Treasury And Economics Flashcards
Who is the most senior minister in the treasury?
Chancellor of the Exchequer who is currently Rishi Sunak
What does the chancellor the the exchequer control and responsible for managing? (3)
1) Fiscal policy - which is tax and spending
2) National debt
3) responsible for managing unemployment and inflation
Where does government money come from?
Tax
Direct Tax
And Indirect Tax
What is Direct and indirect tax?
Direct tax - tax as income, included those take from salaries, such as income tax and national insurance. Plus company taxes such as corporation tax (tax on company profits) and capital tax gains (tax on certain items if there has been an increase in value)
Indirect tax - based on consumption, include things like tax sales (VAT) alcohol, fuel, tobacco duty, green taxes on energy bills
What is said about direct and indirect tax
1) direct tax is seen as progressive, in that they are based on ability to pay - rich pay more than poor
2) indirect tax said to be regressive - not based on ability to pay, poor pay same as rich
What is
1) Deficit
2) Debt
1) If the gov spends more than it takes in revenue, difference between the two is the annual deficit
2) The debt is the accumulation of all the deficits
How much did gov spend in 2010 and how much will it approx spend in 2020/21?
1) 2010 - £672bn
2) 2020 - £848bn
What will gov revenue (mainly tax receipts) be in 2020/21?
£811bn, which is a annual deficit of £37bn, which will need to be borrowed
Spending is increasing
If adding all deficits, what is country’s current debt?
£1.9 trillion and rising
How do lenders set interest rates to different countries?
Use rating agencies like Standards and Poors, which give countries a rating based on their ability to pay debt back.
How much does UK pay in interest payments per year?
£50bn
What is UKs interest rating?
AAA - which is top rating, so we can borrow money relatively cheap
What are the spending departments? (8)
1) Health - £161bn
2) Pensions and sickness benefits - £162bn
3) Welfare - £126bn
4) Education - £91bn
5) Debt interest - £51bn
6) Defence - £50bn
7) public order - £33bn
8) Transport - £35bn
Where the money comes from? (8)
1) Income tax
2) NI
3) VAT
4) Exercise duties (petrol, alcohol, tobacco)
5) Corporation tax
6) Council tax
7) businesses rates
8) borrowing
What is the budget?
Each autumn chancellor makes budget speech to HOC
Reports on performance of economy over last 12 months
Gives outlook for next 12 months
Sets out plans for spending and taxes
This is preceded by Spring Statment
What does the chancellor publish every 3 years?
Comprehensive spending review giving plans over a longer period, every 3 years
What is the budget accompanied by?
A Finance Act to implement the chancellors plans
When was Office of Budget Responsibility set up and by who?
2010 by George Osborn
What is Office of budget responsibility responsible for?
Economic forecasts
What is the Office of budget responsibility political stance
Nothing, neutral
Independent from gov
What is the Bank of England responsible for?
Monetary policing - setting interest rates
Who sets the interest rates, how many people, what is the groups name?
1) The monetary policing committee of the Bank of England
2) 9 economists set interest rates
What is quantitive easing?
When BOE buys bonds from retail banks to increase liquidity (amount of money available) and reduce lending costs to industries and individuals
What is Gross Domestic product?
Market value of all food and services produced by a country
What is it called when the economy (GDP) shrinks?
Recession
What is growth?
When GDP rises, increase employment and prosperity
What is inflation?
Increase in prices and a fall in the purchasing value of money
Consumer price index?
Measures of inflation using a basket of about 650 items
What is the term used to describe difference between total imports and total exports?
Balance of trade
