Wednesday, 7 April 2010

No 105: Election Time!




YESTERDAY Gordon announced that the General Election will take place in one month, on May 6th.

This is what David Cameron hopes



This is those of you who have seen the Alice in Wonderland movie (more about this later)...


The economy will definately be the most important issue in the election which has not been the case for at least the past 15 years, when economic performance was stable.

As a coincedance, yesterday was also the date on which the new rate of income tax started. Anyone who earns over £150,000 will now have to pay 50% income tax on what they get above that amount.

However, the biggest controversy has been over another Labour tax plan which is yet to be introduced.

Next April, there are plans for a rise in National Insurance of 1%. National Insurance is a direct tax which helps to pay for an individual's health care, state pension, etc.. It is paid both by a worker, and by the firm which employs him/her. Therefore, it affects 2 parts of Aggregate Demand, which are..............?

The Conservative Party opposes the rise, saying it will affect jobs. Employers agree. So far 68 bosses of large British firms have signed a letter agreeing with David Cameron and criticising Brown.

Labour have countered that abandoning the rise will lose £6 billion in government revenue at time when it needs the money to pay off its debts and avoid big cuts in spending. The Conservatives argue that the money is better left in the pockets of households and firms.

This in fact follows a time honoured argument between economists: will an economy be helped more by giving government extra money, or by leaving it in the private sector.

Do you agree with Labour or the Conservatives over this issue?

This article from the Guardian says more and has a video of Brown and Cameron arguing about it during PMQs.

2 comments:

  1. eventhough Labour party will increase the direct taxes, and this will helps to pay for an individual's health care, state pension, this doesn't mean that it will be beneficial. I agree with the Cameron, that puting higher taxes will destroy economic growth, will reduce consumption and investment as direct taxes will affect both businesses and workers., shifting A.D to the left. therefore leading to W shape recession as economic growth is very weak - only 0.4%.

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  2. I certainly think your argument has merit.

    However - as often - I don't really agree with what either party is doing here! They're spending a load of time debating what is actually quite a small measure; funny to say, but £6 billion isn't really that much money - especially when you borrowed £170 billion last year!

    I would prefer it if they debated their more gerneral plans to help the economy as well.....

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