Government Expenditure - Explanation

Government expenditure is vital for the efficient running of the economy. The need for much of the government expenditure arises from the facts that some goods will not be provided at all by a free market economy (public goods ) and that others will be under-provided (merit goods ). There is more detail on each of these types of goods in the theory section of government expenditure. It is spending on these goods that accounts for a large proportion of government spending (health, education, police and defence, among others).

Some government expenditure is aimed at providing a safety net for the less-well-off in society and ensuring that they are able to survive in the event that they lose their jobs or have insufficient income. The department that deals with the allocation of most of this money is the Department of Social Security. Payments of this nature are known as transfer payments and there is more detail on them in the theory section of government expenditure.

Other government expenditure is aimed at various areas that may be considered important in a developed economy - providing a transport infrastructure, supporting the work of local government and servicing any debts that may have been accumulated in the past.

The breakdown of government expenditure for 1999/2000 is shown below:

The figures for each of these spending categories for the 2001/2 fiscal year are: