0.0 // Chapter 35: Government revenue and expenditure

The national budget

The government’s financial plan for the year ahead; shows expected revenue and expenditure

Department of Public Expenditure and Reform

Assesses each department’s money requests and approves government spending

Department of Finance

Handles taxes and borrowing

Government revenue

Money received by the government

Categories of government revenue

Current and capital revenue

Current revenue

Money received by the government on a regular basis

Capital revenue

Money received by the government on an irregular basis; mainly non-tax revenue

Sources of government current revenue

Income tax, VAT, Corporation tax, PRSI

Income tax

Tax deducted from individuals' earnings

VAT

A tax added to the price of goods and services

Corporation tax

Tax on the profits earned by companies

PRSI

Contribution deducted from wages to fund social welfare benefits like pensions

Sources of government capital revenue

Sale of state-owned companies, borrowings, EU grants

Sale of state-owned companies

Sale of state-owned companies into private ownership called privatisation

Borrowings

Money from other governments or financial institutions to fund spending

EU grants

Receives billions of euros from EU funding schemes

Government expenditure

Money spent by the government

Categories of government expenditure

Current and capital expenditure

Current expenditure

Money spent by the government on a regular basis

Capital expenditure

Spending on “once-off” projects/infrastructure

Infrastructure

Essential facilities and services a country needs, like water, power, transport, communication, schools, and hospitals

Examples of government current expenditure

Healthcare, education, justice, transport

Healthcare (current expenditure)

Spending on hospitals, medicines, and paying wages of doctors and nurses

Education (current expenditure)

Funding for schools, resources, and paying teachers' wages

Justice (current expenditure)

Spending on courts, prisons, and paying gardaí wages

Transport (current expenditure)

Maintaining roads, public transport, and paying wages of transport workers

Examples of government capital expenditure

Public transport, health, education, housing

Public transport (capital expenditure)

Building new rail networks, buying new trains and buses

Health (capital expenditure)

Building new hospitals, buying equipment and ambulances

Education (capital expenditure)

Building and extending schools, using furniture and ICT equipment

Budget deficit

Occurs when planned expenditure is greater than expected revenue; government is living beyond its means

Solutions to budget deficit

Increase revenue, reduce expenditure, or borrow money

Soluti

Raising tax, selling state assets

Borrowing as a solution

Short-term solution because paying interest and repaying borrowing will impact future budgets

Revenue < Expenditure

Indicates a budget deficit

Solution to budget deficit

Increase revenue

Decrease expenditure

Borrow