Fiscal policy Flashcards
(105 cards)
1
Q
Why was the OBR needed
A
Before the OBR came along, the Treasury produced its own economic forecasts under supervision of the chancellor. But these were often too optimistic about UK growth and the impact of new policies. The result was lower tax receipts than expected, higher borrowing and, ultimately, damaged fiscal credibility.
2
Q
2024 Spring Budget National insurance
A
- National insurance contribution rate will be cut from 10% to 8% of pay
- This comes on top of a 2p cut in the November autumn statement, which reduced the rate from 12% to 10%.
- It is estimated that the 2p cut to national insurance would be worth about £450 a year for someone on a £35,000 full-time salary.
3
Q
2024 Spring Budget Growth
A
- Hunt says the economy is expected to grow by 0.8% this year and 1.9% in 2025. That is slightly stronger than the 0.7% and 1.4% growth rate expected by the Office for Budget Responsibility at the time of the autumn statement in November.
- Growth is then forecast to be 2% in 2026 before dipping to 1.8% and 1.7% in 2027 and 2028.
4
Q
2024 Spring Budget Government Borrowing
A
- Hunt says underlying debt, which excludes Bank of England debt, will be 91.7% of GDP in 2024-25 according to the OBR, then 92.8%, 93.2%, 93.2% before falling to 92.9% in 2028-29. “We continue to have the second lowest level of government debt in the G7, lower than Japan, France or the US,” he adds.
- Hunt says borrowing falls from 4.2% of GDP in 2023-24, to 3.1%, 2.7%, 2.3%, 1.6% and 1.2% in 2028-29. “By the end of the forecast, borrowing is at its lowest level of GDP since 2001,” he adds.
5
Q
2024 Spring Budget Public Services
A
- The chancellor has kept a 1% increase in day-to-day public spending above inflation, despite speculation it would be cut to just 0.75%.
- Military spending will rise to 2.5% of GDP “as soon as economic conditions allow”, Hunt says. It is now at 2% of GDP.
6
Q
2024 Spring Budget Property tax
A
- Hunt says the government will reduce the higher rate of property capital gains tax from 28% to 24%.
- He also announces the abolition of stamp duty relief for those buying more than one dwelling.
7
Q
2024 Spring Budget vaping tax
A
- Hunt confirms widely expected plans for a “vaping products levy” to be paid on imports by manufacturers, specifically on the liquid in vapes. It will be introduced in October 2026.
- The move is an attempt to discourage children from buying the products. It is expected to raise £500m by 2028/29. A one-off increase in tobacco duty is also announced.
- Tobacco duty will go up £2.00 per 100 cigarettes at same time, to ensure vaping remains cheaper
8
Q
2024 Spring Budget Alcohol and fuel duty
A
- Alcohol duty was due to rise by 3% from August but Hunt said it will be frozen until February 2025, benefiting 38,000 pubs across the UK. The government is “backing the great British pub”, Hunt says.
- Hunt said he would freeze fuel duty at its current level for another year, as expected. The levy should rise in line with inflation but this has not happened since 2011.
- A 5p cut to fuel duty, which was introduced in 2022 and is due to run out this month, has been extended.
9
Q
2024 Spring Budget Savings
A
- Hunt announces a new “British Isa”, giving investors a £5,000 extra tax-free allowance to “encourage more people to invest in UK assets”.
- Hunt says a new British Savings Bond will launched in April, delivered by the state-owned National Savings and Investments. It will offer a guaranteed rate, fixed for three years.
10
Q
2024 Spring Budget child beneift
A
extended eligibility for child benefits for around 170,000 families, with people earning up to £60,000 getting benefits in full and the threshold for them to be withdrawn entirely raised to £80,000.
11
Q
2024 Spring Budget Investment
A
£3.4bn to modernise NHS IT systems
12
Q
Definition of fiscal policy
A
The use of government spending, taxation and budgetary position to achieve their macro policy objectives.
