HM Treasury


Budget glossary

Act of Parliament

An Act of Parliament creates a new law or changes an existing law. An Act is a Bill approved by a majority in both the House of Commons and the House of Lords and formally agreed to by the reigning monarch (known as Royal Assent). Once implemented, an Act is law and applies to the UK as a whole or to specific areas of the country.


An increase in the value of an asset. Is also used for currency: when the value of one currency rises in relation to another.


Anything that is capable of being owned or controlled and that is held to have positive economic value is considered an asset.

Bank Rate

Also referred to as the ‘base rate’, the Bank Rate is the main interest rate set each month by the Bank of England’s Monetary Policy Committee (MPC) in order to meet the Government’s remit to control inflation. It is the rate at which the Bank of England will lend short-term money to financial institutions. This in turn affects the rates that commercial financial institutions offer their customers for loans and deposits. (N.B. the Bank Rate refers solely to the rate set by the Bank of England. In other countries, central banks use different terminology for their main interest rate).

Bank of England (BoE)

The Bank of England is the central bank of the United Kingdom, and is independent of the Government. It has two core purposes - monetary stability and financial stability. Since 1997 the Bank has had statutory responsibility for setting the UK's official interest rate.


A Bill is a draft law; it becomes an Act of Parliament if it is approved by a majority in the House of Commons and House of Lords, and formally agreed to by the reigning monarch (known as Royal Assent). Once implemented, an Act is law.


A certificate of debt issued by a government or corporation in order to raise money - a bond is essentially an IOU. A bond states when a loan must be repaid and what interest the borrower (issuer) must pay to the holder. In the UK, Government bonds are called ‘gilts’, and in the US they are called ‘Treasury securities’.

Budget (The)

Currently the Treasury presents two economic reports to Parliament each year. In spring the Chancellor presents the Budget, and in autumn, the Pre-Budget Report (PBR). In these two reports the Chancellor can review taxes and spending plans. Many measures announced in the Budget and Pre-Budget reports are implemented in the annual Finance Bill.

Building societies

Financial institutions that are characterised by mutual ownership (meaning they are privately owned and customers have a right to vote on decisions made by the society). They typically offer a range of services but specialise in providing mortgages.


Assets that can be invested, saved, or used as funding. Capital may be financial (e.g. money), physical (e.g. machinery) or intangible (e.g. intellectual property).

Capital expenditure

Money spent on building, purchasing or upgrading infrastructure, buildings, machinery or other physical assets.

Capital gain

The amount by which an asset's selling price exceeds its initial purchase price.

Central bank

A central bank is a banking institution that regulates all of the currency supplies in an economy and is granted the exclusive privilege to lend government the national currency; acts as banker to the Government and lender of last resort to commercial banks. In the UK the central bank is the Bank of England.

Claimant Count

The number of people claiming unemployment-related benefits. Since October 1996 this has been defined as the number of people claiming Jobseeker's Allowance.

Corporation tax

A tax on the profits made by companies.

Credit crunch

Situation where banks across the economy significantly reduce lending to each other due to falling confidence that loans will be repaid. This restricts the flow of money around the economy and can result in less credit being available for consumers and businesses, resulting in an increase in the cost of obtaining credit.

Deficit (or Budget Deficit)

The amount by which government spending exceeds government income during a specified period of time (usually a year).


A persistent fall in the general price level of goods and services.


The need/desire for a product or service, backed by the ability to purchase.


A decrease in the value of an asset. Is also used for currency: when the value of one currency falls in relation to another.

Developing countries

A term generally used to describe countries that have a low national income.

Economic and Financial Affairs Council (ECOFIN)

A Council composed of the Economics and Finance Ministers of all 27 European Union member states. ECOFIN discuss and reach agreement on how to take forward a number of economic and financial issues that affect the whole of the European Union.

Economic growth

Typically refers to an increase in a nation's capacity to produce goods and services.


Another term for shares.

Exchange Rate

The rate at which one currency can be exchanged for another.


A payment, or the promise of a future payment. Also one of the ways to measure a country’s GDP.


Goods and services sold to other countries.

Finance Bill

The annual Finance Bill encompasses changes to be made to tax law for the year. Its formal description is ‘a Bill to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with finance.’ The Finance Bill puts into law the many measures announced in the Budget.

Financial Services Authority (FSA)

An independent institution that regulates the financial services industry in the UK. The FSA has statutory powers under the Financial Services and Markets Act 2000.

Fiscal policy

The use of government spending and tax policy to affect changes in the economy.


