FinancialAdvice.co.uk Logo

Qualified advisers answering your
Financial Questions
call 0800 092 1245

What is a fiscal policy?

All of the recent talk has been about the government's fiscal policy going forward, but what exactly is a fiscal policy and how can it affect the UK economy?



In simple terms a fiscal policy is the balance between government taxation received from the population and government spending on public services. The balance between these two figures will determine exactly what type of fiscal policy the government has implemented.



A neutral stance



As the term suggests, a neutral fiscal policy would see government spending broadly equal to the taxation income received from the population. This means that government debt will remain unchanged and public services financed wholly from taxation receipts.



An expansionary stance



This is the situation whereby government spending is higher than taxation income, similar to the situation we are seeing today. Often referred to along with terms such as "budget deficit", an expansionary fiscal policy will see an increase in government debt.



A contractionary fiscal policy



A contractionary fiscal policy is determined when government expenditure is less than taxation income and often mentioned in the same breath as the term "budget surplus". A contractionary policy will allow the government to either maintain a surplus or repay part or all of any outstanding government debt.

Share this..

Related stories

Financial Guides

Financial Calculators

Our useful calculators can help you get your finances in order:



Latest News

Blogs

Helpful new tax year facts that could affect you and your money


Blog | Seven helpful new 2016/2017 tax year facts that could affect you and your money. Our recent online blog shares a brief outline on how to stay up to date.


Read more

Useful Links

Popular Searches

Please Enter More Details

 
Enter More Details
Continue