13
Q
General objectives of fiscal policy
A
- managing AD
- Influencing AS
- achieving micro-econ goals (supporting particular indsutries, influencing demand for merit/demerit goods)
- redistributing wealth
14
Q
Why does the government spend
A
- Subsidies to encourage consumption of merit goods
- Provide public goods
- Provide a safety net of welfare benefits to supplement the incomes of the poorest in society
- Provide neccessary infrastructure via capital spending
- Stiimulate economic growth (multiplier effect)
- Expensive supply-side projects (new runway at heathrow)
15
Q
catagories of gov spending
A
- Transfer payments: welfare payments (redistribution)
- Current government spending: spending on state-provided goods & services that are provided on a recurrent basis (e.g. public sector salaries)
- Capital spending: includes infrastructure spending such as new motorways and roads, hospitals, schools and prisons. This investment spending adds to the economy’s capital stock
16
Q
Types of tax
A
Income tax – a percentage of income.
Corporation tax – a percentage of a firm’s profit.
Sales tax/VAT – an indirect tax on the sale of goods.
Excise duties – taxes on alcohol, tobacco, petrol.
Production taxes – taxes on particular goods/services, e.g. gambling tax, airlines, insurance.
Environmental taxes – taxes on carbon, airports e.t.c.
Stamp duty – tax on buying a house or shares.
Tariff – this is a charge levied on the import of particular goods.
Inheritance tax – a tax levied on the estate of a deceased person.
Wealth tax – a tax levied on wealth, rather than income.
Capital gains tax – a tax levied on an increase in the value of assets/wealth.
Poll Tax – a tax on individuals. Introduced in UK as the “Community Charge”
Windfall taxes – These are a type of corporation tax levied on companies making ‘excess’ profit. The UK introduced windfall tax on privatised industries. Also levelled on particular industries like north sea oil
Council taxes – taxes collected by local government, could be a tax on property or local sales/income tax
17
Q
Direct and indirect taxes
A
- Direct tax is a tax that a person or company pays directly (income tax)
- Indirect tax is paid by a third party. (VAT charge the consumer does not pay, but the firm who sells the good is responsible for paying the tax to the government on your behalf.)
18
Q
Progressive, proportional and regressive taxes
A
- A progressive tax takes a higher percentage of tax from people with higher incomes.
- A proportional tax means different income levels pay the same % of income in tax.
- A regressive tax takes a higher percentage of tax from people with low income.
19
Q
Ad valorem vs specific tax
A
- Certain percentage of the price of the good. E.g. VAT is levied at 20% so the more expensive the good is the more VAT that is paid
- A specific tax is a fixed levy whatever the price of the good. E.g., a £20 passenger levy on long-haul flights
20
Q
Public sector current receipts
A
In 2022/23, UK government raised around £1,027 billion in receipts
- In 2022/23, UK government raised around £1,027 billion in receipts (highest since early 80s)
- Income tax, NICs, & VAT together raised around £591 billion in 2022/23.
21
Q
Expansionary
A
- fiscal policy used to grow AD
- stimulate real output and employment and perhaps reduce the risk of a persistent deflationary recession
22
Q
Contractionary fiscal policy
A
- aims to shrink the economy
23
Q
Fiscal Multiplier Effect
A
- An initial change in AD can have a greater final impact on the level of equilibrium national income.
- Positive: occurs when an inital injection into the economy causes a bigger final increase in national income
- Final change in real GDP / Initial change in AD
- 1 / (1 - MPC )
24
Q
Crowding out
A
- Higher taxes leads to lower consumer spending, offsetting rise in G
- When Gov borrows from private sector (bonds), firms spend less money in investment, offsetting rise
- When Gov increases its spending it will increase the demand for goods and services, which can lead to higher interest rates and inflation. This, in turn, can make borrowing more expensive for private investors, reducing their ability to invest
- Private investment may decrease or “crowd out” as the government spending increases.
