Economic disparities between regions in the UK remain persistent, with productivity in London and the South East significantly outpacing the rest of the country. To address this imbalance, the government has announced an expansion of public sector capital investment, raising green and digital infrastructure spending from 1.5% of GDP to 2.5%. This represents approximately £22 billion of additional funding annually. The government plans to issue green gilts, taking advantage of stable sovereign debt markets to finance these projects without immediately raising taxes.
The investment strategy prioritises rural and historically industrial regions, such as the North East, the East Midlands, and the South West. Projects include upgrading regional electricity grids to integrate community-owned renewable energy and accelerating the roll-out of gigabit-capable fibre broadband. In Cornwall, a completed smart-grid initiative cost £15 million and took 6 years to deliver. However, it is projected to generate £45 million in economic gains over its lifespan by boosting rural tech start-ups, creating skilled engineering jobs, and reducing energy transmission waste, thereby lowering utility bills for local businesses.
With reference to Extract C, discuss the benefits of an increase in green and digital infrastructure spending on the UK economy. Use an aggregate demand and aggregate supply diagram to support your answer.
12 exam-style questions on Edexcel A A Level Economics 2.2.4 Government expenditure (G). Each one has a worked solution and a mark scheme showing where the marks go.