A group of seven major industrialized countries: Canada, France, Germany, Italy, Japan, the UK and the U.S. The Finance Ministers of each of these countries attend regular G7 meetings to discuss economic policy issues.


A group of finance ministers and central bank governors from 20 economies, the G20 is a forum for cooperation on key issues in the global economy.

Gross Domestic Product (GDP)

GDP is a measure of economic activity. It is the sum of all goods and services produced by a country over a given time period (usually a year). A rise in GDP shows the economy is growing, whilst falling GDP means the economy is contracting. GDP can be measured in three ways:

  • Income (the value of the income generated mostly in terms of profits and wages);
  • Output (the value of the goods and services produced); and
  • Expenditure (the value of the goods and services purchased).

Goods and services bought from other countries.

National Income

The sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings received in a given period of time. One of the ways to measure GDP.


The upward price movement of goods and services. Often measured over a 12 month period.

Interest rate

A cost that is charged by a person or organisation that lends money to another. Usually expressed in percentage.

International Monetary Fund (IMF)

The International Monetary Fund (IMF) is an organisation of 186 countries, promoting global monetary cooperation, financial stability, international trade, employment and sustainable economic growth.


Liquidity refers to the ease with which something can be converted to cash with little or no loss of value.


The study of overall economic headlines e.g. inflation, trade, output and the level of employment.


The study of how economic resources are allocated in and between parts of the economy, including individuals and households.

Monetary policy

The regulation of the money supply and interest rates by a central bank, such as the Bank of England, to achieve economic objectives.

Monetary Policy Committee (MPC)

The committee of nine experts which meets each month to set the official Bank of England interest rate, known as Bank Rate. The MPC is independent of government.

National debt

The total amount of debt owed by a government, raised through borrowing from individuals and institutions. It is the sum total of all previously incurred deficits that have not been paid.


The act of bringing a privately owned asset, such as a company or property, under state control.


The goods and services produced as a result of economic activity. One of the measures used for GDP.

Organisation for Economic Co-operation and Development (OECD)

The OECD provides a forum where governments compare policy experiences, cooperate on common issues, identify good practice and coordinate domestic and international policies.


Parliament examines what the Government is doing, makes new laws, and debates the issues of the day. The business of Parliament takes place in two Houses: the House of Commons and the House of Lords. Both Houses hold debates in which Members discuss government policy, current issues, and debate and pass legislation.

Pre-Budget Report (The)

Currently the Treasury presents two economic reports to Parliament each year. In spring the Chancellor presents the Budget, and in autumn, the Pre-Budget Report (PBR). In these two reports the Chancellor can review taxes and spending plans. Many measures announced in the Budget and Pre-Budget reports are implemented in the annual Finance Bill.

Private sector

The part of a nation's economy which is not owned by the Government.


The process of transferring a government-owned business, service, or asset to the private sector.

Public finances

The Government’s accounts including tax receipts, expenditure, borrowing and debt.

Public sector

The part of the nation’s economy that is under the Government’s ownership.

Quantitative Easing (QE)

A process whereby the central bank injects money directly into the economy in order to stimulate bank lending and control inflation.


The commonly accepted definition of a recession in the UK is two or more consecutive quarters (a three-month period) of contraction in national GDP.

Retail Price Index (RPI)

The RPI is a measure of inflation, based on changing prices of goods and services for any given month in relation to same month in the previous year. The RPI is similar in nature to the Consumer Price Index (CPI), however, there are differences in the basket of goods covered. In particular, the RPI includes mortgage interest payments and housing depreciation, whereas CPI does not.


A share is a document entitling the holder to be one of the owners of a company.


People and institutions that own shares.

Spending review

Spending Reviews set firm and fixed multi-year expenditure limits or budgets for government departments and define the improvements that the public can expect from this expenditure.

Sustainable growth

Economic growth that can continue over the long-term without damage to the environment, or the exhaustion of non-renewable resources.

Treasury (The)

The Treasury is the United Kingdom's economics and finance ministry. It is the governement department responsible for formulating and implementing the Government's financial and economic policy. Its aim is to raise the rate of sustainable growth, and achieve rising prosperity and a better quality of life with economic and employment opportunities for all.


The number of individuals actively seeking work who are currently without a job. Unemployment is expressed as a percentage of the total available work force.

World Bank

Owned by 186 member countries, the World Bank is a source of financial and technical assistance to developing countries. It can provide loans and grants for a wide array of purposes that include investments in education, health, public administration, infrastructure, financial and private sector development, agriculture and environmental and natural resource management.


The yield of an investment is the annual income it provides as a percentage of its price.