Lesson video

Hi, I'm Mrs. (indistinct) and I'm going to be taking you through this citizenship lesson today.

I'm going to give you all the information that you need to be successful and I'm also going to pause and tell you when to complete a check for understanding or a task.

Hope you enjoy the lesson.

This lesson is called What Does the Economy Have To Do With Politics? And it comes from the unit of lessons synopticity, how do different ideas and concepts in citizenship interconnect? By the end of this lesson, you'll be able to explain the relationship between the economy and politics.

Our key words for today are economy, which is the state of a country or region in terms of the production and consumption of goods and services and the supply of money.

And tax, which is the charges imposed by the government on citizens and corporations to finance some of its spending.

I'll list an outline for what does the economy have to do with politics, is we're going to look at how does government impact the economy? And then we're going to look at how does the economy affect politics.

So let's start by looking at how does government impact the economy? So the government, and in particular, the Chancellor of the Exchequer, is responsible for managing the country's finances.

And this is referred to as balancing the budget, balancing what's coming in with what's going out.

So Izzy's asking, in what ways does the government, the economy, what do they actually do? So pause and have a think.

The government impacts the economy in many ways, including deciding on taxation figures, setting businesses and employment policies, negotiating trade deals, and regional development.

So Izzy's asking, what do these involve? These might have been some of the things that you thought of yourself.

So have a look at those four bullet points.

What might that involve? So tax is money that people and businesses have to pay to the government.

The government then decide how much tax to collect and how to spend it to help the country.

These are really difficult decisions and can be an emotive topic for many because it's ultimately our money we've earned through working that goes to the government, so it can be a really emotive topic.

In 2018, the government introduced a tax aimed at products with high sugar content.

For example, if a drink had more than five grammes of sugar per hundred millilitres, it was taxed.

This aimed to tackle childhood obesity and also persuade companies to make their drinks healthier.

The new tax, often referred to as the sugar tax, raised millions of pounds to help fund physical education activities in primary schools and the healthy pupils capital fund and provided a funding boost for breakfast clubs in over 1,700 schools who had lots of impact.

And this highlights how the government can make decisions that grow the economy, allowing for additional funding for services.

These decisions could also impact the economy in the future by reducing obesity and lowering pressures on the NHS.

The government also grows the economy by supporting small businesses, by providing tax relief, meaning businesses pay less tax.

This encourages business to spend more and grow faster, which creates more jobs and helps the economy improve.

When businesses do well, they pay more tax in the future and hire more people, which means that they are also paying tax.

So all of this is really good for the whole economy.

So sometimes helping the business out initially can really reap benefits later on.

The government also sets the minimum wage and this is the lowest amount of money workers are allowed to be paid per hour.

Lots might be paid more than that, but it sets that minimum wage.

If people earn more, they are likely to spend more, which drives the economy and helps businesses to grow.

The government also supports apprenticeships where people earn and learn at the same time.

Employers get help from the government to take on apprentices which is beneficial for the organisation and also build a future workforce.

Let's have a check for understanding.

Finish these sentences.

When businesses do well, this is good for the economy because, and when people earn more, this is good for the economy because.

Let's see how you got on.

So the first one, when businesses do well, this is good for the economy because they pay more in tax and employ more people.

And when people earn more, this is good for the economy because they are likely to spend more, which drives the economy and helps businesses to grow.

Trade deals are agreements between countries about how they buy and sell goods from each other.

Following Brexit, when we left the European Union, the government had to make new trade deals because it was no longer part of the EU single market.

The UK made trade deals with Australia and New Zealand, for example, that removed tariffs, which are high taxes, on goods, making it easier and cheaper for British businesses to export.

In return, UK shoppers gained access to more products at lower prices.

When these deals were made, it stated that they could boost the UK economy by over three billion pounds and support small businesses and also create new jobs.

So trade deals can really impact the economy.

The government may also decide to allocate more funding to low income regions to reduce inequality and improve local economies in these areas.

An example of this is the levelling up policy that was introduced in the 2019 conservative parties manifesto.

So Izzy's asking, what was the levelling up policy? So you might have heard of this before.

If not, look at the clues on the slide and you might be able to work it out.

So levelling up was the previous conservative government policy aimed at reducing economic inequality across the UK.

So it was really targeting areas where there was lower incomes and trying to make it a more equal economic status across the country.

The policy recognised that some regions have fewer job opportunities, lower average wages, and also poorer health outcomes than other areas.

This economic divide is particularly evident when comparing many northern regions, Wales and other areas with London and the Southeast.

So levelling up means helping these areas catch up by investing in things like better schools, improve transport, skills training, and high quality jobs within those areas.

An example of the levelling up policy in action was the 48 million pound upgrade to the Penistone Railway line between Sheffield and Huddersfield.

