The estimated Government current budget for 2017 is as follows: Government Current Income €53,245m Government Current Expenditure €50,548m (i) Calculate the current budget surplus - Leaving Cert Economics - Question 6 - 2017

One example of government current income is:

1. Direct tax revenue (e.g. income tax).

One example of government current expenditure is:

1. Salaries of all state employees.

The falling unemployment rate can affect the Government's current budget in two significant ways:

Increased Revenue

As more individuals become employed, they contribute more taxes through Pay As You Earn (PAYE). This leads to an increase in overall government revenue from income tax. Additionally, higher employment can boost Corporation Tax receipts from firms due to increased profitability.

Decreased Expenditure

With more people employed, there is typically a reduction in the amount the government pays out in social welfare benefits. This decrease in social security payouts can significantly enhance the government’s budgetary position.

Increase in social welfare payments of €5 per week

Argument in Favour: Increasing social welfare payments can help improve the standard of living for vulnerable groups in society, enabling them to meet basic needs and stimulate increased spending in the economy, which can enhance overall economic activity.

Argument against: On the downside, increasing welfare payments may lead to higher government expenditure, leading to budget deficits if not matched by increased revenue, potentially resulting in higher taxes or borrowing in the future.

Decrease in rate of Deposit Interest Retention Tax (DIRT) from 45% to 39%

Argument in Favour: This decrease may encourage individuals to save more, resulting in increased deposits in banks, which can promote investment and economic growth.

Argument against: However, it may also reduce government revenue from this tax, necessitating cuts in public services or increased borrowing to offset the deficit.