Contents
Page 1 -Front Cover
Page 2 -Contents
Page 3 -Introduction
Page 4 -Background information
Page 5 -Primary and secondary research
Page 6 -Results from questionnaires
Page 7 -Results from questionnaires - New Child Trust Fund
Page 8 -Results from questionnaires - Smoke duty - up 8p per packet
Page 9 -Results from questionnaires - Increase Winter fuel payments
Page 10 - Results from questionnaires - Beer duty - up 1 p per pint
Page 11 - Results from questionnaires (continued)
Page 12 - What is a budget?
Page 13 - What is a budget? (continued)
Page 14 - Tax payers money
Page 15 - Conclusions
Page 16 - Recommendations
Page 17 - Evaluation
Page 18 - Primary Research
Page 19 - Copy of letter to companies
Page 20 - Bibliography
Introduction
In this report, I will assess whether everyone benefited from the 2003
Budget.
I will do this by collating results from primary and secondary
research to reach a conclusion. To assess whether everyone benefited from
last year's budget I will also use economic theories and past budget
reports to assist in making my conclusion.
I will structure this report in sections. The structure is as follows -
- Introduction
- Background
- Research section
- Theory section
- Conclusion
- Evaluation
I will use primary and secondary research to help put together this report.
I will complete questionnaires and conduct interviews. To gather secondary
research I will use various textbooks, the internet and information
received from companies.
When this information is collected, I will conclude and evaluate ways that
the budget has affected different range of people and I will offer
recommendations to help the government draft the 2004 Budget Report.
I think that the last year's budget will affect various people differently.
I think that people who drink alcohol or wine will be worse off as price of
alcohol had gone up by 1p, while a bottle of wine will cost an extra 4
pence. However, I feel that newly born families will benefit because of new
baby bonds, which have been introduced which will guarantee money in the
bank at the age of 18.
Budget 2003 sets out how the Government is working to achieve this goal,
ensuring that the UK can compete effectively in an integrated world economy
and benefit when the recovery in global growth begins. The Budget describes
how the Government will build on its previous reforms to build a stronger
and more enterprising economy, deliver full employment, end child poverty
and tackle pensioner poverty, establish world class public services, and
meet the global challenge of climate change
Source - Hm-treasury.gov.uk
Background information
The 2003 budget was announced on 17th April 2003 by Mr Gordon Brown,
Chancellor of the Exchequer.
The origins of the Budget go back to the Norman period. In those days two
departments dealt with finance. Firstly, the Treasury received and paid out
money on behalf of the monarch. Secondly, the Exchequer, which received
public money, dealt with regulating the King's accounts.
The other key measures in the 2003 Budget were as follows -
- The starting rate of corporation tax was cut from 10 per cent to zero.
This meant that smaller companies had a higher chance of survival.
- Simplify tax and improving access to finance enabling smaller companies
to develop and grow.
- Substantial increase in working family's tax credit which increased by
2.50 a week.
This meant more financial support for poorer families.
- A new child tax credit system will provide a secure stream of income for
families with children.
- A new child trust fund giving every newborn child 250, ensuring that
every child will have money in the bank at the age of 18.
- Pensioners received an extra 100, on top of winter fuel payments.
- The road fuel duties for cars was increased by 1.28 pence, and lower
vehicle excise duty for the cleanest vehicles was reduced. This meant that
car owners were worse offin general apart from cars with low fuel
emissions.
- The main focus point of this year's budget was the substantial increase
in funding for the National Health Service. This meant an increase of an
extra 1bn expenditure for the National Health Service next year. This was
financed from an increase of 1% in National Insurance Contributions.
- The other increases were taxes on beer by 1p, wine by 4p per bottle and
cigarettes, which increased to 8p a packet. This will have a negative
effect on people who drink and smoke.
- The amount of income tax paid by working citizens stayed the same in the
2003 budget. This will benefit the majority of citizens in the UK.