It improved train services, making it easier for people in lower income areas to travel for work and education.

This helped boost local economies by creating more jobs and attracting businesses to the area.

The specific term, levelling up, is no longer used by the current labour government, but the policies aim of addressing regional inequalities in the UK does remain a political focus.

The government constantly makes economic decisions to ensure they are driving and managing the economy.

These decisions need to be carefully considered, ensuring the economy in the UK is strong and that communities or businesses that are struggling financially have the tools and resources needed to grow.

Let's have a check for understanding.

Complete each sentence.

So the first one, the government constantly make economic decisions to ensure they are driving and managing the what? And these decisions need to be carefully considered, ensuring the economy in the UK is strong and that communities or businesses that are struggling financially have the tools and resources needed to what? Pause and have a go at completing each sentence.

Let's see if you managed to do that.

So the first one we were looking for, economy, and the second one we were looking for, growth.

Let's have one more.

Which statement is most accurate about the government's role in the economy? Is it A, the government controls everything that happens in the economy, B, the government helps manage the economy but can't control everything, or C, the economy runs on its own without any help from the government? And it's B, the government helps manage the economy but can't control everything.

For task A, I'd like you to explain the relationship between the government and the economy, ensuring you describe some of the actions that the government have made to grow and protect the economy.

When explaining the relationship between the government and the economy, you may have included, the government and the economy are closely linked because the decisions made by the government can help the economy grow or protect it during difficult times.

One way the government does this is by making trade deals with other countries.

For example, after Brexit, the UK made trade deals with Australia and New Zealand, which means it's cheaper and easier for UK businesses to sell things to these countries.

This helps businesses grow and brings more money into the UK economy.

You may have also included, the government also supports the economy by addressing regional inequality through targeted investment.

For example, the previous conservative government's levelling up policy aimed to boost struggling local economies by investing in areas with fewer job opportunities and lower wages.

For example, the 48 million pound upgrade to the Penistone rail line between Sheffield and Huddersfield, improved transport links, making it easier for people to travel for work and attracting businesses to the area.

This type of investment helps create jobs and encourages economic growth in specific regions, showing how the government can use targeted spending to strengthen the overall economy.

These examples demonstrate how the government can take the proactive and reactive approaches to support the economy.

So we've taken a look at how does government impact the economy, now we're going to flip it and we're going to look at how does the economy affect politics.

The relationship between the government and the economy can also be seen when examining how the financial landscape of the UK, which can be impacted by many different factors, impacts actual political decisions.

When the government makes strategic proactive decisions to grow the economy, this is a mechanism for growth.

But at other times, factors will impact the economy, which will force the government to make key political decisions and this is a response to economic change.

So these are the examples of when the economy is actually affecting politics.

So Izzy's asking the question, when has the economy affected politics? Pause and have a think.

So some examples of when the economy has affected politics include during the COVID-19 pandemic, during energy price hikes and during the 2008 financial crisis.

I'm gonna have a look at these in more detail.

The COVID-19 pandemic led to a severe recession, and this is when a country's economy starts to shrink instead of grow, meaning that overall people and businesses are spending less money, companies may sell fewer products and as a result, jobs can be lost.

During the COVID-19 pandemic, lockdowns halted business operations and kept people home, sharply reducing economic activity.

This severely impacted the economy.

It meant the government had to make quick and strategic decisions about how to ensure the economy could recover.

Let's have a check for understanding on that important word, what does it mean if a country is in a recession? Let's see if you could describe that word.

A recession is when a country's economy starts to shrink instead of growing.

This results in reduced spending by individuals and businesses, which causes companies to sell less and may force them to cut jobs.

So this recovery following COVID-19 included the decision to provide grants to help small businesses recover from the economic impact of the pandemic.

And as such, 21.

3 billion pounds was allocated to small businesses in England through the COVID-19 local authority business support grant scheme.

And to support hospitality businesses, so that's things like cafes, restaurants, hotels, so to support those businesses during COVID-19, the government cut value added tax, also known as VAT, or VAT, from 20% to five percent for restaurants, cafes, and hotels.

This made hospitality cheaper, helping businesses attract customers and recover from lockdown losses.

Because remember, during lockdown, these businesses were not able to operate.

So that reduction in that was aimed to drive that economy, and improve business in these areas.

Also, the Eat Out to Help Out scheme was another government strategy to support the hospitality sector during the height of the pandemic.

It gave people up to 50% off food and drink during the periods where lockdown restrictions were lifted.

It aimed to help businesses by encouraging more customers to eat out and therefore continue to drive this economy.

Let's have a check for understanding.

State two things the UK government did to try and support the hospitality industry and drive the economy during this time.

