Letter of Transmittal

02 November, 2023
Mr. Muin Uddin Ahmed (AhU)
Lecturer,
Dept. of Accounting & Finance (BBA)
North South University, Dhaka, Bangladesh
Subject: Submission of Group Project

Dear Sir,

Trend Analysis
We are delighted to present our group project, which involves this report on analyzing the trends
in the United Kingdom's government revenues and expenditures. Our main focus was on
Government Revenues & ExpenditurE of
understanding where the government's money comes from and how it is spent during the years

United Kingdom
2018 to 2023. This report reflects our observations, research findings, what we've learned, and
the recommendations we've developed during the course under your guidance.

Submitted Mr. Muin

We have strived to address all the project requirements as per Uddin AhmedIf you have any
your guidelines.
questions or need further clarification about our work, please don't hesitate to reach out. We
Senior Lecturer
appreciate your time, guidance, and the opportunity to learn through this project.
toSincerely,
North South University

Afia Azad Hridita 2111622030

Nafisa Tasneem 2111022630

Submitted
Saikat Hossen Munna 1821806030
Ramisa zaima wasif 2012232630


Saikat Hossen Munna 1821806030
Samin Islam 2011991030

bySamin Islam 2011991030 


Ramisa zaima wasif 2012232630
Nafisa Tasneem 2111022630
 Afia Azad Hridita 2111622030
Acknowledgements

The creation of this report on the trend analysis of the United Kingdom's revenue sources and
expenditure sectors was made possible through the support and blessings of Almighty, as well as
the unwavering support of our families and friends. We extend our sincere gratitude to our
esteemed faculty member, Mr. Muin Uddin Ahmed Sir, whose guidance and assistance were
instrumental in shaping our research project. It is undeniable that without the contributions of
these individuals, our research paper would not have been executed as effectively and
comprehensively as it has been.
Contents
Introduction.................................................................................................................................................5
Economic Conditions...................................................................................................................................5
Sources of Government Revenue of UK......................................................................................................7
Sources of Government Expenditure of UK.................................................................................................8
Conclusion.................................................................................................................................................15
Reference..................................................................................................................................................15
Introduction

Analyzing how the UK government earns and spends money helps us understand how well the
country is doing financially and what its economic priorities are. This approach involves looking
at the patterns and changes in government income and spending over a few years. By doing this,
we can learn about how well the government is managing its money, how its policies affect the
economy, and where it's putting money into public services and programs. This data-driven
analysis helps us make informed choices, make sure the government's money is managed well,
and see if it can pay its bills while dealing with the country's changing needs and problems. In
this introduction, we'll explore the important factors and reasons why looking at trends in how
the UK government earns and spends money is essential.

Economic Conditions

The United Kingdom (UK) has a mixed-market economic system, which combines elements of
free-market economics with government intervention in the economy. The United Kingdom's
economic system is a highly advanced social market economy. In terms of nominal gross
domestic product (GDP), it ranks sixth globally, tenth in terms of purchasing power parity (PPP),
and twenty-first in terms of nominal GDP per capita. Its nominal GDP accounts for 3.1% of the
nominal global GDP. The GDP of the UK is 2.3% of the global GDP in PPP terms.
In the "subdued growth" base case scenario, the UK economy will expand by roughly 0.1% in
2023 and avoid a recession. This scenario is predicated on the absence of geopolitical upheavals
and the nation benefiting from the "dullness" of a return to more typical domestic and
international circumstances with less policy uncertainty.
In the "prolonged damage" scenario, the dangers to the UK economy become apparent. The most
obvious risk is that inflation will be unusually high due to rising prices for food, services, and
wages, or because of changes in geopolitics. This may be followed by protracted strikes that
affect large portions of the public sector and result in missed work hours. According to this
forecast, UK economic output would shrink by roughly 0.9% this year.
Projected annual average real GDP growth by scenario

‘Subdued growth’ ‘Prolonged damage’

2023 0.1% -0.9%

2024 1.0% -0.4%

2025 1.8% 1.9%

Here are a few significant characteristics of the UK economic system:

