cuts in expenditure

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Reductions in government spending. These may refer to changes in actual government spending which have already taken place, or, more usually, to announcements of planned reductions. Cuts in actual spending may be due to the application of unchanged spending rules in changing circumstances: for example, a reduction in unemployment benefits when employment rises during a boom. They may alternatively be due to a change in policy about spending, for example increasing the stringency of tests for eligibility for benefits. Similarly, announced plans to cut spending may be in anticipation of a reduction in the need for it, or an indication of changes in policy. In an inflationary economy, government spending has to rise in money terms if it is to stay constant in real terms; ‘cuts’ often take the form of money increases smaller than anticipated increases in costs.

Subjects: Economics.

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