25
Fiscal Policy and Long Run Aggregate Supply
- Changes in marginal and average income tax rates can have a significant effect on work incentives in the labour market
- State funding of R&D can have important effects on process innovation and the pace of dynamic efficiency in markets
- Higher government spending on education & training can increase human capital & labour productivity to lift the long-term trend rate of growth
- Changes in corporation tax and import tariffs can influence the size and direction of FDI
- Government spending on new infrastructure is crucial to lift LRAS – it often makes private sector firms more efficient and profitable too
26
Fiscal Policy and Short Run Aggregate Supply
Changes in VAT affect the supply costs of businesses – a fall in VAT reduces costs and – ceteris paribus – will cause SRAS to shift outwards
Changes in environmental taxes – a rise in a carbon tax will increase the costs especially of energy-intensive firms. SRAS will shift inwards
Changes in import tariffs – lower tariffs as a result of trade liberalisation will lead – ceteris paribus – to lower costs, SRAS shifts outwards
Changes in government subsidies – input subsidies paid to producers (such as farmers) lower their costs and cause an outward shift of supply
27
What does the OBR forecast do
The OBR forecast tells the government whether it is on track to meet its fiscal targets and, if so, how much headroom it has against them (i.e. how much more it can increase spending / reduce taxes and still achieve its targets for borrowing and debt). This information is critical for sound economic and fiscal policy making.
- provides information to the UK government’s creditors (i.e. financial markets) on the sustainability of public finances
28
What did George Osborne say about the OBR
According to George Osborne the OBR was introduced to “remove [from politicians] the temptation to fiddle the figures”.
| Arguably one of the best legacies of the Cameron–Osborne government
29
What did John Kenneth Galbraith say about economic forecasting
“the only function of economic forecasting is to make astrology look respectable”
30
Is the OBR using long term economic forecasting
-
31
What does Liz truss say about the OBR
- They didn't produce a report for Rishi Sunak furlough scheme during COVID so why would they for her
- the core purpose of the OBR is to produce twice-yearly forecasts of whether the Government is on track to meet its fiscal targets. We weren't due to set our spending plans until November so it would have been neither appropriate nor feasible for a report to have been produced in September.
32
Insurance Premium Tax (IPT)
- a type of indirect tax levied on general insurance premiums
- reinsurance and life insurance are exempt
33
A spending review
| also called: a comprehensive spending review
- A governmental process carried out by HM Treasury to set firm expenditure limits and, through public service agreements, define the key improvements that the public can expect from these resources.
- Spending reviews typically focus upon one or several aspects of public spending while comprehensive spending reviews focus upon each government department's spending requirements from a zero base (i.e. without reference to past plans or, initially, current expenditure).
34
2010 Sending review
- Driven by a desire to reduce government spending in order to cut the budget deficit.
- George Osborne announced the details of the spending review on 20 October 2010
- The review led to an £81 billion cut in public spending in the following 4 years of the parliament, with average departmental cuts of 19%. In addition;
- £7 billion of extra welfare cuts,
- changes to incapacity benefit, housing benefit and tax credits
- rise in the state pension age to 66
- Public sector employees would face a £3.5 billion increase in public pension contributions.
35
Additional cuts from 2010 spending review
The Home Office faced cuts of 25%,[10] local councils would face a yearly 7% cut in funding from central government each year until 2014.[10] The Ministry of Defence faced cuts of around 8%. DEFRA withdrew funding support from seven waste management PFI projects, the BBC had its licence fee frozen for 6 years and took on the funding of the BBC World Service. The OBR predicted that the spending review led to a loss of about 490,000 public sector jobs by 2015
36
Marginal propensity to save
- The portion of additional disposable income that is saved by a consumer
- MPS = Change in Saving ÷ Change in Income
- typically higher at higher incomes.
- MPS helps determine the Keynesian multiplier
-
37
Factors that influence MPS: Income levels
At low-income levels, consumers will be buying all the necessities of life. An increase in income, will probably all be spent. At higher income levels, with all necessities bought, saving becomes an affordable extra.