Research Section
Primary Research
Primary research, otherwise known as field research (GCSE Economics studies
by Alain Anderton), involves the process of gathering information for a
specific purpose through direct investigation. This could mean researching
ways such as using questionnairesorconductinginterviews.
The
information collected is new and information that has not yet been known.Primary research is collected especially for that particular piece of
research. Field research is normally collected through direct investigation
using surveys and experiments. An advantage of using primary research is
that it is more reliable than secondary research. Another advantage is that
the person writing the questionnaire or interview will have more control
because they have direct control over the questions written.
A disadvantage
of primary research is that it costs more money if you hire someone to hand
the questionnaires out and collect them. Another disadvantage is that if
the company designs and distributes the questionnaires it could be time
consuming and costly. In my report, I will be using primary research. This
could be in the form of interviews, questionnaires and written letters to
various companies.
Secondary Research
Secondary research, otherwise known as desk research (GCSE Economics
studies by Alain Anderton), looks at data, which already exists, such as
accounts, internet sources and textbooks.
Desk research is information
which is already available that has been collected from other sources. An
advantage of using secondary research is it is less time consuming to print
out a document on the internet than complete thousands of questionnaires. A
further advantage is that it is easier because the company may not have the
staff or the resources to design their own questionnaire. A disadvantage of
using desk research is that sometimes this type of communication can be
expensive if the company hires another company to collect the data.However, it can be cheap if the information is based on the internet.Another disadvantage of using secondary research is that the information,
which is collected, may not be 100% accurate in the way it is collected.
I
will use desk research in my report. This will be in the form of using
information from websites and information from text reports. Secondary
research could also provide incorrect information if the material is out of
date.
I carried out the survey as primary research because I think it will give a
large number of responses.
I did the interview with the same questions but
the answers given were more detailed. I also did the interview because it
gave answers that were more detailed as the questions were open questions.The final piece of primary research was writing to several companies about
their thoughts on the problem of how their staff and company benefited or
lost out from the 2003 budget. I wrote this letter so that I could have
more information and research on the budget.
Primary Research
Questionnaire results
What is your Gender?
Male -12 people
Female -8 people
pic
I asked this question in the questionnaire because it tells me what gender
of the respondents who received the questionnaire. The result from the
questionnaires tells us that there are four more males in this survey than
females.
This means that the survey could be biased and may not give very
fair results.
Are you married or single?
Married - 11
Single - 9
pic
I included this question in the questionnaire because it shows what age the
applicant is. The graph shows me that 11 married people completed my survey
and 9 single people completed my survey. From this question, I can tell
whether the person will get working tax credit from being married.
Budget Measure - New Child Trust Fund
Do you intend to have children in the near future?
Yes - 2 people
No - 18 people
picFig 1
From my Primary research, I can see that, I can see that 10% of the people
I interviewed may have children in the future (Fig 1). This means that
these two people will benefit from the budget. This is because they will
benefit because of the new child tax fund that has been introduced by the
government.
Who won?
The people who will have children in the future have gained because they
will receive an extra 500 when the child is 16, this is to pay for
university fees and future costs. This means that parents could benefit
from last years budget.
However, the person interviewed may not have kids and so they will be
unaffected by this years budget.
Who lost?
The people who lost out due to the new child trust fund are the government
and therefore the public. They lost out because they will now have to pay
an extra 500 to the parents of newborn children. This will mean the
government have less revenue to spend on the public services such as the
NHS and the education system.
Smoke duty - up 8p per packet
Do you Smoke?
Yes - 6 people
No - 14 people
picFig 1
How much do you spend on smoking per week?
0 - 3 Cigarettes- 2 people
4 - 6 Cigarettes - 3 people
7 - 9 Cigarettes - 1 people
10 + Cigarettes - 0 people
pic Fig 2
From my Primary research, I have seen that 30% of people have lost out due
to the increase by 8p per packet. (Fig 1)
However, only a few people will quit smoking because it is addictive, which
means the product is inelastic.
