Public expenditure of government expenditure come from the budget from i.e. current budget and capital budget. The current budget is for non-development expenditure such as defense, unemployment allowances etc. whereas capital budget expenditure are for development purposes. e.g. construction of roads, dams, railways etc. In order to achieve a high growth rate in the economy, government expenditure has got to be maintained at a reasonably high level, particularly in third world countries. However, in the world today. We see that many third world countries are suffering. This may be attributed to the natural calamities, war-zones and inappropriate management of the country. Resources are not being fully utilized or even worst still misallocated and wasted.

The question is what are the causes of increase in public expenditure? Generally public expenditure for each country rises each fiscal year. The increase may be due to the following reasons.

For defense:
The World today is said to be at war without a battle, in general. Developed countries are producing modern armaments, other countries purchase it. A country is either said to be at war or is trying to prevent it, whichever way, their Government expenditure on defence rises and rises. The pentagon, USA is reported to having increased its defence expenditure to 23 Trillion and this includes the orders placed by foreign countries, which have yet to be settled.

For welfare services/social services:
In order to meet the rising demand for houses, electricity, water supply, means of communication, just to mention a few, have got to be increased, and of course social services such as free education and, health facilities have got to be provided.

To increase public revenue:
Ever since the industrial revolution, demand for heavy plants and machinery have shot up. As a result per capita incomes of the individuals have risen. Hence, they are to be taxed more dearly. As a result government revenue is increased and hence government expenditure must be increased as it must not have a surplus budget particularly in case of third world countries. This would hamper their economic growth.

For growth of population:
As a result of an increase in population public expenditure is adversely affected due to the fact that the Government has to increase its expenditure on the supply of goods and services for the people.

For government subsidies:
As it is in the third world countries, in order to encourage entrepreneurs to increase their exports, the government covers up a certain percentage of the cost. As a result the govt. expenditure in the aggregate sense is largely increased.

To get or give a higher price level of resources:
Prices of resources are now-a-days reaching the sky height, particularly in the case of petroleum where OPEC countries have a monopoly over the resource. Besides that prices of other goods and services have also gone up and the public expenditure has also increased to meet the requirement.

A result of defective administration:
This is a serious matter and occurs to a great extent in some countries. Misallocation of resources takes place to corruption and as a result government expenditure is wasted.

For economic development:
Basically every government wants to achieve a desirable level/standard of living and in order to do so it has got to maintain a fairly high rate of expenditure in the public as well as private sector. Research has to be undertaken in both the agricultural as well as industrial sector in order to allocate, financial resources and in the meantime a certain amount of expenditure has got to be borne by the Government.

Thus, it must be understood that for government expenditure to exceed the government revenue, such a phenomenon is not an undesirable phase but rather it is a sort of productive measure in order to ensure that there is sufficient growth in the economy.

The basic aim of government expenditure is to ensure that the society obtains a maximum level of satisfaction as far as possible i.e. a high standard of living as well as environments. Thus, the government must ensure that the marginal benefit of each scheme must be equalized with each other. Every government motto should be maximum expenditure, maximum benefit, which means that all the resources must be properly allocated. Thus, the government should focus on the main expenditures such as energy projects, research for agricultural purposes to increase productivity etc.

As it is in England, it is the duty of the Chancellor of Exchequer to ensure that resources are properly allocated. The chancellor is given the authority to sanction projects for expenditures and he would have to answer to Parliament for any wrongdoing. In short there must be a legal authority to sanction public expenditure so that the audit department may scrutinize the expenditure incurred and eliminate extravagance. This canon means to say that the public expenditure should not be rigid. It should vary accordingly with the state of affairs. It should be fairly elastic. During the phase of a depression the Government must increase its expenditure so that stability of the economy is attained. Similarly during the phase of expansion or rather at the boom period, Government expenditure has got to be reduced and at the same time it must not adversely affect the people.

Public expenditure must be organized in such a way that it promotes the growth of the economy and reduces, if not totally eliminates the unequal distribution of wealth. Through fiscal policy the Government should control the price level with a high rate of growth and at the same time maintain a high level of expenditure to promote growth. However, the Government must govern within a means and keep its budgets balanced as far as possible.