Are Government Spending and Taxes Too High (or Too Low)?

Abstract

Arguably the biggest change in the nature even of market economies in the last hundred years has been the increase in the economic role of government. The activities and responsibilities falling under this head have varied with circumstances, but the most universal and consistent theme has been the growing prominence of government as a spender both on goods and services and on transfer payments to other economic agents. The objects o f government spending include the traditional collective products of the legal system, the civil service and the armed forces. They also include the major pillars of the welfare state—social security, health—care and education—as well as other items such as the transport and urban infrastructure, public housing and various forms of assistance to industry and agriculture. These wider objects of government expenditure are mostly popular with the electorate at large, besides being invariably supported by specific advocates and interested parties. Increases in spending are generally easier to bring about than reductions. At the same time, all these objects have to compete for approval and resources not merely with one another but with people's wish to retain as much income as possible for their own private disposition. Tax reductions are no less popular than increases in spending. This article discusses recent UK government policy towards public expenditure and taxation, and some of its impacts upon social welfare.