Who lost?
The people who lost out due to this increase are people who smoke
cigarettes. This means people who smoke will lose out by at least 32 pence
if people smoke between 4-6 cigarettes. However, only heavy smokers will be
affected by the increase in cigarette duty.
Who Won?
The government will be the main benefices will be the government. This is
because of the huge increases in revenue for the government. This will mean
more spending on public services such as the NHS and on schools.In addition, the general public may benefit because some smokers may quit
the habit this will mean they will not get sick and use valuable hospital
resources.
Winter fuel payments - Up 100
Are you a pensioner?
Yes - 6 people
No - 14 people
picFig 1
From my Primary research, I can see that 30% of people are pensioners.
This
means that these six people will benefit from the budget because pensioners
will receive an extra 100 winter fuel payments. The pensioners will also
now get a full pension when in hospital. (fig 1)
Who won?
The pensioners won because they achieved a new extra 100 winter fuel
payments. The pensioners also will now receive a full pension whilst in
hospital.
This means that pensioners have benefited from this year's
budget.
Energy supplying companies may also benefit because the people feel they
can afford to the heating up.
Who lost?
The people who lost out due to the increases are the government. They lost
out because they will now have to pay full pensions and will have to pay an
extra 100 winter fuel payments. This will mean the government have less
revenue to spend on the public services such as the NHS and the education
system.
This means there is an opportunity cost for the government for
giving an extra 100 to pensioners
Beer duty up - 1p
Do you drink Beer?
Yes - 19 people
No - 1 person
picFig 1
Number of pints of beer consumed per week?
0 -10 pints - 10 people
11 -20 pints - 7 people
21-30 pints- 2 people
30 + pints - 0 people
picFig 2
From my Primary research, I have seen that 95% of people have lost out due
to the increase by 1p in alcohol. (fig 1)
However, the amount of loss that the person makes depends on the amount
they drink. This means that people who drink very little will not be
affected much by the increase. This is shown in the graph, as most people
will only lose about 50p (Fig 2)
Who lost?
The people who lost out due to this increase are people who drink alcohol.
However, the extent to which they lose out depends on how much they drink.Therefore, if the person drinks 1 pint the person will only lose out by one
penny. On the other hand, if the person drinks 10 pints they will lose out
by 10 pence. However, if the increase in tax on alcohol persuades people to
give up alcohol it could mean a loss of revenue for the beer companies.
Who won?
The winners of the increase in tax on alcohol are the government who will
benefit with more revenue to spend on public services such as the NHS and
schools. However, the general public will only benefit if the standard of
NHS services are increased.
Do you think you pay too much tax?
Too little Tax - 0 people
The right amount of Tax - 1 People
Too much Tax - 19 People
pic
I included this question in the questionnaire because it shows what the
public think about the amount of tax that they pay. To this question, most
people answered that they felt they paid too much tax. However, only one
person chose to differ saying that they pay the right amount of tax.
Do you think you benefited from the last Budget?
Yes - 6 People -30%
No - 14 People -70%
pic
I included this question in the questionnaire because it shows if thought
they benefited from last years budget.
To this, question most people
answered no this showed me that people think that the majority of people
think that they have not benefited from last years budget.However, six
people think that they have benefited from last years budget.This
question shows me that most people think that they have not benefited from
last years budget. On the other hand, some of these people may have
benefited from the budget. This could be from hidden measures that they do
not know about.
An example of this is benefiting from social costs such as reduced
pollution from people encouraged to drive more low emission cars.
What is the Budget?
The budget is a statement of the financial position of the United Kingdom
for the financial year, with proposals for spending and taxation, presented
in a speech by the Chancellor of the Exchequer
This year's budget was set by Gordon Brown. The chancellor sets the budget
using methods to raise money for the government to spend on the country. To
achieve budgetary objectives, it may be necessary to set aside savings or
to borrow from outside sources.
The main source of revenue for the budget is from income tax and indirect
taxes such as corporation tax, value added tax and National Insurance
contributions.
