Local Government
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Public expenditure is the total amount of monies that are spent by the local government, nationalised industries and public corporations. including all capital spending of the central and local governments, any loss incurred by public corporations and the grants loans and debt interest carried by any of the above. Some of this public money is spent directly by the government on goods and services and approximately half of local government expenditure goes on transfer payments, such as pensions, grants and loans to industries. The former represent the public sectors claims on the resources of the economy, while the latter is a transfer of purchasing power between individuals. The governments main source of revenue are taxes, national insurance and trading surplus.
Over time the share of public expenditure spent on different services by the local government has changed. At the beginning of the last century fourty percent of expenditure went on primary activities of defence and administration, sixty years later and this was brought down to a combined total of only ten percent. In the nineties the collapse of the soviet union caused a significant drop in expenditure in defence. But there has been no easing of pressure in the areas of social security, education and health which account for two thirds of all local government spending. as societies grow richer and people live longer, and technological change increases the need for a more skilled and better educated workforce, so there is more demand for these services.
The role of public expenditure - its total distribution across different programmes, and attempts to increase, cut back, or balance the total in relation to government revenues - lies at the heart of policy making. Academic studies, memoirs of ministers and media reports of the spending process remind us of the clashes between the conflicting ambitions, values and purposes of ministers. Departments like education, health social security and defence for example have major spending programmes. The reputations of ministers for these departments vis-a-vis their respective clienteles depend in some measure how successful they are seen to be in extracting resources for their departments. They have to contend with the treasury and the chief secretary, which is more concerned with the overall spending picture than financial markets.