Public Sector Economics

ForewordSection 1: Economie Framework 1 Economie Systems and Models Political Economy Types of Economie System Economie Models The Sector Model of an Economy Input-Output Model Summary Suggested Further Reading Exercises 2 National Income Purposes of National Income Data Early Estimates of National Income Social Accounting Definition and Calculation of National Income Income Method Expenditure Method Output Method Choice of Method of Calculating National Income for Developed and Developing Countries International Comparison of National Income Comparison of the Standard of Living Determination of National Income and the Multiplier Fluctuations in National Income Trade Cycle Theories Summary Suggested Further Reading Exercises 3 Allocation of Resources and Provision of Public Goods Optimum Allocation Utilitarian Approach to Economic Welfare Market Allocation of Resources and Government Intervention Opportunity Cost Social Choice Summary Suggested Further Reading ExercisesSection 2: Public Finance Expenditure 4 Public Expenditure Public Finance Functions of the State Theories of Public Expenditure Observations on the Growth of Public Expenditure Trends in Public Expenditure, Current and Constant Prices Empirical Evidence on the International Growth of Public Expenditure Reasons for the Growth of Public Expenditure Restraints to the Growth of Public Expenditure Consequences of the Growth of Public Expenditure Summary Suggested Further Reading Exercises 5 Public Expenditure in Practice: The British Experience Phases in the Growth of Public Expenditure Development of Social Services Education Health Services Relief of the Poor Establishment of the Welfare State Summary Suggested Further Reading ExercisesSection 3: Public Finance, Taxation 6 The Theory of Taxation and the Tax System The Need for Revenue Early Taxes Theories of Taxation Equality of Sacrifice Rates of Taxation Principles of Taxation A Tax System Merits and Demerits of Direct and Indirect Taxation Pattern of Taxation Revenue Maximisation, 'Laffer Curve' Analysis Summary Suggested Further Reading Exercises 7 Taxes on Income Basis of Income Tax The Origin of Income Tax in the UK Compliance of Income Tax with the Principles of Taxation Income Tax and Incentives in Theory Income Tax and Incentives in Practice Supply of Labour and Taxation Empirical Evidence on Tax Disincentives and the Supply of Labour Effect of Progressive Income Tax on the Level of Personal Savings and the Pattern of Investment Empirical Evidence on Effects of Taxation on Savings and Investment Inflation and Indexation for Income Tax Purposes Negative Income Tax (NIT) Summary Suggested Further Reading Exercises 8 Taxes on Profits Early Taxes on Incomes of Businesses Computation of Profits Illusory Profits, Inflation and Taxation Profits Tax, Differentiated Rate on Distributed and Undistributed Profits Corporation Tax, The New System of Computation The Effects of Profits Taxes Taxation of Excess Profits A New Tax on Profits from North Sea Oil Calculation of Petroleum Revenue Tax The Use of Government Revenue from North Sea Oil Social Security Contributions as a Form of Taxation The Surcharge, Departure from the Principle of Insurance Summary Suggested Further Reading Exercises 9 Taxes on Consumption Types of Taxes Choice of Goods to be Taxed Tax Rates Negative Indirect Taxation—Subsidies Indirect Taxation in the UK Customs Duties: Use as Protective Measures Trend Away from Tariffs, GATT, EEC Excise Duties Purchase Tax Value Added Tax (VAT) Licences Summary Suggested Further Reading Exercises 10 Taxes on Capital Definition of Capital Types of Taxes on Capital Revenue and Policy Aspects of Taxation of Capital Capital Transfer Tax Capital Gains Tax Wealth Tax Valuation and Problems of Indexation Effect of Inflation on Value of Assets Compliance of Capital Taxes with the Principles of Taxation Trend Away from Taxes on Capital Taxation of Capital in the UK Stamp Duties Summary Suggested Further Reading Exercises 11 Reform of the Tax System, Expenditure Tax and the Meade Report Need for Reform Idea of an Expenditure Tax Outline of a Universal Expenditure Tax Problems of Introducing the New System Advantages of an Expenditure Tax Summary Suggested Further Reading Exercises 12 Taxable