B) Write down 3-5 questions about the text. B) Fiscal Policy in the UK

B) Fiscal Policy in the UK

Fiscal policy in... UK is guided by two strict rules:

•... Government will borrow only to invest and not to fund current spending;

and

• net public debt as... proportion of GDP will be held at... stable and prudent level.

These rules mean that... taxpayers pay for... current spending and require public borrowing to be kept under firm control.

The Finance Act 1998 established a new Code for Fiscal Stability, which requires fiscal and debt management policy to be carried out in accordance with five key principles:

• transparency in setting fiscal policy objectives, the implementation of fiscal policy and the publication of the public accounts;

• stability in... fiscal policy-making process and in... way that fiscal policy affects... economy;

• responsibility in the management of the public finances;

• fairness, including between... generations; and

• efficiency in the design and implementation of fiscal policy, and in managing both sides of... public sector balance sheet.

In practice it means that the public finance and fiscal strategy in... UK will be aimed at setting overall spending limits for individual departments and planning and controlling public expenditure more strictly within... framework of capital and current budgets.

Ex. 9. a) Supply the prepositions where necessary,

Focus on Fiscal Consolidation

The past two decades have seen the development of a worrisome and unprecedented phenomenon – the ballooning of public debt in industrial countries during a period of general peace and economic prosperity. In the past, large but temporary budget deficits arose in response... extreme circumstances, such as major wars or global economic depression. But these debt problems were transitory, because in their wake, governments tightened their belts and cut back... spending.

A striking characteristic of modern fiscal imbalances is that they originate... dramatically increased spending rather than falling revenues.

Economists identify several forces that may be behind these imbalances in industrial countries, including:

• The growth of public pension and social spending. Aging populations in industrial countries are growing dramatically, which means more elderly people to support, much higher health care bills, and a smaller share... the population to work and pay taxes. These future liabilities dramatically worsen the budget prospects of industrial countries. According... IMF staff estimates, public pension liabilities in 1994 exceeded 68 per cent... GDP in all major industrial countries. The situation is even worse when commitments to provide future health care benefits are taken... account. The bad news conveyed... these figures is that public pension programs are much more generous than governments are likely to be able to support. Future generations of workers will thus face... either much higher tax burdens to maintain the levels of benefits or sharply reduced benefits;

• Unemployment benefits;

• The productivity slowdown since the early 1970s;

• Increased exchange rate flexibility since 1973 and growing

• integration of world capital markets, which make it easier for governments to run large budget deficits.

Persistently high levels of government debt are a threat... economic health. The heavy public debt burdens in most industrial countries make it imperative... governments to take unpopular and painful... people remedial actions.

Words you may need:

fiscal consolidation укрепление бюджетно-налоговой политики

worrisome adj вызывающий беспокойство

balooning n раздувание, расширение

transitory adj временный

in the wake of по следам, по пятам (чего-л.)

to tighten one's belt затягивать пояс

public pension liabilities обязательства по выплате пенсий

imperative adj настоятельный

painful adj болезненный

remedial adj (зд.) коррективный

Ex. 10. Open the brackets putting the verbs in the correct form:

Transition economies recently (to make) impressive steps towards reducing fiscal imbalances. Cuts of cash expenditure (to bring) about a decline of fiscal deficits for the CEE countries as a whole to about 4 per cent of GDP in 1995 from 10 per cent in 1994 on average. This was mainly the result of large reductions in enterprise subsidies, military spending, and capital expenditures. Despite these spending cuts, however, outlays for social services (such as schools and hospitals) and social security (to remain) relatively stable, relative to GDP. Over the same period, general government expenditures (to fall) on average to 30 per cent of GDP from 38 per cent. While the economies in transition (to make) solid progress over the past few years toward fiscal consolidation, macroeconomic stabilization (to require) additional reduction of inflation and successful implementation of:

• structural reforms, including reform of the tax system and the public expenditure system;

• improved revenue collection through elimination of loopholes, tax evasion and exemptions, broadening of the tax base;

• greater political leadership of the reform process – especially by formulating long-term fiscal adjustment policies.

Words you may need:

transition economies страны с переходной экономикой

on average в среднем

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