1. Free Market Capitalism: The economic system of the United Kingdom is primarily based on
free-market principles. Individuals and businesses have considerable freedom to own and operate
their businesses, make investment decisions, and engage in trade. Prices, production, and
distribution of goods and services are largely determined by the market.
2. Government Intervention: While the United Kingdom supports free-market capitalism, there
is also significant government intervention in various aspects of the economy. Regulations,
taxation, and government spending on public services and infrastructure are all part of this
intervention.
3. Welfare State: The United Kingdom has a well-developed welfare state that offers a variety
of social safety nets, including medical treatment through the National Health Service (NHS),
unemployment benefits, housing assistance, and education. This ensures that citizens have access
to basic services and a living standard.
4. Regulatory Framework: In the United Kingdom, the government regulates a wide range of
economic sectors in order to protect consumers, promote competition, and address externalities.
Regulatory bodies monitor industries like banking, utilities, and telecommunications to ensure
fair practices and protect the public interest.
5. Taxation: The United Kingdom imposes a number of taxes, including income tax, corporate
tax, value-added tax (VAT), and others. Taxation is used to fund government services and social
welfare programs.
6. Monetary Policy: As the country's central bank, the Bank of England is responsible for
monetary policy. It sets interest rates and aims to keep prices stable while promoting economic
growth.
7. Trade and Globalization: The United Kingdom has an open economy and participates in
international trade and investment. Membership in the European Union facilitated trade with EU
member states (up to the knowledge cutoff date of 2022). Following the United Kingdom's exit
from the European Union (Brexit), the country negotiated new trade agreements and sought to
establish its own trade policies.
8. Financial Services: The United Kingdom is a global financial center, and the country of
England is well-known for its robust financial sector. It includes banking, insurance, and asset
management services, all of which make significant contributions to the country's economy.
9. Economic Challenges: The United Kingdom, like many other countries, faces economic
challenges such as income inequality, regional disparities, and the need to adapt to technological
advancements and changing global economic conditions.
It is important to note that economic systems can evolve over time, and that a government's
specific policies and priorities can influence how the economic system operates.

Sources of Government Revenue of UK

The major sources of government revenue of UK include Taxation, income tax, corporate tax,
value added tax, national insurance contributions, excise duties etc. the below table shows the
amount of revenues from each source over the period of 2018-2022.

Sources of government revenue government Revenue:

Sector of government expence of UK

Sector of expense( in billions) 2018 2019 2020 2021 2022
Public pansion 159 165 161 163 166
National health care 147 153 164 219 216
State education 86 88 91 96 100
Defance 47 50 51 53 54
Social Security 113 114 120 141 139
State protection 31 33 35 39 40
Transport 30 33 34 49 45
General government 14 15 17 21 31
Other public service 147 152 161 284 175
Public sector interest 56 51 50 42 73
830 854 884 1107 1039
Income and Capital Taxes: In 2022, the UK government collected £313.1 billion from taxes on
people's income and capital (like investments). This money comes from individuals and
businesses paying taxes.

National Insurance: In the same year, they received £160.9 billion from National Insurance
contributions, which is a special tax that helps fund things like healthcare and pensions.

Indirect Taxes: The government earned £349.1 billion from indirect taxes in 2022. These are
taxes on things like goods and services, like the Value Added Tax (VAT).

Fees and Charges, Business and Other Revenue: This category includes money from various
fees and charges. In 2022, it added up to £78.6 billion.

Sector of government Expenditure of UK

Sector of expense( in billions) 2018 2019 2020 2021 2022

Public pension 159 165 161 163 166

National health care 147 153 164 219 216

State education 86 88 91 96 100

Defence 47 50 51 53 54

Social Security 113 114 120 141 139

State protection 31 33 35 39 40

Transport 30 33 34 49 45

General government 14 15 17 21 31

Other public service 147 152 161 284 175

Public sector interest 56 51 50 42 73

Total Direct Expenditure 830 854 884 1107 1039

Sources of Government Expenditure of UK

Table 2.0 shows the total expenditure and expenditure by category incurred by the UK
government throughout the last 5 years starting from 2018 to 2022. The areas where the UK
government spends he most are Public pension, National health care, Social Security, and Other public
service.

