The economy

The treasury

• the most senior minister in the treasury is the chancellor of the exchequer

Role of the chancellor of the exchequer

• controls fiscal policy- tax and spending

• controls national debt

• manages unemployment and inflation

The treasury

• the most senior minister in the treasury is the chancellor of the exchequer

Role of the chancellor of the exchequer

• controls fiscal policy- tax and spending

• controls national debt

• manages unemployment and inflation

Where does government money come from

• direct taxes

• indirect taxes

direct taxes

• taxes on income

• includes taxes taken directly from salaries

• income tax, national insurance, company taxes, capital gains tax

• capital gains tax= tax on certain items if there has been an increase in value

• progressive- based on the ability to pay

indirect taxes

• based on consumption

• sales tax, alcohol, fuel and tobacco duty, green taxes on energy bills

• regressive- not based on ability to pay and rich pay same as poor

deficit

• the difference between government spending and what the government takes in through revenue

• if the government takes in more revenue than it spends the difference is the surplus

debt

• accumulation of all the annual deficits

• like a mortgage of the money you owe

UK government spending

• spending is increasing

• revenues of £1.49 billion 2024-25

• deficit- £127 billion

• debt- £3.4 trillion

• debts is about 98% GDP

The budget

• a report on the performance of the economy over the previous 12 months

• an outlook for the next 12 months

• plans for taxes and spending

• proceeded in autumn by the autumn statement

• accompanied by a finance act to implement plans

comprehensive spending review

• every three years- chancellor publishes plans for a longer period

the office of budget responsibility (OBR)

• set up by George Osborn in 2010

• responsible for economic forecasts

• politically neutral and independant of the government

Bank of england

responsible for monetary policy- setting interest rates

The monetary policy committee of the bank of england

• group of 9 economists

• sets interest rates

• base rate currently 4.5%

GDP (gross domestic product)

the market value of all the goods and services produced by a country

recession

2 successive quarters when the economy shrinks

growth

when the GDP rises with increasing employment and prosperity

inflation

an increase in prices and fall in the purchasing value of money

consumer price index

measures inflation using a basket of 650 items

• currently 3%

balance of trade

difference in value between total imports and total exports