Index additional personal allowance 224 contestable markets 383 air passenger duty 197 contract culture 130 allocative efficiency 6, 7, 8, 24, 31, 40, contract curve 23 86, 95, 106, 187, 313, 326, 379 contracting out/in 128-9, 133, 308, 309, see also first best and Pareto optimum 375, 378; competitive v. non­ Arrow problem 104 competitive 128 asset specificity 37, 39, 373, 396 contract pricing 393 contributory vs non-contributory backward-bending supply curve of benefits 163, 169 labour 64-5 control total 153-4 bank lending controls 124 corporation tax 55, 188, 194-5, 226-7 basic income scheme 279-81 council tax 230 Baumol's productivity differential crowding in 117 model 49 crowding out, direct and indirect 75-83, Beveridge, W. H. 180, 182,262 117 bounded rationality 6, 14, 37, 39, 372, current cost accounting 303 396 Customs and Excise duties 56 Brown , C. V. 45 build own operate (BOO) scheme 349 dash for gas 325 bureaucratic empire building 105 deadwe ight loss 63-4 Business Expansion Scheme 125 demand -determined expenditures 248 business rates 230 demand -side policies 118 despotic benevolent government capital alIowances 194 model 100 capital gains tax 203, 228 development model 44 capital transfer tax 227 discounted cash flow 78 cardinal welfare 87 disincentives to work 64, 68, 69, 76, 187 cash limits 50, 152 displacement effect 44 cash planning 50, 152 distribution of income 53 Channel Tunnel 139 distributional coalitions 40, 107 charges 85-98, 131, 300, 350-64 dividend controls 124 child benefit 169-71 Docklands Light Railway 139 Child Poverty Action Group 170 Child Support Agency 130, 168,251 earmarked taxes 216-22 child tax alIowance 169 economic rent 56-7, 58; Paretian v. city technology colleges 122 Ricardian 56 Civil Service agencies 130-1, 156 economy, efficiency and Commission on Social Justice 180, 274, effectiveness 380 283 enabling approach 144, 180, 274, 368 compensation test 25 Enterprise Allowance Scheme 121 Competition Act 1980 125 equilibrium, partial v. general 20; community charge see poll tax partial 72 compulsory competitive tendering equity 7, 186, 274; tradeoff with 367-401 efficiency 53, 263; equity and consumer, nature of 4 charges 91-2 consumers' surplus 63, 86 estate duty 227 403 404 Index excess burden see deadweight loss instrumental view 4 excise duties 188, 229-30 intermediate consumption goods 46 external benefits see externalities, internal markets 129 positive invalidity benefit 171-2 external costs see externalities, negative investment income surcharge 124, 191, externalities 29,31,32; negative 32-4, 270 300, 332-3; positive 34-7, 38, 63, invisible hand 10, 24, 26, 38 90,331 Jackson, P.M. 45 family allowance 170 Jaffa Cakes 200 family credit 92, 162, 164, 282 job seeker's allowance 162 Family Expenditure Survey 201 Job Training Scheme 122 family income supplement 164 Joseph Rowntree Foundation 166 first best allocation of resources 27, 263 see also allocative efficiency and Keynes, M. 13, 14 Pareto optimum J. Keynesian liquidity trap 80 fiscal drag 72, 190 fiscal exchange model 100 fiscal stress 52 labour market policies 120-3 fiscal transfer model 100 Laffer curve 71 foreign exchange controls 123 laissez-faire 13, 25, 120 franchising 307 leasing 140 free riders 30, 37, 97 Leontief, W. 15 full-cost charging 88 leviathan model 44, 95, 101-5 funny money 151-2 liberalisation 307-8, 376 London School of Economics Welfare Galbraith, J. K. 15 State Programme 178 general government expenditure lone parents 165, 167 (GGE) 42, 153-4 Lorenz curve 267-8 General Household Survey 166 gilts 74, 252 Maastricht Treaty 205, 258 Gini coefficient 268-9 Manchester Metrolink 140 governance structures 37, 368 marginal cost, long-run u, short-run 87 GP fundholders 129 marginal rate of substitution 22, 66 marginal rate of transformation 22, 66 Hayek, F. A. 186 marginal tax rate, effective 69 hire purchase (HP) controls 124 market failure 8, 38, 40, 42, 315 historic cost accounting 303 market, nature of 6 housing benefit 162 married couple's allowance 224 means-tested benefits 163 imputed rents 204 means-testing 91 incapacity benefit 172 median voter theorem 45,46 incentives to work 56, 64, 121 medium-term financial strategy 248 income, definitions of 265-6 merit goods 28, 29, 38, 90, 331, 333 income effect 65, 67 merit order system 325 income support 92, 162, 164, 282, 363 middle-class capture 92, 107 income tax 55, 67, 188; rates of 191, Mill, J.S. 9, 13 223 mixed goods 29 industrial development certificates 125 models