38
Factors that influence MPS: The diminishing marginal utility of income
As income levels rise, extra income has a diminishing utility and so consumers may not know what to spend the money on and therefore spend an increasing percentage.
The Keynesian consumption function shows that the marginal propensity to consume falls at higher incomes – meaning the marginal propensity to save rises.
39
Factors that influence MPS: Life-cycle hypothesis
Theories of life-cycle spending assume individuals wish to smooth out their consumption over a period of time. During a period of studying, marginal propensity to save will be zero (student probably will borrow. As they get a better-paid job and pay off their debts, they will be in a position to increase savings. During their mid-working life, individuals will tend to have a higher propensity to save – as they put money aside for retirement.
40
Factors that influence MPS: Individual preferences
Not all individuals are rational. Approx 25% of individuals do not follow the life-cycle hypothesis models and may fail to save, when rational utility maximisation may suggest they should. Some individuals are more prone to present-income bias. This means individuals place a higher weighting on consumption in present moment, than saving for future.
41
Factors that influence MPS: Individual preferences
Not all individuals are rational. Approx 25% of individuals do not follow the life-cycle hypothesis models and may fail to save, when rational utility maximisation may suggest they should. Some individuals are more prone to present-income bias. This means individuals place a higher weighting on consumption in present moment, than saving for future.
42
The principles of taxation
In The Wealth of Nations (1776), Adam Smith argued that taxation should follow the four principles of equity, certainty, convenience and economy.
- The characteristics or qualities which a good tax system
should possess
43
The principles of taxation: economy
requires a tax to be cheap to collect in relation to the revenue it yields
44
The principles of taxation: convenience
requires a tax to be convenient for taxpayers to pay
45
The principles of taxation: certainty
Taxpayers should be reasonably certain of the amount of tax they will be expected to pay
- Taxes should be clear and transparent
- not arbitrary with respects to the time of payment, the manner of payment, the quantity to be paid (tax liability).etc
46
The principles of taxation: equity
Requires a tax to be fair
- If everyone is asked to pay taxes according to his ability, then sacrifices of all
taxpayers become equal. This is the essence of canon of equality (of sacrifice).
47
The principles of taxation: efficiancy
A tax should meet its desired objective(s) with minimum unintended consequences
48
The principles of taxation: flexibility
Requires a tax to be easy to change to meet new circumstances
49
Hows taxes can impact the econmy
- Liberalized international financial markets attract capital to countries with favorable tax regimes.
- High personal income taxes may discourage individuals from working more and incentivize leisure activities.
- High taxation on savings can lead individuals to prioritize current consumption over saving for the future
50
The benefit principle
- There should be some equivalency between what an individual ends up paying and the advantages they get as a result of government actions
- Taxes the benefits that someone gets from a public product or service
- Example; charge for crossing a Toll Bridge. Higher level of usage = higher taxes
- Unfair: taxpayers who have lower incomes may end up paying more in taxes than those with higher incomes
51
The ability-to-pay principle
- Taxes should be levied dependent on a person's means to pay
- Charges you based on your earnings
- Unfair: higher-income individuals pay more in taxes, regardless of their actual use of public services, leading to resentment for funding services they do not use
- three kinds of ways to measure ability to pay: salary, spending, and property
52
What are the two considerations that found the ability to pay principle
- We can't always quantify the benefits of government expenditure
- It presumes that individuals with greater incomes are less bothered by paying taxes than those with lower incomes
53
Example of the benefits principle would be transportation system taxes
If a low-income individual takes public transit to work considerably more frequently than a wealthier person, then if they are burdened with higher taxes to support the transportation system, they may struggle to afford essentials like food and rent, hindering their ability to save or improve their financial situation.
54
Link between the Benefit's principle and Adam Smith
in his book 'The Wealth of Nations', he argued that taxpayers should serve as customers of the state, their tax payment akin to payment for products or services utilised.
55
What are fiscal automatic stabilisers?
