The Treasury Flashcards
What is the name of the most senior minister in the Treasury?
The Chancellor of the Exchequer
What is the name of the policy controlled by this minister?
Fiscal policy
What does this minister control?
The national debt
Which further 2 things is he responsible for?
Unemployment and inflation
Which two types of tax does government money come from and what do they include?
- Direct taxes –taxes on income - includes taxes taken directly from salaries such as income tax and national insurance, plus company taxes such as corporation tax (a tax on company profits) and capital gains tax (a tax on certain items if there has been an increase in value)
- Indirect taxes are based on consumption and include such things as sales tax (VAT), alcohol, fuel and tobacco duty, green taxes on energy bills.
Which one is considered progressive and which regressive and why?
Direct taxes are said to be progressive, in that they are based on the ability to pay – the rich pay more than the poor.
Indirect taxes are said to be regressive, in that they are not based on the ability to pay and the poor pay the same as the rich.
What is the annual government deficit?
If a government spends more than it takes in revenue, the difference between the two figures is the annual deficit.
Think of the deficit as a bit like an overdraft from your bank or spending on your credit card
What is the annual surplus?
If the government takes in revenue more than it spends, the difference between the two is the annual surplus.
What is government debt?
The debt is the accumulation of all the annual deficits.
Think of the debt as a bit like a mortgage that includes all the money that you owe.
What do ratings agencies do?
Give countries a rating based on their ability to pay the debt back.
How do lenders use these ratings?
Lenders use these ratings to set interest rates to various countries (the UK currently has the top AAA rating so we can borrow money comparatively cheaply)
What had the biggest negative impact on public finances since the Second World War and how? What is the result?
The Covid-19 pandemic.
Government revenue (from taxes) declined while spending shot up, on support measures such as the furlough scheme.
As a result the tax burden on British workers has increased to its highest level since the 1950s
Which 6 departments have the highest spending?
- Health and social care - £211bn
- Pensions - £141bn
- Welfare - £117bn
- Education - £105bn
- Debt interest - £112bn
- Defence - £55bn
Which 6 areas bring in the highest revenue?
- Income Tax and National Insurance - £428bn
- VAT - £162bn
- Excise duties (on petrol, alcohol, tobacco) - £47bn
- Corporation tax (on company profits) - £86bn
- Council Tax - £42bn
- Business rates - £25bn
What is the Budget Speech and which 3 things does it entail?
An annual speech by the Chancellor to the House of Commons.
The Chancellor:
1. reports on the performance of the economy over the previous 12 months
- gives the outlook for the next 12 months
- sets out plans for taxes and spending.