So they reduced hospitality VAT from 20% to five percent and also the Eat Out to Help Out scheme.

Global events such as the Russian Ukrainian war impacted the economy in 2022 and 2023, and this caused energy prices to rise.

Russia's 2022 invasion of Ukraine disrupted energy supplies, driving up prices and triggering the UK cost of living crisis.

Many people and businesses struggled to afford their energy bills, prompting government action.

As a result, the government introduced the Energy Price Guarantee, limiting household energy costs so people didn't pay the full high prices energy companies were charging.

They also provided direct financial support to millions of households.

Similarly, businesses were supported through the energy bill relief scheme.

Similarly, the economy faced a serious financial crisis in 2008, and this had a significant impact on political decisions.

The 2008 financial crisis in the UK was part of a global problem that began in the US.

American banks gave out risky loans to people who couldn't afford to pay them back, and this caused a big crash in the housing market.

As a result, banks around the world, because they are connected via investments, meant that the crisis spread to the UK.

In the UK, major banks like the Royal Bank of Scotland and Lloyd's Bank were on the verge of collapse, which would have meant people losing their savings and the entire financial system breaking down.

This significant economic downturn meant that the government had to spend billions of pounds bailing out banks to stop them from failing.

However, this led to huge government debt.

To address this debt, the UK faced a period of austerity where large government spending cuts were made, such as reduced funding for public services.

So that's what austerity means.

It means a period of time where there needs to be spending cuts to try and drive the economy and improve the economy.

These were difficult decisions and while some supported the need for austerity, others felt this hit the most disadvantaged the hardest, meaning this period of economic instability had a lasting impact on how people viewed political decision making.

This highlights how the economy can be impacted by external factors, sometimes outside of government control, and with no warning.

When this happens, political decisions have to be made to try and protect the economy and these decisions can be very challenging.

Let's have a check for understanding.

Identify three situations that impacted the UK economy.

They are the COVID-19 pandemic, the energy price hikes due to the Russia Ukrainian War and the 2008 financial crisis.

For Task B, I would like you to describe the political decisions that had to be made during those three situations.

So the COVID-19 pandemic, the energy price hikes due to the Russia Ukrainian War and the 2008 financial crisis.

Each of those, for each of those three, I'd like you to state what the issue was, describe what the government did and state the desired impact.

So you've got the three decisions, they're the three situations there, and then for each one, I want you to describe that by stating the issue, describing what the government did, and also stating the desired impact.

Pause while you have a go at task B.

When describing physical decisions that had to be made in relation to the COVID-19 pandemic, you may have included, the COVID-19 pandemic forced the government to implement lockdowns, which meant many businesses had to close temporarily and people were told to stay at home.

This caused the economy to shrink rapidly as consumers couldn't visit shops, restaurants, or entertainment venues, leading to widespread job losses and business failures.

As a result, the government provided grants to help small businesses, reduced VAT in the hospitality sector and introduced the Eat Out to Help Out scheme.

These measures were to support small businesses and help them stay afloat during the pandemic, and were also to try and encourage people to continue to spend in the hospitality sector.

When describing political decisions that had to be made in relation to the energy price hikes due to the Russia Ukrainian war you may have included, when the war in Ukraine started in 2022, energy supplies were affected, causing prices for gas and electricity to skyrocket and making it hard for people to afford their bills.

Subsequently, the government introduced the energy price guarantee to limit how much people had to pay and gave out direct payments to help households with their bills.

Similarly, they also introduced the energy bill relief scheme to support businesses.

They did this to make energy more affordable for citizens so they could continue heating their homes whilst also preventing business closures.

And when describing political decisions that had to be made in relation to the 2008 financial crisis you may have included, in the 2008 financial crisis, banks around the world lost huge amounts of money because American banks gave out risky mortgage loans to people who couldn't afford to repay them.

This caused a global financial crash that affected jobs, savings, and businesses due to interconnected banking systems. The UK government bailed out big banks at the Royal Bank of Scotland and Lloyd's to stop them from collapsing, and they also introduced austerity measures, including cutting funding for public services.

They did this to keep the banking system stable and try and get the economy growing again.

So in summary of the lesson, what does the economy have to do with politics? The government plays a key role in managing the economy, making important decisions to support growth and stability.

These choices aim to help businesses and communities, especially those facing financial difficulties by providing support and opportunities to recover.

However, the economy can be affected by unexpected events beyond the government's control, such as the 2008 financial crisis, the COVID-19 pandemic or the Russia Ukrainian War.

In these situations, quick and often difficult political decisions are needed to protect jobs, public services, and overall economic health.

That brings us to the end of the lesson.

Well done for working hard, and I hope you come back for more citizenship lessons in the future.