VAT is an example of proportional taxation. The Chancellor of the Exchequer is the minister of finance in charge of the Treasury. The Chancellor announces how much the government is going to spend over the next twelve months, sometime in November. The government states how it is going to raise the money to pay for its expenditure at the same time in the Budget. Table 13.1 Advantages and disadvantages of various taxes.
Reflationary budgets increase total demand within the economy.
A deflationary or surplus budget where government income exceeds expenditure and total demand is falling within the economy. A neutral budget where government income and spending are the same and total demand in the economy remains constant. If the government spends more than its received income it will have to borrow the difference. Selling securities , which are IOUs paying interest yearly which will be bought back sometime in the future. Securities are sometimes called gilts, stocks or bonds.