The main categories of expenditure are social security
payments, the provision of goods and services (such as education, health
and transport)
The government may use the fiscal policy to pay for from everything from
defence to education. To raise this money, the government raises taxes to
generate extra income. However, increasing taxes could be bad for public
moraleifthegovernmentkeepsincreasingtaxes.
Source GCSE Economics Second Edition by Alain Anderton
The budget will have certain affects on the economy. If the government
increases taxes, the aggregate spending of the country will fall because
people will have less disposable income.
However, if the government cut
taxes in the budget it will mean that aggregate spending will increase.However, the increased spending could lead to increased inflation.
A general increase in government spending will generally mean more spending
on the whole economy. It can produce this by booms and recessions by
changing its fiscal policy. Source GCSE Economics Second Edition by Alain Anderton
The effect of changes in fiscal policy can differ.
If the amount of taxes
and spending increases by 100 million, it could mean that national income
of the country is increased by 100 million. This means the government are
employing the multiplier effect. However, sometimes the extra spending can
stop private sector spending because extra public spending will have to be
paid by increases in taxes. This policy is called Crowding out.
In this years budget the total managed expenditure was larger than the
government revenues. This meant the government is said to have a public
sector borrowing requirement (PSBR).
This was shown in this year's budget
because the government spent 460 million but only regained taxes about
423 million. This meant the government had to borrow a deficit of 37
million.
However, occasionally during the period 1987 - 1990 the government spent
less than they received from taxes. This means the government is said to
have public sector debt repayment (PSDR).
Source GCSE Economics Second Edition by Alain Anderton
When the level of aggregate demand is changed, there is more spending in
the economy and the government has PSBR the changes will affect different
government policies. As shown below -
- If there is high spending in the economy, this will mean that more jobs
will be created. This will mean that unemployment will fall. This is
overall good for the economy.
- The increased spending will also mean a higher rate of economic growth.This will have a positive effect on the economy as a whole.
Source GCSE Economics Second Edition by Alain Anderton
- A further increase as a result of the high spending on the economy will
be the increase in inflation. This is because the increased spending will
make companies push up their prices.
However, if the government tightens the fiscal policy and starts to raise
taxes less it could lead to the economy being put into recession.
This
could then lead to higher unemployment, lower economic growth and lower
inflation.
Tax Payers Money
Total public spending is expected to be around 456 billion this year,
around 7,700 for every man, woman and child in the UK. It is set to rise
to 485 billion in 2004-05 and to 517 billion in 2005-06.Source -
Budget2003.tresury.gov.
uk
Where Tax Money is Spent?
Total managed expenditure - 456 billion
pic
Source - Budget2003.tresury.gov.uk
Where Taxes come from?
Total receipts - 428 billion
pic
Source - Budget2003.
tresury.gov.uk
This means there is Public Sector Borrowing Requirement. This is because
the total government spending is larger than government revenues. Source GCSE Economics Second Edition by Alain Anderton
Conclusions
Summary
In this report, I found out that the measures announced in the last year's
Budget Report benefited some members of the public.
The members of public who smoke did not benefit from last year's budget
because they have paid an extra 8 pence per packet.
This will mean if I
consider my questionnaires I can see that the 3 people who do smoke will be
worse off. If I consider that the packets of cigarettes cost 2.00, the
three people will be at least 32 pence worse due this budget. Overall, this
means that people whom smoke did not benefit from last years budget.
For the 8 pence, tax rise on cigarettes rich people may not be affected by
the tax rise.
However, poor people may then not purchase cigarettes because
of its substantial increase in cost. This is because the tax is a
regressive tax.
The members of public who drink alcohol will not have benefited from last
years budget because they will pay an extra 1 penny for beer and an extra 4
pence for wines. This means that if I consider the views of the people I
interviewed I can see that they will have to pay an extra 11p at least
pence per week for the people 7 people who say they buy between 11-20 pints
a week. Overall, this means that people whom drink did not benefit from
last years budget.
