Understanding Public Expenditure and Taxation

1. Public Expenditure, Taxation and Budget PUBLIC EXPENDITURE

2. Public Expenditure Government expenditure Government Investment Transfer Payments

3. Government Expenditure is also known as Current expenditure. This is used for day to day functioning of the government.E.g Salaries to government laborers Government Investments are investments for future purposes such as in roads, hospitals and other government buildings Transfer payments are expenses on benefits provided to the unemployed, sic and pensioners

4. Government spending Public goods- Goods and services that people would like to have but the market system would not be able to give to the people. E.g. law and order, defence Merit goods- Goods and services that the government feels all individuals should have as a whole.E.g. Education, health and services.

5. Social reasons- Benefits to the unemployed,sick and pensioners for the welfare of the state. Controlling the economy- Fiscal Policy(Taxation) to govern the economy and for the welfare of the people Overseas spending- Helping other countries suffering from disasters like an earthquake or draughts.

6. Profit from public sector Public Borrowing Interest payment from loan given by government How the government raises money Rent from government owned land and building Taxation

7. To reduce inequality To raise money for government spending To protect the environment Why does the government impose taxes To restrict consumption of harmful goods To boost employment and control inflation To encourage domestic firms