The Emergency Budget

On the 22nd of June 2010, George Osborne delivered the ‘emergency’ Budget, just three months after the previous budget. It was Chancellor Osborne’s and the coalitions first Budget.

We finally understand what George Osborne meant when he spoke of “the age of austerity”. The chancellor said the “unavoidable budget” required a VAT increase to 20% next year, higher capital gains tax, a levy on banks, a two-year public sector pay freeze and less generous benefits, but insisted the package was needed to thwart the financial markets from turning on Britain.

Presenting his first Budget to MPs, Mr Osborne said the measures were “tough but fair”. Labour unsurprisingly said it was “reckless” and would “throw people out of work”. Acting Labour leader Harriet Harman said Chancellor Osborne’s budget would stifle growth and hit hardest “those who can least afford it”.

George Osborne’s Budget was a major departure from previous economic policies with many hoping it would be a “defining moment” in Britain’s economic recovery. However trade unions were concerned that thousands of jobs would be lost, mainly in the public sector, potentially wrecking local economies and sparking a “double-dip” recession.
Apart from the VAT increase, tax credits are to be cut for families earning more than £40,000 a year and public sector wages are to be frozen for two years for those earning more than £21,000. The fears of some Tory backbenchers came true when the Capital gains increase to 28% was announced for top rate tax payers.

Mr Osborne also froze the Royal families allowance at £7.9m a year and added that in the future their expenses would be under scrutiny from the National Audit Office. In other moves, the Chancellor promised to link pensions to earnings – or prices or 2.5% if they are higher. From January 2011, the government will bring in a bank levy, which will apply to the balance sheets of UK banks and building societies and the UK operations of foreign banks. Mr Osborne said the move would raise £2bn a year once it was fully in place.

The IFS have claimed that the VAT increase was far from ‘unavoidable’. Robert Chote, director of the Institute of Fiscal Studies, said: “You might as well say it was his desire to cut other taxes that made it so.” Despite Mr Osborne’s attempts to present the Budget as “fair”, the IFS claimed his measures hit the poor harder than the rich because of £11bn of welfare cuts.

HOW WILL THE BUDGET AFFECT YOU?
The Treasury themselves say individuals will only be worse off from NI changes and income tax when their income gets close to £50,000. However, things quickly change when you bring VAT and benefit changes into the equation. In 2012, when most tax credit changes kick in, all households will be worse off.
TAXES
Overall you will most likely end up paying more. Taxes are increasing, firstly on VAT starting in January 2011. Capital Gains Tax will stay the same except for those on the highest income for whom it will increase to 28%. As for income tax, the personal allowance is to be increased.
STATE BENEFITS AND TAX CREDITS
The coalition government are looking to save loads of money on welfare and benefits. Therefore benefits, tax credits and public pension will be ‘uprated’ in line with the CPI rather than the often higher RPI. This will probably save the government around £6bn a year. Tax cresits will no longer be available for people earning more than £40,000 next year.
PENSIONS
From April 2011, the state pension will rise by the increase in average earnings, or move in line with prices or by 2.5%, if either of those two is higher. The government has also confirmed that it wishes to increase the state pension age to 66 in the not too distant future.
PUBLIC SECTOR WORKERS
A two year pay freeze has come into effect for workers in the public sector except for employees who earn less that £21,000 a year.

James Browne, IFS research economist, said: “If you look at reforms due to be introduced in 2013 and 2014, they hit the poorest hardest and indeed keep on hitting them more and more every year.” Mr Chote added that “looming cuts to public services… are likely to hit poorer households significantly harder than richer households”.

Prime Minister David Cameron said: “In this emergency Budget I believe you have the measure of this government. “Will it provoke debate? Certainly. Will it cost our coalition some popularity? Possibly. But is this the right thing to do – for the health of our economy, for the poorest in our society, for the future of our country? I passionately believe it is.”
This Budget will be remembered for a long time to come. Let’s hope its for the right reasons.

This was a guest post by ‘Young Economist.’ Check out his blog for more like this!

