British Government's Use of Spending Reviews

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Introduction

The term spending refers to the expenditures that are made by any government. Here in this paper, we will be particularly focusing on the government spending or expenditures made by the government of Britain. Government spending or government expenditure takes into account all the investments and consumptions but does not includes transfer payments that are made by the state of the country. Government final consumption expenditure refers to the acquisitions of services of goods that are made by the government for utilizing them currently in order to satisfy the collective or individual needs of the community members while the term government investment or formation of gross fixed capital is classified as acquisitions of services and goods made by the government that are planned to benefit in the future such as the investment in the infrastructure or spending research. Transfer payments are those transactions in which the government expenditure which does not acquires the services and goods and only represents the transfer of the money such as the payment of social security. The two types of government spending that are gross capital formation and final consumption expenditure together make one major component of the gross domestic product of the country.

Discussion

Spending reviews were introduced in the year of 1997 by the chancellor of that time in the United Kingdom, Gordon Brown, who formulated budgets for every department of the government for the period of next four years. Before the year of 1997, the framework of spending reviews was established on year by year basis that is only for one year. The core reason for making of spending review was to make long term plans easier to be managed. Spending review is considered to be the main tool of the government in order to decide how much amount of money is required for hospitals, schools and other public service departments.

The governments Treasury department places the overall restriction for public spending. Later it distributes resources between various departments, which are according to the priorities of the government. These costs are known as Departmental Expenditure Limits (DELs). It then depends upon the departments to choose how best to handle and spread this spending within their own places. Some government expenditures cannot be set in this way. Public protection advantages, for example, can differ considerably and are therefore handled in the budget and the pre-Budget Review.

How this will affect economy and people as a whole?

Large reduction in spending of the government will mean job failures within the public sector. Increasing lack of employment will outcome in sluggish spending within the consumer and could also be the reason of slowing the recovery of the economy. This will result in the decreased level of services and advantages in some of the places. Chancellor Alan Johnson has stated that the decreased plan would "basically modify our community". Respected economist, Mr.David Blanch flower considers that reducing will signify "the biggest macro-economic error in a century". Chancellor George Osborne said the consequences will ...