The National Budget

For up-to-date-statistics visit Susan Hayes “The Positive Economist”

Overview 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 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 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

Source: Irish Independent 7/11/10 Irish government must cut spending by 6 billion euro in 2010 budget = approx 4,000 per household

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 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-state- bodies 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€m €m€m PAYE 2850 VAT 1930 Corporation Tax 260 Excise Duties Expenditure Debt Servicing 290Subtract Health Services1960 Social Welfare1360 Education1490 Agriculture Deficit(130)

2007 Q 3 National Budget Current A/C Current Income Current Exp Capital A/Cadd Capital Income Capital Exp Surplus+860

2005 Q 6 (c) National Budget Income €m€m €m€m PAYE2,550 VAT1,470 Corporation Tax 260 Customs Duties 2354,515 Expenditure Debt Servicing 190 Health Services1,720 Social Welfare1,230 Education & Science 1,3404,480 Surplus 35

Exam Question 2001 Q 4 (a) Income €m€m €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?