Prepare for Economics and Management interviews at Oxford and Cambridge

oxbridge interview studentsIntroduction to Oxbridge interview preparation

Ok, so you’ve got the  best part of another month at least to prepare for interviews – great that’s loads of time! I only started a week before mine (albeit during the half-term holidays when I had not much else on my plate). Unless the world of Economics at University has changed drastically in a year, it is only Oxford and Cambridge (Oxbridge) that interview so this article will be tailored to Oxbridge interviews, but could make for useful reading regardless of where/what your interview is for.

Let’s begin.

First things first – get some sort of exercise book – buy one, make one, steal one from school, whatever will do.

For Oxbridge candidates who have applied to a certain college (i.e. not an open application), have a look at who your tutors are (Google them) and see where their interests lie. It’s highly probable that they will ask you questions based on their research interests. If you can, skim through a few of their papers too but don’t worry if you don’t understand it all (especially economics which will be filled with ugly looking algebraic stuff) – I certainly didn’t/possibly still wouldn’t understand it all. Just jot down a few points in your purchased/hand-made/stolen exercise book about what these research interests are. Don’t go overboard, you don’t want to know every single thing about them. I only had 3 points (i.e. no more than 4 words per point) for each (of two) tutors.

There’s no set structure but the next thing I’ve got written down is some information about a society that I was really looking to join. Again, only about 5 points but enough to be able to talk about what the society did (guest speakers, workshops, networking events etc.) and why I wanted to join. I didn’t really get a chance to speak about this in interviews but definitely think it’s worth doing.

The different aspects of an Oxbridge interview

I then decided I’d have a double page spread reserved for jotting down any interview questions I thought up and to think about how I’d answer them. This was subdivided into 4 categories – University/College choice, the course, subject matter/academic Qs, Me. (Luckily) For me, there were no questions in section one asked during my interview (i.e. why I picked that particular university and college). As you can probably tell, I’m quite a lazy person so I only had 1 question under section 2 – “What do you want to gain from this course?” This was pretty much me imaging where I wanted to be after graduation and what skills I would have in that position – question answered. Not wanting to break the whole lazy thing, I had nothing under the 3rd question but hopefully the rest of this website (hint: The Economist articles discussion) should give you an idea about this. Finally, under the 4th category of ‘Me’ there were 3 questions that I thought up  – future ambitions, A-Level subject choice and what I can give back to the university. These were pretty easy since my personal statement covered all 3 so it was just a matter of elaborating on this trying to think up a joke or two I could use if any of these questions were asked. (Un)fortunately, they weren’t.

Next up, I had almost a full page (most writing I’d done on any single topic!) about the course – the structure, modules, choices and this helped me formulate a general idea of what elective/optional modules I would take come second year. Again, it wasn’t asked directly in interviews but I’m sure it helped in one way or another. Also, rather cheekily, I lifted out some quotes from the prospectus to give me an idea of what they (the university) thought the course would deliver.

Current events and philosophical questions in management and economics

Next, we get onto the real juicy stuff. Current events, recent developments and some more fundamental, almost philosophical questions.

Page 1 – I thought I’d write about an article I’d read in The Economist about a psychologist called Simone Schnalle who claimed to have found that ‘washing with soap and water makes people view unethical activities as more acceptable’. (Don’t ask, Google if you wish.)

Page 2 – Hotly debated current event: BANKERS PAY! The main thing here is to get both sides of the argument down and form some sort of opinion. I won’t go into the specifics of for/against but the conclusion I came up with was “Very political – during crises people want to be able to point finger at 1 group and this bankers have got the short end of stick…” then words to the effect of: politicians chirping in and fueling anger towards bankers, could just as easily blame US mortgage salesmen/mortgage holders and so on, very rough but you get the idea. If you want to learn more, see the Econ At Uni briefing on bankers’ and executive pay.