Automatic stabilisers are automatic fiscal changes as the economy moves through different stages of the business cycle
56
Automatic stabilisers during strong economic growth (boom phase)
- Tax revenues will rise as household real incomes and corporate profits grow m
- Employment increases as output increases and employment is derived from output, meaning that Government welfare spending then falls as previously unemployed people now require less state financial support
- As a result, government finances improve including a falling budget deficit / possible fiscal surplus
- Consequently, fiscal policy is taking income out of the circular flow; automatic stabilisers help moderate a boom
57
Automatic stabilisers during an economic recession
- Real output and employment contracts
- As real incomes fall workers pay less in direct and indirect taxes and company tax payments also drop
- Gov spending on welfare support (e.g. Universal Credit) increases
Combined, this will increase budget deficit
A fiscal deficit is a net injection into the circular flow – thus helping to limit the depth / severity of a recession
58
Evaluate he success of ass
59
How can fiscal automatic stabilisers act as a form of progressive taxation?
As an individual taxpayer earns higher wages, their additional income may be subjected to higher tax rates based on the current tiered structure. If wages fall during a recession, the individual will remain in the lower tax tiers as dictated by their earned income.
60
Example of one time automatic stabilisers USA
- The 2008 one-time tax rebates under the Economic Stimulus Act
- The $831 billion in federal direct subsidies, tax breaks, and infrastructure spending under the 2009 American Reinvestment and Recovery Act
- The Coronavirus Aid, Relief, and Economic Security (CARES) Act became the largest stimulus package in U.S. history. It provided over $2 trillion in government relief
61
Automatic stabilisers as a first round effect
Since they almost immediately respond to changes in income and unemployment, automatic stabilizers are intended to be the first line of defense to turn mild negative economic trends around. However, governments often turn to other types of larger fiscal policy programs to address more severe or lasting recessions or to target specific regions, industries, or politically favored groups in society for extra-economic relief.
62
Keynesian perpsectivon automatic stabilisers
Keynes noted that in a recession, confidence falls and the private sector cut back on spending and investment. Therefore, we see a rise in private savings and a fall in aggregate demand. This can worsen the recession. This is why Keynes advocated government borrowing – to make use of these surplus savings. Keynes argued that automatic stabilisers may not be enough, and the government should specifically find public sector projects to inject money into the circular flow. This is known as discretionary fiscal policy
63
Tax revnue automatic stabilisers
- Income taxes are generally at least somewhat progressive. This means that as household incomes fall during a recession, households pay lower rates on their incomes as income tax. Therefore, income tax revenue tends to fall faster than the fall in household income.
- Corporate tax is generally based on profits, rather than revenue. In a recession profits tend to fall much faster than revenue. Therefore, a company pays much less tax while having slightly less economic activity.
- Sales tax depends on the dollar volume of sales, which tends to fall during recessions.
64
Transfer payments and tax rebates do not count directly in real GDP
They impact real GDP indirectly through their effect on consumption. When someone gets a tax rebate from the government, it is not counted as government spending because the government is not buying anything from them. But when they spends that money on veggie burgers and baseball gear, it gets counted in consumption.
65
Automatic stabiliser v. discretionary fiscal policy
Automatic stabilizers avoid the decision lag that discretionary fiscal policy suffers from. Whereas discretionary fiscal policy takes longer because people ask questions like "What kind of output gap are we in? Positive or Negative?" and other such questions are asked in legislative positions where it may take a longer time for people to agree on the necesary policy in order to smooth the buisness cycle.
66
How can economies prevent hysteresis during a recession?
Economies can use expansionary monetary and fiscal policies, such as lowering interest rates and increasing government spending. Long-term solutions like job training programs can help address skills gaps caused by technological advances.
67
How does public debt hysteresis impact fiscal sustainability?
High levels of public debt limit a government's fiscal flexibility, potentially leading to prolonged periods of hysteresis as the need to service debt restricts spending in other critical areas.
68
What is fiscal federalism?
Fiscal federalism refers to the financial relations between units of government in a federal system, dealing with the division of governmental functions and financial relations among levels of government.
