Fiscal Policy

Fiscal variables relate to government spending and taxation. Government induced changes in these variables constitute fiscal policy. On this page we show the links between these decisions, the government’s budget deficit and the National Debt. We show how these links relate to the issue of fiscal sustainability – an issue that has become especially relevant following the Greek crisis of 2010. Our data sources are given in the panel on the right, from which you can also download the data in CSV format.

Fiscal Policy Background

This page explains some of the basics of fiscal policy – government decisions about spending and taxation. After describing the link between government deficits and government debt it presents evidence on the historical pattern of UK government debt, showing that whilst it has risen sharply in the UK following the financial crisis the current ratio of government debt to GDP in the UK is by no means unprecedented.

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Fiscal Sustainability

This page explains why the long-run sustainability of the government’s fiscal position depends on the interest rate it has to pay on its debt, the size of the government’s deficit after excluding interest payments, the growth of the country’s nominal GDP, and its current ratio of debt to GDP.

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Fiscal Indicators

This page explains several fiscal policy terms – primary balance, current budget deficit, public sector borrowing etc.

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Commentary - Fiscal Policy

The commentary examines the behaviour of some fiscal indicators – mainly for the UK but also for other countries. In particular it shows how these indicators responded to the financial crisis. It also uses them to highlight the scale of ‘austerity’ in a number of countries, and the sharp tightening of fiscal policy envisaged by the current UK Coalition government over the next 5 years.

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