Budget Contd It

Budget Contd It

Budget (cont'd) It is unlikely that revenue and expenditure will balance exactly in any one year. Thus surpluses and deficits may arise, usually as a result of deliberate Government policy. After the Second World War an Above-the-line surplus was common, achieved by making revenue exceed expenditure. This meant that purchasing power was taken from the private sector of the economy (private individuals and privately owned businesses). The size of such a surplus or deficit could be altered by changes in taxation or expenditure.

An Above-the-line surplus was frequently matched, however, by a Below-the-line deficit, that is, payments below the line exceeded receipts. For example, the Above-the-line surplus of £400 million in 'Year 2' was exceeded by net payments below the line of £500, the difference between the two of £300 million representing the total deficit to be met by borrowing. 1 2

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