20th July 2026
What is fiscal policy, and why does it matter?
Fiscal policy is one of the government’s most powerful economic tools, yet it is also one of the least understood. Fiscal policy is the process of managing the difference between government spending and its tax revenue for the benefit of society. That means that every debate about taxation, public spending, inflation, public services and economic growth is really a debate about fiscal policy, but few people ever explain what it actually is.
In this video, I explain fiscal policy from first principles. I show what fiscal policy is, how government spending is authorised, why taxation plays a very different role from the one most people imagine, and how fiscal policy shapes employment, inflation, inequality, investment and economic well-being.
I also explain why fiscal policy is about far more than balancing budgets. Good fiscal policy is about using the government’s financial powers to mobilise the real people, skills, and resources available within the economy to achieve the best benefit for society. That means fiscal policy should support full employment, strong public services, economic security, environmental sustainability and rising living standards while keeping inflation under control.
This is the first video in a short series. The next will explain monetary policy before examining how fiscal policy and monetary policy should work together instead of frequently pulling in opposite directions.
If you want to understand how fiscal policy really works, and why it should be at the centre of economic debate, this video is for you.