4.5.1

• Current and capital spending

  Government spending is split into categories based on whether the money is spent on an asset that lasts a number of years (such as a new building or vehicle) or is spent on things that are used up (like salaries of civil servants or teachers). The former is referred to as ”capital” spending, and latter as either “resource” or ”current” spending.
• Examples of current spending

  • Salaries of NHS employees
  • Drugs used in health care
  • Road maintenance budget
  • Army logistics supplies
• Examples of capital spending

  • Construction of new motorway and bridges
  • New equipment in the NHS
  • Flood defence schemes
  • Extra defence equipment
• Significance of government spending

  • A key component of AD
  • Can have a regional economic impact e.g. from spending on regional infrastructure projects
  • Important in providing public goods and goods with positive externalities
  • Can help to achieve greater equity in society