Relating books and theory to your interview preparation

If you’re at all an avid reader of Econ@Uni, you’ll know that I’ve written about Malcolm Gladwell’s ‘The Tipping Point’ quite often. I really liked his 3 rules so thought I’d think about these for a bit: Law of the few and Stickiness Factor and the Power of Context (read the book, if not, Wikipedia it to find out more). I also copied out a paragraph referring to a type of person he termed a ‘Maven’, just for the sheer fun of it… (Apologies for the unconventional language, but speaking formally does get rather boring after a while). Oh and also because I thought that this would be relevant to mention (you’ll probably understand this only if you’ve read the book). Oh, speaking of books, you’ll notice a shiny new thingy on the right hand side of this post showing you books I personally recommend reading for all prospective economics applicants. I’ve actually read (or am in the middle of reading) all of these books and these are personal recommendations – you can see why by reading the comments underneath each one.

What is economics? What is management? Etc.

Next, I have the heading “What is/why economics?” It doesn’t make a lot of sense but I’m sure you can extract some sort of meaningfulness from it. Here, I’d actually just written the traditional definition (allocation of resources etc.) and below written the Freakonomics definition (i.e. science that provides necessary tools to answer ‘interesting questions’). Obviously these are my ideas and interpretations and I don’t really care if you copy them, but it’ll be a lot better if you can come up with your own. :)

Ah, then the topic I used to love discussing shouting about in economics lessons – what other than MONOPOLIES! :O

For this, I’d had some basic ideas (I’m the only person in the class who didn’t have an irrational hatred for big companies by the way) about why they weren’t always bad. Then I went on the internet to get some examples and theories to back up my ideas/opinions. To cut a long story short, my view was that generally the goodness/badness of a monopoly depends on how the monopoly was created. Political ones (e.g. Deutsche Post – they tried to increase German minimum wage for postal workers, this is an interesting case so research it if you want and then try and justify the actions taken by DP and rivals using some of the economics you’ve learnt – hint: costs) are bad and economic ones are good. Obviously this isn’t a coherent argument and leaves lots left to be discussed but this is good- as long as you’re prepared to discuss it and add weight to your opinion.

Oh wow, that’s it. The rest of the book is devoted to maths practice. Speaking of which, basic probability, logarithms, geometric/arithmetic sequences, calculus are worth running through – you won’t have done them all in huge depth but make sure you know what you have done pretty well if you can).

A quick note – a lot of the stuff I wrote about didn’t come up at all in any of my (4) interviews and the chances of the exact stuff you prepare coming up are unlikely too. There is a lot you can do to control the path of the discussion but don’t worry if you don’t speak about any of topics you prepare, looking back I don’t think I really did. However, it’ll probably do wonders for you mentally to have that feeling of being prepared so it’s worth it just for that if nothing else.

Feeling ready to have a go at a mock interview? Or perhaps you might benefit from some interview practice and mentoring? Once you’re done, make sure you can answer these 20 possible interview questions for economics and management.

Personal Statement, a Prelude.

From the poll on the website, it looks like everyone is starting to build their personal statement and some even claim it’s starting to take shape already! I’ll try and avoid the general jibber jabber that every single personal statement guide seems to have and try and keep it all as relevant as possible to the situation you’re in as an economics (and/or management, PPE, psychology and so on…) applicant but before that I’ll just lay down the basics.

The personal statement is perhaps the most time consuming part of the UCAS form to fill in. You’ll most likely have several (around 3-6) drafts before you even copy it onto UCAS Apply, so it makes sense to start it in Word/your word processor of choice (OpenOffice, anyone?) and only copy it online once you’re fairly sure it’s nearly done. The limits are strict – 47 lines or 4,000 characters (including spaces) – and the figures your word processor will show for lines aren’t going to correspond with those in your UCAS form as font size/type is different.

This will be, for most universities, the most important determinant of how strong your application is going to be so it needs to be good. Really, really good! So start working on it early and draft and re-draft taking into account the suggestions you receive (but at the same time, remember this is your personal statement and you don’t have to follow all of the advice you get).

There are lots people you can ask to review you personal statement – teachers, friends (at school or uni – even those applying in the same cycle as you… though be careful if it’s for a similar course!), parents are the obvious ones but parents’ colleagues can offer fresh advice from a non-academic point of view and as people who perhaps won’t know you so well (similar to admissions tutors). Anyone dealing with job applications on a regular basis is great too – you’ll get different ideas from different people; the things your economics teacher might pick up on are probably going to be different to the things your parents might pick on so it’s great to have it looked at by people from various backgrounds.

