The UK government is considering a Clean Travel and Skills Programme. It would subsidise local bus fares, fund training for electric-bus mechanics and increase the tax on petrol. Table 1 shows selected current indicators and government forecasts if the programme is introduced.
| Economic indicator | Current | Forecast with programme |
|---|---|---|
| Government revenue | £820 billion | £834 billion |
| Government spending | £842 billion | £852 billion |
| Unemployment rate | 5.8% | 5.1% |
| Inflation rate | 2.4% | 2.7% |
| Annual bus journeys | 1.8 billion | 2.2 billion |
| Annual petrol-car journeys | 4.5 billion | 4.1 billion |
| Road-emissions index | 100 | 94 |
[ITEM A] The programme would reduce local bus fares by an average of 25% and fund more frequent services. It would also pay for training courses for electric-bus mechanics. Supporters argue that cheaper, more reliable buses would reduce congestion and air pollution, while the training would help unemployed workers gain skills needed by transport employers.
[ITEM B] The programme would be partly financed by increasing the tax on petrol. Rural residents and night-shift workers argue that they often have no practical alternative to driving. Small firms warn that higher delivery costs may increase prices. Critics also say that training takes time to affect productivity and that forecasts of drivers switching to buses are uncertain.
Define the term 'supply-side policy'.
Using Table 1, calculate the forecast percentage decrease in the size of the budget deficit. Give your answer to one decimal place.
Explain two possible benefits of the Clean Travel and Skills Programme for workers and households.
Using Table 1, analyse how the Clean Travel and Skills Programme may create conflicts between government economic objectives.
Do you think the UK government should introduce the Clean Travel and Skills Programme? Use Items A and B and your own economic knowledge to justify your view.
104 exam-style questions on AQA GCSE Economics 2.3 How the government manages the economy, covering 2.3.1a Fiscal policy and income and expenditure, 2.3.1b Fiscal policy and government objectives, 2.3.1c The government budget, 2.3.2a The meaning of monetary policy, 2.3.2b Uses of monetary policy, 2.3.3a Supply-side policies and their trade-offs, 2.3.3b Using supply-side policies, and 2.3.4 Policies to correct positive and negative externalities. Each one has a worked solution and a mark scheme showing where the marks go.