Government spending & income

Question 1

(TAXES)

What are the 6 main sources of government income?

Answer 1

• income tax
• national insurance contributions (NICs)
• Value added tax (VAT)
• corporation tax
• business rates
• excise duties

Question 2

What is income tax?

Answer 2

• a tax paid by everyone earning or having an investment or savings income above a set annual level

Question 3

What are national insurance contributions (NICs)?

Answer 3

• paid by everyone aged under 65 who is in employment and is earning above a certain level

Question 4

What is value added tax (VAT)?

Answer 4

• paid on a large range of goods and services

Question 5

What is corporation tax?

Answer 5

• paid by companies on their profits

Question 6

What are business rates?

Answer 6

• paid by businesses based on the value of their properties

Question 7

What are excise duties?

Answer 7

• taxes on things eg alcohol or cigarettes

Question 8

What are the two main government spends?

Answer 8

• welfare related (education, health etc)
• debt interest/paying off debt

Question 9

What are the two main sources of local government income?

Answer 9

• council tax (annual) imposed by local councils on properties in their local area
• income from charges they make for their services eg parking, planning applications etc

Question 10

What is the main source of local government spending?

Answer 10

local services

Question 11

Who controls the local government income? What can they force them to do?

Answer 11

central gov

regulations to force local councils to hold a referendum if they want to raise council tax beyond a certain %

sets income streams, amount of business rates recieved, funds for house building

grants are available, must link to central government’s objectives

Question 12

What is the budget? (Based on? On what terms?)

Answer 12

based on the leading party’s political philosophy, eg in favour of higher or lower gov spending, in its election manifesto

can be short term for immediate crisis eg covid-19

can be long term eg considering ageing population

Question 13

What 3 concepts change the budget?

Answer 13

1. increase taxes in order to increase gov income
2. borrow additional money, increase national debt
3. make assumptions on economic growth where existing taxes will raise more income

Question 14

How does the gov manage risk when deciding the budget?

Answer 14

• If the economy is growing, it’s easier for the state to spend more, which can lower % of the nation’s GDP in taxation at the same time
• there are problems or crisis when the economy’s growth stops or reverses, the gov is trapped by greater demands for services due to increased unemployment and decreased spending in the economy (which cuts tax revenues), howevee they are committed to maintaining services/supplies/conditions which may have been generous during growth years

eg:
- covid 19, support NHS, businessed needed financial help
- war in Ukraine, food/energy insecurity, cost of living crisis

Question 15

What is GDP? What is it useful for?

Answer 15

• Gross Domestic Product
• a key economic measure that represents the total value of goods and services produced within a country over a specific period
• assess a country’s economic health, determine government policies, and compare living standards between nations

Question 16

What is the impact of the budget on citizens?

Answer 16

• increase/cut public spending, which raises/lowers taxes
• raise pensions/benefits due to wage inflation
• living standards can fall/improve

Question 17

What are the four aspects of the debate on gov spending?

Answer 17

Welfare benefits
health
elderly
education

Question 18

What is the gov spending debate about welfare benefits

Answer 18

• cut them to encourage work
• cutting/freezing them makes gov appear indifferent
• should provide basic income to live normally

Question 19

What is the gov spending debate about health?

Answer 19

• should involve different sectors to promote competition which could increase efficency
• should be funded from tax to make it free of charge, and use more money to maintain or improve it
• should encourage to take out private medical insurance if you can (lessen strain on NHS)
• funding the NHS should be independently decided (not politically)

Question 20

What does the gov do to keep pensions secure

Answer 20

• triple lock provides security to the poor and vulnerable (2.5%)
• triple lock protected pensioners income, its time to help others

Question 21

What is the gov spending debate about education?

Answer 21

• should invest more to improve pupil outcomes and create a skilled workforce for later
• should raise standards, increase competition, funding isn’t the issue