The deadline for Oxford and Cambridge applicants is October 15th and for the rest it’s in January. However, regardless of where you’re applying it does help to get it in early, not least because you’ll be waiting for a shorter period of time and it always feels great to get an offer in the bag early on! I’d recommend setting a personal deadline of mid-November at the latest.

Ok, now down the nitty gritty…

How should I go about it?

I’d first start by gathering the stuff you’ll write about – certificates, articles, things you’ve written (however petty), work experience details etc.

If you already have made a CV, this will make this a lot easier although the personal statement is very different to a CV in that dates are usually not needed, and a certain level of depth rather than breadth is needed to demonstrate that you  have an interest in the subject and what particular areas of the subject you’re most interested in.

For the first draft, don’t worry about the space limits, write anything and everything you can think of – there’ll be lots of irrelevant/waffly bits that you can remove or cut down on later.

It can be pretty daunting at first when faced with the task of writing your personal statement. It often helps to look at the type of things people have written about and how they’ve written about them by looking at personal statements such as the ones on Studential (link for Economics and Management). When going through each personal statement look at what and how points have been made and more importantly, look at the what you liked and what you didn’t like. Make (mental) notes on the positive and negative aspects of the statements you read so that you can identify and replicate this in your own personal statement.

Also remember that while everything else matters too, the introduction is of great importance so start thinking about these especially. If you can, start with something unique to you, something that will make the tutor go “mm?” and take of his/her reading glasses (in a good way :D). While on this topic, it’s important to end strongly too. This post will be followed by one that focuses more on the specifics of what rather than how to go about writing alongside some proper personal statement dissection – so I’ll leave you with one final thought…

What sets you apart from all the other applicants for that course/uni?

Reading The Economist, the FT or the Times doesn’t do this. Neither does saying you’ve read The Undercover Economist or Freakonomics. In fact, your work experience in itself probably won’t either.

What matters is how you write about what you (and specifically you – not in general terms!) gained from either of these activities. It also shows tutors that you’re ‘switched on’ and your work experience isn’t just for the sake of ticking that box but that you have a real interest.

That’s all folks. When you’re ready move on to the next article in the personal statement writing series which dissects the structure of a personal statement. And download the Personal Statement Guide (currently on sale!) before you start writing.

I’m an economist, get me out of here! (Discussion)

The past 30 years of macroeconomics training at American and British universities were a “costly waste of time”.

Melting Economist Text Book

Melting Economics Text Book

Says an article in The Economist quoting Willem Buiter of the LSE. One would hope that Mr Buiter was either having a bit of a laugh or was slightly intoxicated when that was said, but somehow I’m doubtful. This article is perhaps a bit late – based on articles in the July 18th – 24th issue of The Economist, but in the grand scheme of things, a fortnight and a bit hasn’t changed anything. If at all, it’s given time for everything to sink in. Before proceeding, I strongly recommend you read all 3 cover articles in this issue. The 2 main articles forming the basis for discussion can be found online here: (read them!)
What went wrong with economics?

The other-worldly philosophers

Not only do these articles raise questions that you might well be asked in an interview or wish to  pose yourself in your personal statement but they’re also relevant to the macroeconomics you’ll be learning, examining the way central banks make decisions and referring to concepts such as the Phillips curve and the variations between the Classical or Monetarist and Keynesian approaches. It’s also a great basis for undertaking further research. I’ll be the first to admit that macroeconomics isn’t my favouritest bit of economics, yet it’s still really interesting and (dare I say it) fun to delve deeper than the usual classroom stuff. I’ll first cover the basics of what the articles said and then raise some points for discussion.
Continue reading ‘I’m an economist, get me out of here! (Discussion)’ »

Stuff to Read (12 Aug 2009)

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A fortnightly post is going to be made providing links to other websites which have stuff worth reading in terms of extension of classroom work as well as to keep up to date with current issues for those who will be writing their personal statement or preparing for interviews. If you’d like to suggest a link, you can do so by letting us know through the Contact page. We’re also looking for someone who will do this regularly!

