Issues related with central government - Finance (part one)

You are helping on a Budget special and have been asked to prepare a brief for the editor explaining key terms for the readers and then to obtain quotes from local contacts to get reactions to the Budget.

Direct Taxes: an umbrella term for taxes, such as Income Tax and Corporation Tax, that are taken directly from the individual or company on whom they are levied, normally at a progressive rate determined by their income levels in a given financial year.

Inflation: This is general increase in the prices of goods and services, or to look at it another way, a fall in the purchasing power of the pound, caused by too much money chasing too few goods and services.

Inflation is calculated using either the Consumer Prices Index (CPI), or Retail Prices Index (RPI), which monitor fluctuations in the values of a notional “basket” of goods containing items regularly bought by a typical British household.

Although the CPI is the “official measure of inflation, the RPI figure is also published.

Recession: a term describing a rapid economic slowdown. Technically speaking, a recession is signaled by a period of two successive economic quarters during which the economy “shrinks” – that is, during which less money is being borrowed and spent by consumers, leading to lower sales and profits for businesses, the scaling back of production, and redundancies.

Gross Domestic Product(GDP): the total profit from all goods and services generated in Britain in a given financial year, irrespective of which state benefits from team.

Balance of Payments: the difference in value between imports to and exports from the UK in a given financial year, including all types of payment.

It encompasses both “visible” items (such as cars and refrigerators) and “invisible” ones (such as legal and financial services), as well as the value of financial transfers and debt payments to foreigners.

If the value of imports exceeds that of exports, Britain is in a “balance of payments deficit”; if the reverse if true, it is in a “balance of payment surplus”.

Public sector net cash requirement(PSNCR): formerly the “public sector borrowing requirement” (PSBR), this is the sum of money that the British government will need to borrow through commercial loans or from the public in a given financial year to meet its public spending commitments – that is, it is the difference between the total taxation that the Exchequer expects to raise in a year and its actual outgoings.

Chancellor of the Exchequer: the secretary of state in charge of the Treasury is known as the Chancellor of the Exchequer, an ancient title.

Interest rates: an instrument of monetary policy used to promote saving and investment, and reduce consumer spending.

Since the 1980s, raising interest rates has been the preferred method of controlling inflation. The Bank of England’s Monetary Policy Committee (MPC) meets monthly to decide whether or not to raise or lower interest rates.