What's happening with the government's finances?



this year the government will raise a little over 700 billion pounds in revenue that's about 37 P for every 1 pound in the economy the big four taxes income tax national insurance contributions value-added tax and corporation tax will bring in two-thirds of this revenue but the remainder coming from a whole load of smaller taxes typically the government spends a bit more than it raises in revenue and this year is no different total spending will be equivalent to almost 40 pence for every 1 pound of economic activity just over 1/4 of this spending goes on state pensions and other welfare benefits with most of the remainder going on public services of which the National Health Service has the largest budget this difference is the deficit when the government spends less than it raises this is a surplus but at the moment the government is running a deficit this is not unusual in fact only on 12 occasions since 1948 has the government run a surplus and the total of all of the deficits and surpluses over years makes up roughly speaking the national debt so the national debt has gone up in the last year this need not be a problem if the economy is growing faster than the debt then it can be perfectly sustainable and a strong case can be made for borrowing to finance investments for example the building of a new road or a hospital from which future generations will benefit it can also be sensible for governments to borrow during tough times for the economy and this is certainly what the UK has experienced since 2008 the financial crisis and the associated recession pushed to deficit up to its highest level since the second world war while it has fallen since it is still large by historical standards and relative to most other advanced economies and while the deficit is now lower than it was the outstanding debt has risen sharply over the last decade as a result the government's debt has risen relative to the size of the economy it is now high by recent historical standards but if we look further back in time we can see that the UK government has often had debt much above current levels you

Maurice Vega

Leave a Reply

Your email address will not be published. Required fields are marked *

Post comment