This time round there’s an article on Singapore’s highly praised (from an economic viewpoint at least) health system, an article which appeared in The Economist magazine about debt and borrowing and for the more business-minded; a little bit about how to go about doing the numbers behind an iPhone app.

1. The Singapore Healthcare Model –  You may be familiar with this after reading a bit about it in Tim Harford’s book The Undercover Economist. This article delves a little deeper into the way the Singapore health system, which is said to be amongst the most efficient, works and hwo a combination of public and private funding helps provide a marketplace with more competition and hence greater quality of produce at reasonable prices.

2. Public Debt and dealing with the financial mess –  This one’s quite significant politically as well as economically. With quite significant deficits already built up, is increasing spending further through loose fiscal and monetary policies going to be prudent? If yes, how will this be funded and what will the consequences be? If not, what do you suggest instead? This article examines the dilemma and proposes various actions that should help. Complements the A-Level syllabus nicely!

3. Working out the potential for an iPhone app –  It’s interesting to see how the author calculates the likely demand for an iPhone app. Apps have been said by some experts to be ‘as big as the internet’… perhaps a bit of an exaggeration depending on how you look at it but you get an idea of just how big it’s thought they’ll become. The article uses some numbers too, something that both economics and business studies A-Level students don’t really seem to do much!

It’s summer! What should I read?

If I’d had a pound (or dollar if there’s any yanks about) everytime I had been asked that question, I’d have enough to buy… er, some sellotape or something. Nevertheless, a few people have asked, so here goes!

Undercover Economist (Tim Harford)

This book is probably read by the majority of economics applicants. Nevertheless, it’s definitely worth reading, not only because it supports the A-Level syllabus almost perfectly providing examples and the history of many topics you’ll study but also because it really is an enjoyable read.As well as bringing economics to life it’s a great for those of you wanting a taster of what economics is really like (outside of the classroom) and for management or business students who aren’t doing economics for A-level.

As with most books, you’ll find a Contents page at the front. Don’t read it at face value though, being an economics student, this is how you should read it:

1. Who Pays for your Coffee? Introduction to attract the reader and lay out the basics featuring David Ricardo (remember that name)
2. What Supermarkets Don’t Want You to Know. Price discrimination, elasticity of demand and contestability
3. Perfect Markets and the ‘World of Truth’. Perfect Markets and (Elasticity of) Supply
4. Crosstown Traffic. Externalities, Market and Government Failure
5. The Inside Story. Symmetry of Information (Akerloff’s Lemons), Govt. Intervention
6. Rational Insanity. Ok, there’s no direct links to your studies here, but still a great chapter. Read it!
7. The Men Who Knew the Value of Nothing. Game Theory! (Microecon) – Read about the UK 3G license auctions, many questions on mobile companies have been set in the past (on the WJEC board at least) and it’s good to have background knowledge of this.
8. Why Poor Countries are Poor. Developmental Economics (Trade, Aid, Entrepreneurship…)
9. Beer, Chips and Globalisation. Globalisation (duh..), Ricardo’s theory of comparative (and absolute) advantage and specialisation, Types of Economies, Free Trade/Protectionism, CAP (Common Agricultural Policy) [ex. of market failure]
10. How China Grew Rich. Great chapter if you’re doing geography, but also: Incentives, the softer side of the dismal science.

So there you have it! That’s probably all of your economics syllabus covered in one book. This is one of the few books I’d actually recommend buying as after reading it now, you’re likely to want to come back to it and use some of its examples and case studies in your exams when the time comes. I did!

If you’ve finished the book, check out www.timharford.com and also his new book ‘The Logic of Life’.

Freakonomics (Stephen Dubner, Steven Levitt)

If you’re thinking Freakonomics is just like The Undercover Economist, think again! (Perhaps the only similarity is they both refer to Sudhir Venkatesh and his research in deprived neighbourhoods in the US).

You’ll struggle to find links to your studies when reading Freakonomics, but that’s not necessarily a bad thing. Many would disagree, but I found it a refreshing read which shows the wide-reaching uses of economics and economic tools. You’ll find nothing about the economy in this book but you will learn stuff about names, sumo wrestlers, how the KKK worked and more. For this reason, it’s hard to say what the book is really about – perhaps you could say it takes two variables and investigates any links and determines if the variables are causally (one causes the other as opposed to the link just occurring by chance) related.