Table 2.0: Sectors of Government Expenditure in UK

Figure 08: Sectors of Government Expenditure in UK

Figure 08 shows government expenditure of the UK in the form of a bar graph over the past 5
years.

Public Pension:
Public pension is the state benefit given to the retired citizen at the age of 66. The illustration
down below shows the public pension given by the government from 2018-2022 has an
increasing trend. They started with the lowest value of £159 billion in 2018 and increased, but in
2020, there was a decline in the public pension by £4 billion and raised again in 2021. As the
illustration below is an upward trend and it has been like this for the past 5 years, we can assume
that in future it will also be an upward trend.
Figure 09: Public Pension

National Health Care:

A state benefit given to the UK citizens for the purpose of free medical treatment. Figure 10
shows an increasing trend of the National Health Care from the year 2018-2020. In 2018, the
national health care facility was £147 billion which increased by £69 billion by the year 2022.
Therefore, it can be assumed that in the upcoming year the national health care expenditure by
the government will increase.

Figure 10: National Health Care

State Education:
A Benefit provided by the government for education purposes like school, collage and
university.
Illustration 10 shows an upward slope of state education from the year 2018-2022. The highest
£100 billion in 2022 and the lowest is £86 billion in the year 2018. With this upward trend, it can
be safe to presume that in the future the government will increase their spending in this sector.

Figure 11: State Education

Defense:
Expenditure done by the government for the military army. The graph below demonstrates an
upward trend in the defense sector for the year 2018-2022. From the figure it can be seen that the
government has £47 billion in 2018 to £54 billion in 2022. To conclude, the government
expenditure in defense is likely to increase in the coming year.

Figure 12: Defense

Social Security:
This is a benefit given to the disadvantaged people and unemployed people. The graph below
illustrates a steady increase in social security of the year 2018-2022. In 2018, the government
spent £113 billion on social security which increased to £141 billion by 2020; however in 2022,
the government expenditure reduced by £2 billion. Therefore, it is safe to say that the forecast of
this trend is unpredictable.

Figure 13: Social Security

State Protection:
Government spends money to protect the state. The diagram below demonstrates a steady
increase in state protection from 2018-2022. In 2022, the government spent £40 billion which is
the highest spending in this sector and the lowest is £31 billion in 2018. With this trend analysis,
it can be figured out that in the upcoming year there might not be much of a difference in the
government spending.

Figure 14: State Protection

Transportation:
Figure 15 illustrates a steady increase in transportation from 2018-2020 then a sharp increase
from 2021-2022. From 2018-2020 transportation expenditure was increasing by approximately
£2 billion starting from £30 billion; however from 2021-2022, the expenditure raised to £45
billion. In this graph it is nearly impossible to make future trend analysis.

Figure 15: Transportation

General Government:
Figure 16 illustrates the upward trend of general government expenditure from 2018-2022. In
2018, the government spent £14 billion and it increased throughout the past 5 years. So, we can
say that the government is likely to increase their expenditure in general government in the
future.

Figure 16: General Government

Other Public Services:

These are other public services on which the government has been increasing their expenditure.
The graph shows a steady increase from 2018 to 2020, but in 2021, the government expenditure
increased to £284 billion which declined in 2022 to £175 billion. Hence, it is quite impossible to
say whether the government will continue to increase their expenditure or not.
Figure 17: Other Public Service.

Public Sector Interest:

Starting from 2018 to 2021, the government expenditure in public sector interest declined
steadily which can be seen in the graph below. However, in 2022, the government sharply
increased their expenditure to £73 billion. So, we can say that the government might consider
increasing their expenditure for public sector interest.

Figure 18: Public Sector Interest

Conclusion

In summary, looking at how the UK government earns and spends money over time is really
important. It helps us understand how well the country is doing financially and what it prioritizes
economically. This information is useful for making smart decisions, managing money wisely,
and checking if the government can meet its financial commitments while dealing with the
country's changing needs and problems. This analysis is crucial for politicians, economists, and
regular people because it gives us insights into the country's financial health and how
government policies affect the economy and public services.

Reference

https://www.statista.com/topics/6500/the-british-economy/

https://www.elibrary.imf.org/view/journals/024/1978/004/article-A004-en.xml

https://www.mdpi.com/2673-4060/3/2/9