Economy and local gov finance Flashcards
What is The Treasury?
- The Whitehall department that controls the nation’s “purse strings”
- The developer and guardian of gov spending
Who is in charge of The Treasury?
-Rishi Sunak- Chief Finance Minister is Chancellor of the Exchequer
Who is the Chief Sec of the Treasury?
Simon Clarke MP
What is the OBR? (Office for Budget Responsibility)
- Independent of the Treasury
- Provides independent economic data on the state of the economy
- Gives an independent view on whether the gov’s economic plans will achieve their aims
- Ensures gov budget figures are accurate and not being manipulated for political ends
What is the Bank of England?
- Britain’s central bank
- Manages money supply- quantitative easing
- Sets interest rates
- Governor- Andrew Bailey
What are the gov’s responsibilities when it comes to the economy?
- Taxation
- Manages national debt and deficit
- Promoting economic growth
- Controlling domestic inflation and unemployment
- Allocating cash to spend on services the government is responsible
What did the Chancellor say he wanted to do in the new budget?
- To finalise spending plans, a review of the economic policy, medium-term forecasts as well as gov spending plans and taxation changes
- Aims to control inflation, reduce unemployment, stimulate growth and encourage exports in investment
- Presented in parliament and passed Finance Act
What are direct taxes?
They are levied on the income and earnings of individuals and companies
What are indirect taxes?
Paid on expenditure when buying goods and services e.g VAT or alcohol
What is the spending review?
Sets out the total amount of money the gov plans to spend on departments and public services over three years- 2021 budget also included a spending review
What is inflation?
The rate at which prices of a given basket of good rise
What is GDP? (Gross Domestic Product)
Value of goods and services produced in the UK
What is GNP? (Gross National Product)
Value of goods and service produces by UK firms
What is National Debt?
How much the nation owes to creditors
What is the deficit?
Difference between cash raised by gov and cash spent on services and interest on borrowing
How much of all public spending is spent by local gov?
A quarter
Where does the money for local councils come from?
- Roughly half of the money comes from grants
- Half comes from money raised locally by the council
How much was the reduction in “core gov funding” from 2010-15 according to the LGA?
40%
Local Gov Association
LGA welcomed new grant funding in the 2021 spending review but says more is needed for adult social care and public health
What are the two types of council spending?
Capital and revenue
What is capital spending?
- For buildings and other long-term projects
- For this councils borrow money
What is revenue spending?
-Spending on day-to-day expenditure- salaries, maintenance, and upkeep of property and services etc
What are the current revenue sources?
- Council tax
- Formula grants
- Non-domestic rates
What is council tax?
Contains a mixture of charges on the market value of the property AND on the no. of people living in it
Who is council tax levied by?
Charging authorities- District Councils, Met Districts, London Boroughs and Unitaries
Who’s exempt from council tax?-
- Children under 18
- People on some apprentice schemes
- 18 and 19-year-olds in full-time education
- Full time college and uni students
- Student nurses
- People with a severe mental impairment
- Live-in carers who look after someone who isn’t their partner, spouse or child
- Diplomats
Describe formula grants
- These are administered by the Department for Local Communities and Local Gov (DCLG)
- There are no restrictions on what local gov can spend this on
- Specific grants aren’t part of the annual settlement, but are usually announced by the DCLG at about the same time
- This does NOT include the Dedicated Schools Grant, which is the main funding for schools
How do councils set council tax?
- To spend more money on services a council can raise its council tax
- But if it wants to raise council tax by more than 2% its required to hold a local referendum
- On top of that councils are allowed to increase council tax by up to 3% to pay for social care
What are non-domestic rates?
Property tax paid by the occupiers of commercial and industrial properties, is set by central gov and collected by local council
Which non-domestic properties don’t pay the business rates?
- Agricultural land and buildings
- Fish farms
- Churches
Sunak announced business rate discounts up to 50% up to a max of 100k, who benefited?
- Pubs
- Music venues
- Cinemas
- Restaurants
- Hotels
- Theatres
- Gyms
How else do local authorities also raise money for services?
- Rent
- Planning/building permission
- Recreation/leisure facilities
- Burials
- Car parking
- They may also be earning interest on balances and reserves
What is capital expenditure?
Spending on items which will last a long time
What is capital expenditure?
Spending on items which will last a long time
What are sources of capital funding?
- Capital receipts (money raised from selling other assets)
- Capital grants (from central gov) e.g Neighbourhood Renewal Fund (from Europe) e.g European Regional Development Fund
- Private sector money e.g Private Finance Initiative
When did funding to local gov by central gov start to reduce?
2011