There’s a strong American slant to the book with a lot of stories/chapters being based in America which, for students in the UK at least, may be seen to be less relevant. So this book doesn’t link in with studies, but what it does do is that it introduces the economic way of thought and once again is a fun read.

Read it, but if time’s short, read the Undercover Economist first. For further reading, check out the Freakonomics blog where you’ll find some fresh content, sometimes written by Levitt and Dubner themselves.

Thinking Strategically (Avinash Dixit, Barry Nalebuff)

Just a quick mention of Thinking Strategically. I haven’t had the chance to finish it yet and it’s a lot more involved (matematically – requires you to think a bit more if you want to understand it properly) than the previous two books but it’s been recommended by many people when asked to suggest something that’s a good introduction to game theory.

It’s not one of those books you can read half asleep in bed (at least, not for me) if you want to get the most out of it. But if you’ve already read The Undercover Economist and Freakonomics and have an interest in game theory, it probably the next logical step.

The Tipping Point (Malcolm Gladwell)

It’s been a few years since I read this book but it’s main points are still engraved in my brain. First of all, it’s a psychology book. I’m not sure how many behavioural economists are out there, but on the whole, this is likely to be of more interest to those wishing to study an economics course that’s more on the business side or management. It’ll also be interesting (presumably) for sociology and psychology students.

The book covers a large range of topics from abortions (Roe vs Wade, also touched on in Freakonomics) to Sesame Street and educational programs for children to different types of people (Connectors, Mavens and Salesmen if I remember correctly). However, for me, the highlight of the book is the chapter on Hush Puppies marketing campaign undertaken by the firm Lambesis and how a small firm’s product spread like wildfire. There’s also the theory about ‘The Law of the Few.’ Check out the Wikipedia article about it if you’re not convinced it’s for you – it offers a pretty in-depth summary of the book.

On a side not, Gladwell’s new book called ‘Outliers’ is out now too. I haven’t had a chance to read it yet, but it’s on my list. Will let you know what it’s like.

Hope you enjoy reading all that! Also - read books on the basis of you liking what it's about and finding out more - not on the basis of being able to list it's title in your personal statement - many peple will have read the first, maybe first two but the last one especially could give you some unique ideas which if you feel necessary, can be used as a point for discussion in interviews or your personal statement. If you've already read these books, fear not! In the next few days, I'll point you to some websites worth frequenting!

Considering Oxbridge? PodOxford and Cam Interview Vids

Just a quick post to make you aware of some pretty useful resources if you haven’t already come across them.

The PodOxford website which currently has 12 podcasts ready to download. In particular, you’ll want to take a look at the following:

  1. Undergraduate Admissions which covers topics like “Is Oxford for me?”; tutors giving application tips; interview explanations and international applications guidance.
  2. Economics Department podcasts, in particular there are some nice neat topics discussed such as “Is public housing a public bad?”
  3. Said Business School podcasts for any Management (MBA, Economics & Management etc.) applicants out there.

The Economics Department and Said Business School podcasts are at a relatively advanced level so don’t worry if you don’t understand everything being discussed. However, be sure to listen to the Personal Statement and the ‘Tutors give Tips’ podcasts.

Even if you can’t listen to them all now, just dump a few on your MP3 Player and listen to them whenever you have the urge/time/get bored because of a lack of new One Direction songs.

And what about Cambridge?

Last but not least watch the interview videos on Emmanuel College’s (Cambridge) website. There aren’t any for economics, management, geography, psychology and similar. However, you’ll get a good idea of what your interview setting is going to be like, how the tutors speak and assess the way you think and so on.

Crisis Of Credit Visualised Video

This video by Johanthan Jarvis is great for those of you who want to find out more about what’s been in the news and in magazines such as The Economist in regards to subprime mortgages and takes a not too intense look at recent events. It doesn’t cover everything but is worth watching as you’re probably going to pick up at least a few new things in the process.

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.