The National Budget
For up-to-date-statistics visit
Susan Hayes “The Positive Economist”
Overview
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Government involvement in the economy
National Budget
Balanced Budget
Budget Surplus
Budget Deficit
Current Income and Current
Expenditure
• Capital Income and Capital Expenditure
• National Debt
• Debt Servicing
Why does the government
provide services?
• Ensure security: eg. Gardai, Army
• Essential services/Public Utilities:
eg. Education
• Too expensive for individuals to set up:
eg. ESB
• Provide employment: Public & Civil Service
State Owned Business
• Is a business which is
set up, financed and
controlled by the
government.
• State owned business
• State-sponsored
body
Semi-state bodies
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Energy – An Bord Gais, Bord na Mona
Training/Employment – Fas
Fisheries – An Bord Iascaigh Mhara
Forestry - Coilte
Food – An Bord Bia
……………………..
Tourism – Failte Ireland
Business – IDA, Enterprise Ireland
Communications – An Post, RTE
Transport – Ianaroid Eireann, Dublin
Bus, Luas
Marketing – An Bord Trachtala
Distinguish Between
National & Local
Government
• National
• Government
ministers &
departments run the
country
• Local
• County councillors run
towns & counties
Government Departments
• Finance
• Education and
Skills
• Health
• Jobs, Enterprise
and Innovation
Financed by tax
Local Government
Services
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•
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County Councils
Dumps
Planning permission
Repair roads
Libraries
• Financed by charging
for these services.
The National Budget
• Is a plan of future government
income and expenditure for the
country.
Prepared by
• The Minister for Finance
• In December
Decisions made
• How much does the gov need to spend?
• How much can be raised by tax?
• How much does the gov need to borrow?
Balance Budget
• Planned Income = Planned Expenditure
Surplus Budget
• Planned Income > Planned Expenditure
What can be done with a
surplus budget?
• Pay off loans (National Debt)
• Reduce tax
• Increase spending on health, education
Deficit Budget
• Planned Income < Planned Expenditure
How can a deficit be
reduced
• Increase tax
• Reduce spending on health, education etc.
• Borrow money – increase the national debt
Irish government must cut spending
by 6 billion euro in 2010 budget =
approx 4,000 per household
Source: Irish Independent 7/11/10
National Budget
• Current Budget
• Money received
and spent on a
day-to-day basis.
• It is used up
within one year.
• Current Income
• Current
Expenditure
• Capital Budget
• Money received and
spent on a
once-off basis.
• It is used for
things that last a
long time.
• Capital Expenditure
• Capital expenditure
Current Income
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•
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Income Tax
PAYE: Pay As You Earn
PRSI: Pay Related Social Insurance
VAT: Value Added Tax
CGT: Capital Gains Tax (Profit on sale of an asset)
CAT: Capital Aquisitians Tax (Gift or inheritance)
Corporation Tax: Tax on companies profits
..........
• Customs/Import Duty: Tax on imports
• Excise Duty: Tax on certain goods such as
alcohol, petrol, cigarettes
• National Lottery:
• Service Charges: Dump, library….
• Profits of Semi-State-Bodies: eg. ESB,
BNM
Current Expenditure
• Civil & Public Service Salaries:
Teachers……
• Social Welfare: Unemployment Benefit….
• Pensions:
• Servicing the National Debt: Paying
interest on loans
Capital Income
• Loans (National Debt):Money borrowed
eg. from EU or the World Bank.
• Privatisation: Selling off semi-statebodies eg. Airlingus.
• EU Grants: Money given to use by the EU
to improve the country.
Michael O’Leary offers to buy
government’s share of Aer
Lingus
EU Commission did not allow
takeover as Ryanair would then
be a monopoly
Capital Expenditure
• Public Utilities: Building schools,
hospitals, roads, libraries……
• Agriculture: Grants to farmers.
• Nationalisation: The government may buy
a privately owned company in order to
save jobs or help the economy.
e.g. Anglo Irish Bank
Revenue Buoyancy
• Is when the actual taxation revenue
collected during the year is greater
than that which had been planned
for.
• This is not the case now however!
National Debt
• Is the total amount of money that
has been borrowed by the
government over the years.
• Interest has to be paid and is very
high.
Debt servicing
• Servicing the national debt means
paying interest on the countries
loans.
Economising
• Means cutting down on spending in
order to save money.
Exam Question 2008 Q (b)
National Budget
Income
€m
PAYE
2850
VAT
1930
Corporation Tax
260
Excise Duties
215
5255
Debt Servicing
290
Subtract
Health Services
1960
Social Welfare
1360
Education
1490
Agriculture
285
€m
Expenditure
Deficit
5385
(130)
2007 Q 3
National Budget
Current A/C
Current Income
- Current Exp
Capital A/C
Capital Income
- Capital Exp
Surplus
2621
-1910
+711
add
5961
-5812
+149
+860
2005 Q 6 (c)
National Budget
Income
€m
PAYE
2,550
VAT
1,470
Corporation Tax
260
Customs Duties
235
€m
4,515
Expenditure
Debt Servicing
190
Health Services
1,720
Social Welfare
1,230
Education &
Science
1,340
Surplus
4,480
35
Exam Question 2001 Q 4 (a)
Income
€m
€m
Recap/Review
• Why does the Government get involved
in the economy?
• What is a Balanced Budget?
• How can the Government deal with a Budget
Surplus? Budget Deficit?
• Budget Deficit
• Distinguish between Current Income and
Current Expenditure? Examples?
• Distinguish between Capital Income and
Capital Expenditure? Examples?
• What is the National Debt?
• What is meant by Debt Servicing?