69
According to Musgrave, which government should be responsible for economic stabilization and income redistribution, and which government should handle the allocation of resources
- The term fiscal federalism was introduced by the German-born American economist Richard Musgrave in 1959.
- Musgrave argued that the federal or central government should be responsible for economic stabilization and income redistribution.
- Musgrave believed that the allocation of resources should be the responsibility of state and local governments
70
What are some benefits of fiscal decentralization?
Benefits of fiscal decentralization include accounting for regional and local differences, lower planning and administrative costs, competition among local governments, and more efficient politics with greater citizen influence.
71
What are some disadvantages of fiscal federalism?
Disadvantages include lack of accountability of state and local governments, lack of qualified staff, the possibility for people to choose where to reside, local governments' independence from the national government, and unavailability of infrastructure for public expenditure at the local level.
72
Why is federal government intervention necessary in fiscal federalism?
Federal government intervention is necessary because states and localities are not equal in their income and resources, requiring federal action for economic stability and income redistribution.
73
What effect did the New Deal have on fiscal federalism?
The New Deal increased interactions and central planning among levels of government, contributing to the development of national policy making and state and local policy implementation.
74
According to public choice analyses, how do government agents behave?
According to public choice analyses, government agents behave as individuals responding to incentives, similar to actors within a market, which can influence their actions and decisions.
75
- What are debt or loans incurred by local authorities in the UK called?
- How is central government debt typically referred to in the UK?
- Referred to as corporation or county loans.
- Frequently referred to simply as funds
76
What did economist John Maynard Keynes suggest about the use of fiscal policy?
- Keynes suggested that fiscal policy should be used countercyclically to offset economic extremes of expansion and contraction, inflation and recession.
- Budget should be in deficit when the economy is slowing and in surplus when economic growth is booming
77
What economic problem emerged in the United States following World War II, despite the effectiveness of fiscal policy in reducing unemployment?
Following World War II, the significant problem was a surge in inflation, reaching upwards of 20% by March of 1947.
| In the USA!
78
What is Inter-Generational Equity
refers to the principle that each generation should have the opportunity to enjoy a similar quality of life as the previous generation, and that they should not bear an undue burden of negative consequences from the actions of previous generations.
79
Examples of Inter-generational equity
- Distribution of natural resources
- Preservation of the environment for future generations
- Fair distribution of economic opportunities
- How high national debt might necessitate higher future taxes, affecting future generations' welfare
80
What are the two 'control totals' managed by the Treasury for public spending?
Departmental Expenditure Limits (DELs) and Annually Managed Expenditure (AME).
- DELs mostly cover spending on public services, grants, and administration and investment
- AME includes categories of spending less amenable to multi-year planning, such as social security spending and debt interest.
## Footnote
Debt interest spending is one of the largest items in AME
81
What constitutes most public sector debt interest spending?
Most public sector debt interest spending is accounted for by **central government** and payments relating to funded **pension schemes** in the public corporations sector.
82
What are the main components of central government debt interest?
Interest paid on government bonds (gilts), payments to holders of NS&I savings products, and interest on the reserves created by the Bank of England for monetary policy purposes.
## Footnote
Interest paid by central government on gilts held by BoE do not leave the public sector Because BoE is part of the public sector
83
What are the two types of government bonds ('gilts')?
Conventional gilts, which pay a fixed amount of interest, and index-linked gilts, which pay an interest rate linked to RPI inflation.
84
What is the most relevant metric when considering the sustainability of public finances?
Debt interest spending as a share of GDP.
85
What happened to debt interest payments as a share of GDP from the late 2000s financial crisis to 2019-20?
- They fell by 0.8 per cent of GDP
- The principal drivers of the fall were the **increase in gilts** held in the APF, low RPI **inflation**, and historically low **interest rates**
86
How did the pandemic affect debt interest payments as a share of GDP between 2019-20 and 2020-21?
- There was a further 0.5 per cent fall.
