Crib sheet 6: Treasury Flashcards
What does the Treasury do?
The most senior minister in the Treasury is the Chancellor of the Exchequer (Jeremy Hunt).
He controls fiscal policy: tax and spending.
Controls national debt.
Responsible for managing unemployment and inflation.
Where does government money come from?
Direct taxes: based on income. Taken directly from salaries such as income tax and national insurance, company taxes like corporation tax and capital gains tax. They are progressive because they are based on ability to pay.
Indirect taxes are based on consumption like sales tax, green tax on energy bills, alcohol, tobacco and fuel duty.
They are regressive as they are not based on ability to pay.
What is debt, surplus and deficit?
Annual deficit: The difference between what the government spends and takes in revenue if it spends more than it takes in revenue.
Annual surplus: If the government takes more in revenue than spends, difference is the surplus.
Debt: The accumulation of all the annual deficits.
What are rating agencies
They give countries ratings based on their abiliy to pay debt back. Lenders use these to set interest rates to various countries.
What are the spending departments from most spending to least?
Health and social care
Pensions
Welfare
Education
Debt interest
Defence
The Budget
Each year the Chancellor makes a Budget Speech to the House of Commons.
He reports on the performance of the economy over the previous 12 months
He gives the outlook for the next 12 months
He sets out plans for taxes and spending
Proceeded in the autumn by the Autumn Statement
Every three years the Chancellor also publishes a Comprehensivr Spending recview giving plans over a longer period
Accompanied by a finance act to implement the Chancellor’s plans
What is The Office of Budget Responsibiity
Was set up in 2010 by George Osborne
Responsible for economic forecasts
Politically neutral, independent of government
Bank of England is responsible for monetary policy- setting interest rates
Monetary Policy Committee of the Bank of England- group of nine economists who set interest rates
Quantitive Easing- The bank of England buys bonds from retail banks to increase fluidity and reduce lending costs for individuals and industry.
What is Gross Domestic Product?
The market value of all the goods and services produced by a country
What is Recession?
Two successive quarters when the economy (GDP) shrinks
Growth
when GDP rises, increasing employment and prosperity
Inflation
Increase in prices and fall in purchasing value of money
Consumer price index/ retail price index
measures of inflation using a basket of about 650 items
Balance of Trade
difference in value between total imports and total exports.
