Who Makes UK Economic Policy
Economic policy in the UK Is made by a number of bodies both at home and abroad. There are some actors who directly make economic policy- for example the chancellor, and there are thhose who just influence the making of economic policy- for example pressure groups. Some of these actors are domestic actors and some are pannational. The different bodies responsible for economic policy making have different degrees of accoutnability. Traditionally the principle actor in making economic policy would be the chancellor and the treasury however, the responsibilty have been shared over many bodies as power has been ceded to other groups.
The Chanellor does remain the key figure in economic policy making. It has been suggested that Gordon Brown has been the most powerful chancellor yet. This is because Tony Blair has ceded a lot of power traditionally of the PM to the chancellor and created a dual monarchy. However, Gordon Brown has also ceded his own power elsewhere. For example he gave control of interest rates over to the Monetary Policy Commity in the Bank of England. This means he no longer has the power to shape economic policy in order to benefit politcs by creating artificail booms before elections for example.
However, Brown does still retain a lot of power over economic policy. For example he can still tamper with the tax and credit systems. The treasury has become a superministry in the sense that it can control so much of economics. However, it has also lost a lot of power to the MPC and to the city and Globalisation limits its room for manouvre. For example, if the chancellor chose to increase coorporation tax this would result in investment leaving the country. The Chancellors key advisors also play a larrge part in shaping economic policy- for example Ed Balls.
Also interesting to read about fiscal policy questions and answers
Margaret Thatcher actually listend to her advisor Sir Alan Waters more than some in her treasury. The Prime Minister (whose official title is First Lord of the Treasury) should always want to play a key role in economic policy making. This is because the success of the Governemnt is very dependent on the state of the economy. The privitisation of the capital market shows thast Prime Ministers can be very influential. However, there has alwasy been tension between Brown and Blairs domestic policy and Blair actuially has little influence over economic policy making.
This hasnt been the case with all PMs however. Margaret Thatcher played a big part in economic policy; by making key appointments to the treasury she turned around the Uks economy against the with of the Governement (for exaple Trade Union legislation and supply side reforms). The New Claus 4 also has limited Blairs influence as he has had to keep his prmise not to raise top and basic rates of tax. The Bank of England is another key actor in making and shaping economic policy.
Althgouh they are an unelected body they have been ceded the power to change interest rates through the Monetary Policy Committee. This, along with maintaining the value of the pound is its main role. The MPC offers political neutraliy in monetary policy and in affect the UK nw has an independent central bank. Although unnaccountable and not able to directly influence the making of economic policy, the City has a large influence over economic policy. As the City holds 30% of the UKs GDP it is too important for any Governement to ignore.
Over the last 20 years after the Big Bang of 1986 and the deregulation of the capital markets the Citiys influenece has grwon hugely. They have a huge influence over microeconmic legislation, coorporation tax and fiscal policy. Pressure groups and the media also have influence over shaping economic policy. In particular the CBI, Tus and consumer groups. For example the recent suggestions of green taxes will have been influenced hugely by the environmental lobby. Trade Unions are now a lot less influential as they once were after the TU legislation and the Government now listening more to the CBI.
The 1992 election was said by some to be won for the Tories by the Sun (The Sun printed that Labour would just increase taxes) and this shows how the media can be highly influential. These days, Parliament has very little influece over economic policy as is has become increasingly marginalised . However, Parliament has begun to become more effective (and not just in terms of economic policy. ) Theyt have the vote over the budget although given that the governing body has a majority the liklihood of it being rejected is very slim.