Earlier it was thought that ‘Every tax is an evil’ and public expenditure is ‘unproductive’. Such ideas are no more now-a-days. It means that a least amount of tax is to be collected to meet “three duties of sovereign”.
The three duties are maintenance of internal law and order, defence from foreign attack and issue of currency. Now-a-days, public authorities have to incur expenditure on protection of citizens as well as of public welfare and promotion of socio-economic development.
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However, after the great depression of 1930 and war and post war years, increasing attention was paid to the study of public expenditure. So, public expenditure refers to expenses of public authorities like the central, state and local governments.
Adolph Wagner studied the trend of modern states and found that economic growth of a country has been accompanied by increasing state activities and, hence, increasing public expenditure. F.S. Nitti found similar tendencies of expenditure growth in all countries of the world.
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The growth of public expenditure became more prominent in second half of twentieth century and has continued to be so till date. Wiseman-Peacock and Colin Clark have also corroborated the ever-increasing public expenditure by the public authorities.
Precisely, public expenditure is the expenditure incurred by public authorities – central, state and local governments either for the satisfaction of collective needs of the citizens or for promoting their economic and social welfare.
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Factors like population growth, increasing urbanisation, growth of democratic institutions, provision of economic overheads, defence expenditure, maintenance of law and order, welfare activities, provision of public goods and utility services, education and human capital formation, planning and economic development etc are responsible for the continuous growth of public expenditure.