Macroeconomics: UK economy, IB Economics

The BBC Verify team look at the Chancellor's last Budget and dissects whether it achieved what it set out to. They conclude that, broadly-speaking, most of the aims were achieved in some form or other bar one of the biggest - the prospect of growth.

Having declared that the Budget was a "budget for growth" the UK economy hasn't grown since. 

Bloomberg drills down into the cost of living crisis in the UK, looking at the effect of the crisis on the poorest in UK society, and the ability of food banks to meet the needs of these people, not least those who have children and can't afford childcare. 

A key part of the government is the expansion of free childcare in the hope of increasing female participation in the labour force. However, whilst welcome, there are some who think that the policy is undeliverable.

In the first instance, although announced today, it will be gradually rolled out from next April. Additionally, childcare providers are of the view that the amount offered by the government has, thus far, been too small and that they either can't afford to offer free childcare or are then forced to charge parents more to cover their costs.  

Another scheduled 'dripfeed' on the Budget with the announcement that the Chancellor is going to increase funding for childcare for 1 and 2 year-olds in the hope encouraging women to re-enter the albour force sooner. 

The government are both trying to match Labour's commitment in this area and boost growth. The problem might be that in much of the South East, the commitment from the government to pay £6.66 per hour for such care comes nowhere near meeting the £10 per hour cost of supplying such care.

The first of no doubt many article about the prospects for the 2023 Budget flagging up a number of likely policy changes. It highlights five main areas of policy that may be addressed: maintenance of energy support; increase support for childcare; extension of the fuel duty cut; a rise in the state pension age and and extension of the tax free allowance on pension.

You might already start thinking about the aims of these policies, their opportunity cost and their wider macroeconomic implications. 

This Guardian article highlights the fact that the cost of UK childcare is a factor that has stopped some parents rejoining the labour force. Certainly childcare costs are high, and the CBI has identified that there are 1.7 million adults who are economically inactive and looking after their families or at home. 

That's out of a total number of 9 million people of working age who are economically inactive, so anything that can help get some of these people back into the workforce would help overcome ongoing labour shortages, and, by definition, supply-side problems. 

And here's what the Guardian believes could be the supply-side agenda that the government commits to - deregulation across the board, notably in childcare and education, and the abolition of corporation tax. 

Quite how this is all going to occur, not least given last year's commitment to a global minimum level of corporation tax, heaven only knows, but you can't say you haven't been warned. 

The latest Institute for Public Policy Research (IPPR) research reveals that the level of poverty among working households is the highest ever. 

They argue that relative poverty has risen from 13% in 1996 to 17.4% of working households in the year to March 2020, and identify four main causes: rising housing costs, modest pay rises, a social security system that has failed to keep pace with housing costs and a lack of affordable childcare.

It should be a national embarrassment that 1 in 5 people in the world's largest economy are living in relative poverty - but I suspect it won't garner much in the way of publicity. 

Another pre-Budget piece this time encouraging the Chancellor to focus on fixing a 'broken' childcare system. However, why is childcare so important? 

In the first place, the greatest returns to education are in the early years sector, and this alone might justify the expenditure. However, additionally, better quality childcare would increase female participation in the labour force and boost the size of the working population, enhancing an economy's productive capacity and making the achievement of a number of macroeconomic objectives more likely. 

Oh dear! Now the serious analysis of the Budget has started, the real nature of the promises becomes apparent, starting with this IFS research. 

According to them, the cost of the schemes designed to get people back into the labour force, are likely to encourage 110,000 more people back into work but at a cost of around £7bn per year - or 70,000 per job.

To put that in perspective, net migration, which costs nothing to incentivise, and assumed to be around 245,000 people per year is much more successful in enlarging the labour force.  

An at a glance look at today's Budget, although it's been so widely trailed that there's not much in the way of a surprise here.

It seems as though the government are starting to tackle the issue of childcare for Universal Credit claimants, with a move to pay their childcare costs up front, rather than asking them to pay and wait for a refund. 

It's a good thing, in reducing the burden of risk for some of the most vulnerable, and potentially might encourage some of them to return to work. 

I spotted this article yesterday but wanted to give it a bit of thinking time - it's fundamentally about incentives though.

In short, Britain now has 8 million people working part-time and nearly 9 million people of working age are economically inactive, which represents an economy working well below its productive capacity, and makes you wonder whether we should be more concerned with under-employment that unemployment. 

So why aren't people returning to full-time work? This article suggests that the incentive structures created by the current benefit system, the cost of childcare and lifestyle choice all play a part. And none of these factors are going to be cured by a Chancellor pleading for people to return to work. He should be asking whether he'd be willing to work triple his monthly hours to earn £100 extra per month. Of course, the reality is that were a former government minister 'working' for 11 hours per month in another job, they'd be expecting to earn a sizeable six figure salary. 

Stella Creasy writes in the Guardian about the need to invest in childcare provision if we are to maximise our productive capacity. Investing in childcare has the capacity to increase female participation in the labour force, boosting growth. 

An interesting solution to the cost of living crisis has been suggested by left-wing thinktank Autonomy. A four-day week, with no loss of pay. 

They argue that not only would it reduce childcare and commuting costs but it might also help boost productivity. This sort of thing comes at a time when a number of employers have been trialling a four-day week, with many of them seemingly likely to continue with it.