Capacity, Incidence of Taxation and the Tax Burden Taxable Capacity Defined Measurement of Taxable Capacity Tax Burden of a Country Taxpayers' Burden Incidence of Taxation International Comparison of the Tax Burden The Hidden Cost of Taxation, Compliance and Avoidance Costs The 'Black Economy' and Taxation Summary Suggested Further Reading ExercisesSection 4: Budgets and Borrowing: Finance of Central and Local Government and the EEC Budget 13 Central Government Finance The Budget Types of Budget Preparation of the Budget: Administrative Framework Role of Parliament Audit of Public Expenditure Control and Management of Public Expenditure Cash Limits European Community Budget Summary Suggested Further Reading Exercises 14 Public Sector Borrowing National Debt Defined Structure of the National Debt Acquisition of National Debt Holdings National Debt as an Asset and as a Liability Management of the National Debt Origin of the British National Debt Attempts to Repay the National Debt. The Sinking Fund Public Sector Borrowing Requirement (PSBR) Consequences and the Burden of National Debt The Internal and External Burden of the National Debt International Monetary Fund (IMF) International Bank for Reconstruction and Development Summary Suggested Further Reading Exercises 15 Local Government Finance Organisation and Functions of Local Government Features of a Financial System Provision of Public Goods and Services Pattern and Growth of Local Authorities' Expenditure Reasons for Growth Sources of Finance Incidence of Rates Arguments in Favour and Against Rates Modification of the Rate System Charges and Fees Market Mechanism in the Public Sector Pricing Policies of Local Authorities Grants to Local Authorities New Sources of Revenue Local Authorities' Borrowing Budget and Policies Summary Suggested Further Reading ExercisesSection 5: Public Sector of Industry and Public Investment 16 Nationalised Industries and Public Sector Enterprises Composition of the Public Sector of Industry The Size of the Public Sector of Industry Reasons for Nationalisation Performance of the Nationalised Industries Arguments Against the Expansion of the Public Sector of Industry Organisation and Control of Nationalised Industries Parliamentary Controls Planning Financial and Economic Obligations of the Nationalised Industries New Investment Policies Pricing Policies Borrowing Public Dividend Capital Summary Suggested Further Reading Exercises 17 Investment Appraisal Purpose of Investment Appraisal Procedure in the Decision-Making Process Pay Back Method of Investment Appraisal Average Rate of Return Method Discounted Cash Flow Technique Outline of Cost-Benefit Analysis Development of Cost-Benefit Analysis Problems in Valuation of External Costs and Benefits Limitations of Cost-Benefit Analysis Usefulness of Cost-Benefit Analysis Summary Suggested Further Reading ExercisesSection 6: Management of the Economy 18 Fiscal Policy to Stabilise the Economy Background to Fiscal Policy Keynesian Prescription Monetary Policy, Friedman's Monetarist Prescription Inflation and Stagflation Prices and Incomes Policy The British Experience Summary Suggested Further Reading Exercises 19 Fiscal Policy in Relation to Employment Full Employment Measurement of Unemployment Basis for a Policy Frictional Unemployment Seasonal Unemployment Structural Unemployment Regional Unemployment Cyclical Unemployment Voluntary Unemployment Future Unemployment Problem Summary Suggested Further Reading Exercises 20 Fiscal Policy in Relation to Economic Growth and the Standard of Living Measure of Economic Growth International Comparison Factors Influencing Growth Limits to Economic Growth Economic Welfare and the Standard of Living Elimination of Poverty Fiscal Policy to Increase the Standard of Living Summary Suggested Further Reading Exercises 21 Fiscal Policy in Relation to Distribution of Income and Wealth Objective of Equality Causes of Inequality Measure of Inequality Lorenz Curve Formulation of Policy Problems of Inadequate Data Measures to Redistribute Income and Wealth Summary Suggested Further Reading ExercisesAppendices 1 Calculation of Index Numbers 2 Calculation of a Change in the Purchasing Power of Money 3 Calculation of Public Revenue, Public Expenditure and National Income in Real TermsIndex