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R01 - Financial Services, Regulation and Ethics > Chapter 1E - The Role of Government > Flashcards

Chapter 1E - The Role of Government Flashcards

1
Q

What are the main economic effects of high taxation?

A
  • reduces the ability of consumers to spend and businesses to invest
  • slows down growth in the private sector
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2
Q

What are the main economic effects of low taxation?

A
  • more money available for private spending and commercial investment
  • stimulates economic activity
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3
Q

What is are the primary and secondary aims of taxation?

A
  • raise money for Government

- re-distribute wealth from rich to poor via welfare and NHS (depending on the party in power)

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4
Q

What products are currently encouraged with tax concessions?

A
  • pension schemes
  • ISAs
  • certain life assurance policies
  • friendly society saving plans
  • gains on directly held gilts and corporate bonds
  • certain NS&I products
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5
Q

True or False: Adding or removing tax concessions influences investment strategy.

A

True

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6
Q

During 2018, how many first time buyers purchased property in the UK?

A

175,500

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7
Q

What additional % of Stamp Duty Land Tax (SDLT) is applied to second homes?

A

3%

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8
Q

How does taxation affect an advisers’ recommendation to different clients?

A

Different products taxed in different ways to appeal to different classes of people

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9
Q

What is Economic Policy?

A

Government proposal for expenditure, borrowing and interest rates
designed to help the economy

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10
Q

What does Fiscal Policy cover?

A

taxation, borrowing and government spending

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11
Q

What does Monetary Policy cover?

A

interest rates and money supply

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12
Q

Whilst the Chancellor defines levels for government spending and borrowing, who controls interest rates?

A

Monetary Policy Committee (MPC)

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13
Q

How does government spending affect the economy different to tax cuts?

A

Tax cuts could be spent outside of UK, spending can be controlled within

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14
Q

How does government borrowing affect the wider economy?

A

government borrowing reduces money in circulation

when repaid, this injects liquidity and stimulates economic activity

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15
Q

What is quantitative easing?

A

government buys back gilts and bonds from the financial sector to increase liquidity and stabilise

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16
Q

What are the two examples of large Quantitative Easing in UK history?

A

The 2007/08 banking crisis and the 2020 COVID-19 pandemic

17
Q

What does the Gilt Repo Market do?

A

influence short-term interest rates

18
Q

How many members are on the Monetary Policy Committee (MPC)?
How many external members?
How many times per year do they meet?

A
  • 9
  • 4
  • 8
19
Q

Why does the Monetary Policy Committee (MPC) have external members?

A

To benefit from wider thinking and expertise than just BoE

20
Q

Why do the Monetary Policy Committee (MPC) confirm the Interest Rates?

A

To ensure it is not used for political manipulation

21
Q

What happened to interest rates during the COVID 19 pandemic?

A

lowest ever rate 0.1

help with economic shock

22
Q

When was the Bank of England founded?

A

1694

23
Q

Other than interest rates, what can be used to control the economy?

A

taxation, spending and borrowing

24
Q

What does the UK welfare system cover?

A
  • NHS
  • sickness and disability
  • unemployment
  • tax credits
  • State Pension
  • pension credits
  • NHS funded nursing
25
Q

True or False: The State’s level of welfare provision has increased in recent years.

A

False, it has decreased

26
Q

What is the DWP?

A

Department for Work and Pensions

27
Q

True or False: There is a mounting body of evidence that points to a future pensions crisis?

A

True

28
Q

When did the UK move to the ‘new State Pension’?

A

April 2016

29
Q

How many years’ of NI contributions are the minimum and maximum considered under new State Pension?

A

Minimum 10 years, maximum 35 years

30
Q

In what 3 ways did the government stimulate private pension uptake?

A

Pension Freedoms
Auto-Enrolment
National Employment Savings Trust (NEST)

31
Q

Government actions like the removal of dividend credits and changes to accounting regulations have caused closures and changes to the benefits of what kind of pension?

A

Final Salary (Defined Benefit)

32
Q

True or False: Tax relief on Social Care contributions makes it appealing for families to sell the family home in order to fund care?

A

False - There is a distinct lack of any favourable tax relief

33
Q

What will be the main effect of the UK’s ageing population?

A

Less future taxpayers to support those retired or on benefits

34
Q

What four further actions could be considered to relieve the aging population issue further?

A
  • More compulsory pension laws
  • Compulsory medical insurance
  • Tax breaks for health insurance, medical insurance or long-term care
  • More increases to State Pension Age

R01 - Financial Services, Regulation and Ethics (10 decks)

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