of government 100-5 inequality aversion 7 models of public expenditure growth: inheritance tax 55, 194, 227 macro models 43-5; inspection effect 44 micromodels 43, 45-52 Institute of Economic Affairs 180 Monopolies and Mergers Institute of Fiscal Studies 165, 268 Commission 125,300,312 Index 405 monopolistic rent 58 private goods 29, 30, 31, 47, 48, 332 mortgage interest relief 224 privatisation 10, 295-8, 301-12, 375-6 multiple deprivation 51, 53 privatisation effect 342 Musgrave, R. A. 44 producer capture 130 national insurance contributions producers' surplus 63, 86 (NICs) 55-6, 190, 205-9, 231-2; profit -related pay 122 integration with income tax property tax 56, 203, 233-5 211-16 public, nature of 7-12 national insurance surcharge 122 public choice 8, 36, 107 national savings certificates 252 public expenditure, cash v. real 42, 147; nationalisation 291-5, 298-301, 302-6 central v. local 154-5; current v. negative income tax scheme 276-8 capital 155; exhaustive v. normative economics 1 transfer 43, 52, 146, 148; public normal profits 18 expenditure/GDP ratio 147-53 public goods 29-31, 37, 38, 48, 300, O'Connor legitimation thesis 75 331-2; pure v. impure 31, 47 office development permits 125 public interest 12 Office of Fair Trading 125 public sector borrowing requirement opportunism 37,373,396 (PSBR) 74-83, 239-61 opportunity cost 22 purchaser-provider split 132-6, 377-9 opting out 133, 378 purchase tax 199 organic state model 44 organisational slack see X-inefficiency QUALGOS 130 Ormerod, P 15 QUANGOS 130 quantity theory of money 80, 240 paradox of thrift 240 quasi-rents 58 Paretian welfare 87 Queen Elizabeth II bridge 139 Pareto optimum 24, 26, 27, 31, 40, 85, 263 ratchet effect 159 see also allocative efficiency and first regulation 11,315-27,334; economic v. best environmental 336 partial overhead charging 88 regulatory failure 314 passport benefits 166 relative price effect 50, 151 payback period investment method 78 rent seeking 2 Peacock , A. T. 44 residential care of the elderly 177 pensions: funded v. unfunded 174; Restart 122 occupational 121; SERPS 174; roles of government: allocative 17; state retirement 173-7 deliberative 10; distributive 17; PEPs 194, 273 instrumental 10; regulatory 17; personal allowance 224 stabilisation 17 petroleum revenue tax 55, 228 Rostow, W. W. 44 PICKUP 122 Rousseau }.-J. 13 planning gain /obligations 142-3 RPI-X 318-25 political constraints model 44 poll tax 59, 67-8, 230 Samuelson, P. A. 30 'polluter pays' principle 347 Say's law 116-17, 119, 123 posit ive economics 1 second best theory 26, 27, 42, 187 poverty, definition of 265 secondary picketing 122 poverty trap 70, 164, 187, 263 shadow tolls 140 premium bonds 252 share option schemes 122 price discrim ination 96-97 shifting, backward u, forward v. printing money 79 lateral see tax incidence private finance initiative 136-42, 257 sick pay 172-3 406 Index simplified planning zones 125 TESSAs 194, 273 Single European Act 237 training 122 single parents see lone parents transactions costs 37, 372-3, 396 Skye road bridge 137 transfer earnings 57 Smith, A. 10 transfer payments see public social justice 146, 262, 274 expenditure Social Security Benefits Agency 130 treasury bills 74, 252 social security expenditures 159-80 Trustee Savings Bank 124 social security reform 164-77 TUPE 386, 391 social security taxes see national insurance contributions unanimity rule 25 stamp duty 227 unemployment benefit 161-2 subsidy: for efficiency 36, 90, 92; for unemployment trap 70, 164, 187,263, external benefits 35; for income 282-3 maintenance 36, 91; in kind u. in universal benefits 279 cash 94; long-tun marginal cost Urban Regeneration Agency 125 90; set aside 36 substitution effect 65, 67 value added tax (VAT) 56,188,197-203, supplementary benefit 164 228-9,232-3 supply-side policies 118-44 variable cost charging 88 Veblen, T. 15 targeted benefits 279 vehicle excise duty 231 tax avoidance/evasion 71, 196, 236 volume planning 152 tax capitalisation 234 voter, calculatively rat ionalS, 6 tax harmonisation 235-7 tax incidence 59-62, 232-3 wages councils 122, 178, 270 taxable perks 196 Wagner, R. E. 44 taxation, principles of 186-7 water 330--66; metering trials 358 taxes, direct v. indirect 55-6; welfare, measures of 87 progressive u. regressive u. Wiseman, J 44 proportional 59, 186; unit v. adalorem 59, 61, 190; welfare X-inefficiency 95, 106, 313, 326, 379, effects 62-4 390 Technical and Vocational Education Initiative 122 Youth Training Scheme 122.