- Lower inflation, lower interest rates, and further expansion of asset purchases through the APF.
87
What caused debt interest spending to reach a post-war high (4.4%) in 2022-23?
| £111.5 billion
- £111.5 billion. 4.4 per cent of GDP.
- A 40-year high inflation rate and surging interest rates.
88
What do forecasts assess about public finances?
Forecasts assess the likely evolution of public finances based on existing Government tax and spending policies and economic trends
89
- How much revenue is the public sector expected to raise in 2024-25?
- What is the expected public spending in 2024-25?
- £1,139 billion, equivalent to around £39,000 per household or 40.9 per cent of national income.
- £1,226 billion, equivalent to around £42,000 per household or 44.0 per cent of national income.
90
- What is the expected budget deficit for 2024-25?
- How is the budget deficit expected to change over the next five years?
- A deficit of £87.2 billion.
- The deficit is expected to fall to £39.4 billion.
91
92
- What percentage of total public sector income comes from taxes in 2024-25?
- Which taxes are the largest sources of revenue for the public sector?
- How much revenue is VAT expected to generate in 2024-25
- Besides taxes, what other revenues does the public sector receive?
- 89 per cent
- Income tax and National Insurance contributions, expected to raise around £470 billion together.
- £176 billion.
- Interest earned on assets (such as foreign exchange reserves and student loans) and income generated by public corporations.
93
- Which taxes are expected to rise more quickly than the growth of the economy as a whole?
- Why is income tax expected to rise faster than the growth of the economy?
- Why is capital gains tax expected to rise faster than the growth of the economy?
- Income tax and capital gains tax.
- Due to wages and salaries growing faster than frozen tax thresholds
- Due to asset markets, like housing and the stock market.
94
Which tax receipts are expected to fall and why?
Tobacco duty (due to declining smoking rates) and UK oil and gas receipts (due to falling energy prices and production).
95
- What are the biggest items in central government department spending for 2024-25?
- How much is expected to be spent on capital investment and loans in 2024-25?
- Health (£179.6 billion), education (£84.9 billion), and defence (£32.8 billion).
- £136.0 billion, which is 11 per cent of the total public spending.
96
- What is the largest component of 'annually managed expenditure' (AME) for 2024-25?
- What percentage of welfare cash transfers are paid to pensioners?
- What are the other big items in welfare cash transfers?
- Cash transfers through the welfare system, expected to cost £315.1 billion
- 55 per cent, with state pensions being the largest item at £141.6 billion.
- Universal credit and related tax credits and benefits (£92.0 billion) and disability benefits (£47.0 billion).
97
- How much are net interest payments on the national debt expected to cost in 2024-25?
- What does net debt interest include?
- £73.5 billion
- Interest paid to private sector holders of government bonds ('gilts') and interest paid by the Bank of England on money created during quantitative easing.
98
Rachel Reeves talking about the the National Wealth Fund March 2024
"*The lifeblood of economic growth is private sector investment* "
99
What is the main economic goal of the National Wealth Fund (NWF)?
To mobilize billions in **private investment** and generate a **return for taxpayers** by aligning key **public finance** institutions.
## Footnote
Will increase econ growth by supporting transformative investments that create jobs, boost energy independence, and drive growth across various sectors.
100
How does the National Wealth Fund plan to attract private investment?
By combining catalytic capital with government policy certainty to provide confidence to private investors.
101
How does the British Business Bank contribute to the NWF's objectives?
By mobilizing institutional capital through its investments and acting as the largest investor in UK venture capital.
102
What specific industries will the NWF target for investment?
Clean energy, infrastructure, ports, heavy industry, manufacturing, and other green growth industries.
103
What are the economic benefits of bringing together public finance institutions under the NWF?
Increased efficiency in investment processes, improved access to finance for businesses, and enhanced ability to attract private capital.
104
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How does the NWF support the UK’s long-term economic strategy?
By making strategic investments in future industries, it aims to rebuild the economy's foundations and ensure sustainable growth.