The members of public who are pensioners benefited from this years budget.This was shown in my secondary research. My secondary research showed me
that pensioners benefited because they received an extra 100 in winter
fuel repayments. Pensioners would also have benefited from the increased
spending of up to 1bn in the National health service as they will not be
effected by the 1% rise in national insurance.
Pensioners may also have
benefited because bingo tax has been abolished. Overall, this means that
pensioners did benefit from last years budget.
The members of public who have newly born children will have benefited
because they will receive a new child trust fund and the families will
receive a new effective child tax credit as well as the working families'
tax credit being increased by 2.50 a week.
If I use my primary research
this means that, the 15 people who replied yes to the budget will benefit
from the budget because each will receive an extra 2.50 per week in
working families' tax credit. These families will also benefit if they
decide to have more children. Overall, I think the families with children
have benefited from last years budget.
When I look at the whole picture I think most people have benefited. This
is due to people who switch to public transport due to the 5 increases on
vehicle excise duty.
This will help the traffic congestion and reduce
carbon dioxide emissions hence will reduce pollution. This means that whole
population did benefit because there is now less pollution. The public may
also benefit from the NHS increase spending. This may be true even if
people do not use the NHS that often. It means it will keep the rest of the
country fit and healthy, which will in turn mean a more efficient economy,
which will mean more jobs and income for workers.
Recommendations
I have made a number of recommendations for the government and the
Chancellor of the Exchequer. I have classified my recommendations in a star
system. The more stars the better I consider the recommendation. This is to
show which recommendation I think is the bestsuitsthecurrent
government's position. The recommendations are as follows -
Raise Tobacco Taxes5 Stars *****
My first recommendation would be to increase taxes on products that are
considered to be 'inelastic'. An example of an inelastic product is
cigarettes.
I would suggest to the Chancellor of the Exchequer that he
should increase the price more on cigarettes because people would continue
to buy the product because it is very addictive. However, by increasing the
price people could stop buying the product because it has become to
expensive. In the short term this would reduce taxes earned by the
government. However., in the long term, the reduced NHS costs would greatly
benefit the public because these people would not have to go into hospital
for treatment of lung cancer and other smoking related diseases from
taxpayers money.
Cut funds to Iraq4 Stars ****
My second recommendation would be to cut much of the funding to Iraq.
In
this years budget the government pledged 3 billion to the war in Iraq. I
recommend that most of this money should be spent on domestic counter-
terrorism measures. The rest of the revenue could be spent on education,
NHS and transport. However, this may temporarily ruin relations with
England's allies such as USA.
Borrow less money3 Stars ***
My final recommendation would be for the government to borrow less money.The government would not have to borrow so much money because of the amount
they spend would be reduced from cutting funds to Iraq and the rise in
taxes for tobacco.
This would leave the government with public sector debt
repayment. This would help the government to invest the money or to save
the money for future investment. However, if the money is left in a bank
the money could lose its value.
Raise Income Tax2 Stars **
My third recommendation would be to increase income tax. This would bring
in lots of revenue because everyone who works would have to pay extra
income tax. This money could then be put to good use.
However, this tax
rise could cause unrest as many people would object any rise in income tax.This is because it leaves the public with less disposable income. However,
this may then also lead to more unemployment.
Evaluation
My investigation into how the last year's budget affected the public may
not have been very accurate.
The actual budget measure may not have been
very accurate. This is because the costs for each measure may affect each
person differently. However, this may also be because the tax rise is an
indirect tax.
To make my questionnaires more efficient I could have had more time, bigger
range of ages and results from different parts of the UK.
In my questionnaires, I asked the question 'do they think they benefited
from last years budget.
To this question 70% answered in favour of NO. This
means that they think that they did not benefit from last years budget.However, these people may have benefited from last years budget indirectly.
My questionnaires did not reflect the total opinion of the public.
