Sums that don’t add up

Money Matters!

It sure does. Even for the Government. You may recall that during the elections, some of the hottest issues being promoted are all about money. How much one political party iss going to spend on this, how much another party would save on that, and what a further party would give us all.

In the end, whoever wins, they have to run the country - very much like running a company – only bigger! But the principles are the same. You need to make money to spend it. And if you haven’t got enough, you have to borrow.

Big Bucks

So, how does a Government make money? Taxes. There’s a tax on almost everything we do and buy – though not on food, young kids clothes, newspapers and books! So as long as you’re a kid, munching a banana and reading OINK! you’re OK!

Yours to Keep?!!!

Income tax is the fave moan of everyone. Depending upon how much you earn at your job, you’ll pay a proportion of that whole amount (the gross) in tax. Income tax can be as much as 40% of what you earn. But back in the 1970’s it went as high as 90%! Can you imagine: for every £100 some people earned, they only got to keep £10. What a swizz!

What VAT’s About

Value Added Tax (VAT) is probably the ‘fairest’ tax as you only pay the tax on what you buy or consume.

What’s Duty?

Duty is another form of tax and can make things quite exorbitant. Duty on alcohol, tobacco and petrol makes the UK one of the most expensive places on the planet to have a drink, smoke a cigarette or drive a car.

...And Business Tax

Companies pay a corporation tax on the profits they make. The profit is the difference between what a company earns and spends.

Spending It!

What does the Government do with all this cash? Well, it spends it on roads, hospitals, public buildings, defence, transport, the National Health Service and everything we need to keep the country operating that isn’t paid for by private companies.

Do they earn enough money? In the end, they don’t. So what do they do? They have to borrow money. Where from? The banks and other countries. Did you know that after the last World War, the British Government borrowed money from the United States – and it’s still paying it back!

By Angus Paterson
Angus is an expert in finance and economics.

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