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How the UK government raise and spend money


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Social Protection
A main area of government spending - the system of social security benefits
Health
A main area of government spending - the NHS
Education
A main area of government spending - education provided by the public sector
Debt interest
The amount of money the government spends on paying back its budget deficits
Tax
A compulsory payment to government
Direct tax
A tax on income and wealth
Indirect tax
A tax on spending
Income tax
The largest contribution to taxes - a direct tax paid on wages and salaries
National Insurance contributions
Contributions paid by both employees and employers - a direct tax
Corporation tax
Tax on the profits of companies - a direct tax
Value-added tax
A tax on a wide range of goods and services - an indirect tax
Excise duties
Taxes on specific range of goods - normally with negative externalities
External Cost
The negative impact of an economic transaction on a 'third party'
Negative externality
An external cost
Positive externality
An external benefit
Demerit good
A good or service which is over-consumed if left to market forces
Merit good
A good or service which is under-consumed if left to market forces
Distribution of Income
How incomes are shared out among the people of the country
Redistribution of Income
A policy to reduce the inequalities of income
Transfer Payments
Benefits to citizens which are paid out of tax revenue
Income
A flow of money received over time
Wealth
A stock of assets which are owned
Regressive Tax
A tax that takes a greater proportion of income from lower incomes, or takes a smaller percentage of a higer income
Proportional Tax
A tax that takes the same proportion of income from all income levels
Progressive Tax
A tax that takes a greater proprtion of income from higher incomes, or takes a smaller percentatge of a lower income
Market Failure
When the market (D=S) fails to allocate resources in the best interest of society as a whole
Laws and Regulation
The government can use these to reduce or eliminate negative externalities