Get the low down on who the Chancellor is and the economic issues they face.
Who is the Chancellor?
The Chancellor is in charge of Her Majesty’s Treasury – the UK Government’s department responsible for finance and the economy.
Chancellor’s set out their plans for the country’s economy in a Budget – published annually, traditionally in mid-March. The Budget presents plans for raising and spending the money required to run the country and includes hotly contested decisions on who pays what through taxation and where the money goes.
Find out more about the Chancellor and the Budget in the video below:
What are the current economic issues?
The current economic issues facing the UK are deeply rooted in the global financial crisis which began in 2008.
2008: Credit crunch
2008 saw the outbreak of a global financial crisis which led to a credit crunch across the world. Sound complicated? Check out the simple explanation provided in the video below:
The credit crunch led to a dip in the growth of the UK’s economy as banks reduced how much they leant to avoid further risks. Individuals and businesses found it hard to lend money which led to less goods and services being produced and sold.
As the growth of the economy slowed down the numbers of people losing their jobs increased and had less money to spend. The total amount of money moving around the country’s economy started to decrease.
This also meant that the Government received less money through tax on people’s earnings and on goods and services produced and sold. All this combined led to the most severe recession – that is a negative growth in the economy – the UK had experienced since the 1930s.
Here’s another video clip explaining a recession:
2010: The deficit
In order to get things going again the Government needed to raise billions of pounds to spend in the economy. As the Government received less tax that it needed to spend it sold gilts – national IOU’s repaid with interest – to private investors to fill the gap.
When a government spends more money than it raises in tax this is called a ‘deficit’. In the 2010 the Government paid over £44 billion in interest alone on its gilts – this is approximately £4 billion more than the amount the country spent on defence.
2011-12: Tough choices
As the global financial crisis continued to affect individuals and businesses the Government faces tough choices on the best way to deal with the on-going economic challenges.
This has led to many controversial economic policies in tax and public spending being announced in the country’s annual Budget and an on-going national debate on the best way forward.
The Conservatives won a majority in the 2015 General Election after pledging to reduce the deficit, cut income tax and cap benefits.