In my
questionnaires, I could also have expanded my interview questions this
would have given me a wider range and greater in-depth results.
To this I could have asked a wider range of people. I could have also used
other sources of information. This means using electronic sources such as
the internet and E-mail to give me more information.
The budget 2003 was very hard to research because the budget was almost a
year ago. This left limited resources to find information such as in
newspapers. The task was also difficult because information was always
shown about Pre-budget 2004.
To improve my Budget 2003 report I could have also interviewed more people
to give me more results and wider range of results.
Primary Research
Questionnaire
Please circle all answers that apply
Age 16-2526-3334-4344-6060+
GenderMaleFemale
What is your income band?
0 - 10,000
10,000 - 20,000
20,000 - 30,000
30,000 - 40,000
40,000 - 50,000
50,000 +
Are you married or single?
Married
Single
How many children do you have below 16?
No children
1 child
2 Children
3 Children
4 Children +
Do you smoke? YesNo
If so, how many packets of cigarettes do you buy per week
0 - 3 Packets per Week
4 - 6 Packets per Week
7 - 9 Packets per Week
10 + Packets per Week
Do you drink Alcohol? YesNo
If so, how much do you spend on Alcohol per week
0 - 10 Packets per Week
11 - 20 Packets per Week
21 - 30 Packets per Week
30 + Packets per Week
Please tick which public Services you use?
NHS.
....
......
Public Transport ......
......
Schools....
......
Fire Brigade ....
....
..Police....
....
... Ambulance..
.....
....
Do you think you pay?
Too little tax
The right amount of tax
Too much tax
Do you think you benefited from the last Budget?
Yes
No
Why/ Why not
.....
......
....
......
....
......
....
....
....
.....
......
.....
.....
.....
......
.....
......
......
............................................................................................................................................................................................................................................................................................................................
Thank You for Your Time
Primary Research
Interview
Interviewee - Shila Tailor
Interviewer - Deepak Tailor
Do you think you benefited from last years budget?
YesNo
Why/ Why Not?
..................................................................................................................................................................................................................................................................................................................................................................
What benefited you in last years budget and why?
..................................................................................................................................................................................................................................................................................................................................................................
What did not benefit you in last year budget and why?
..................................................................................................................................................................................................................................................................................................................................................................
How would you change the budget to benefit you In the future?
..................................................................................................................................................................................................................................................................................................................................................................
Thank you for your time
Copy of letter
The letter below shows the letter I sent to various companies in request
for information. The reply and information NTL sent is overleaf. The letter
is shown below -
BT Group Plc
BT Centre
Newgate Street
London
EC1A BAJA
9th September 2003
Dear Sir/Madam,
I am a year 11 student of Beal High School.
As part of my GCSE Economics Coursework. I am currently working on a
project, which involves evaluating the effect of the 2003 Budget on the
people and companies.
I would like to obtain information (leaflets, booklets and so forth)
relating to the different ways that the 2003 budget affected your personal
staff, income stability and so forth. I am particularly interested in ways
that budget affected profit levels at the company.
Could you please send any information you feel would assist me in my
project as soon as possible.
Yours faithfully
.......................
Bibliography
For this report, I used various sources of information. I used the
following to help me prepare this report.
Text Books
GCSE Economics - Written by Alain Anderton, Second Edition
GCSE Bitesize - Economics revision guide, written by David Smith
People
Shila Tailor - the person I interviewed helped me with this report.Mr Cummisky- my Economics teacher
Mr Ali - this teacher helped me with this report
Mr Smith - this teacher also helped me with this report.
Organisations
I also used information from different organisations.These organisations
included -
Bank of England
Budget Report 2003
The Economist magazine
Electronic
Electronic services also helped me with my report. This included the use of
the internet. The websites used to get the information included: -
www.Inland Revenue/ Budget2003.co.uk
www.bbc.co.uk/Budget2003
www.Guardian.co.uk
In this report, I also used e-mail and fax services to help with my
project.
