher proportion of people in employment than ever before;

Both the monetary and fiscal policy frameworks allow for action in the face of economic shocks while safeguarding the Government’s commitment to long-term stability. These frameworks have ensured low interest rates, low inflation and allowed the UK to be the only major economy to have achieved continuous positive growth over the past decade. This strong performance was achieved despite several significant economic shocks, including the Asian crisis of 1997, the Long-Term Capital Management hedge fund collapse and Russian debt crisis of 1998, the bursting of the dotcom bubble in 2000, and the impact of the terrorist attacks of 11 September 2001 and the sustained increase in oil prices since 2002.

08

further reforms to modernise the tax system, modernise tax administration and protect tax revenues.

an ambition for all new non-domestic buildings to be zero carbon from 2019 with consultation at the timeline and its feasibility and new public sector buildings from 2018;

•extending the Stamp Duty Land Tax exemption from zero carbon homes to new flats, retrospectively from 1 October 2007.

The Government’s fiscal policy objectives are:

•over the medium term, to ensure sound public finances and that spending and taxation impact fairly within and between generations; and over the short term, to support monetary policy and, in particular, to allow the automatic stabilisers to help smooth the path of the economy.

2.33 These objectives are implemented through two strict fiscal rules, against which the

performance of fiscal policy can be judged. The fiscal rules are:• the golden rule: over the economic cycle, the Government will borrow only to invest and not to fund current spending; and• the sustainable investment rule: public sector net debt as a proportion of GDP will be held over the economic cycle at a stable and prudent level. Other things being equal, net debt will be maintained below 40 per cent of GDP over the economic cycle.

Stamp duty land tax (thresholds for residential property)

Provides for the threshold above which stamp duty land tax applies to residential property to be raised from £125,000 to £175,000 between 22 April 2009 and 31 December 2009.

The estimated total volume of all new construction orders in the fourth quarter of 2012 increased by 3.4 per cent (£370 million) compared with the third quarter of 2012. The total volume of all new construction orders in the fourth quarter of 2012 was estimated to be 11.2 per cent higher (£1,100 million) than the fourth quarter of 2011.

The increase in new construction orders in the fourth quarter was not attributable to any single sector with five out of the six sectors showing a quarter on quarter increase. The private sector delivered the largest increases, with private commercial other new work increasing 9.7 per cent (£270 million) and private new housing increasing 10.3 per cent (£230 million). Of the six sectors, only infrastructure showed a fall in the quarter (15.4 per cent).