Fiscal retrenchment means that a government has to introduce deflationary fiscal measures designed to reduce the amount of borrowing and debt that has been run up during the downturn and economic/financial crisis.

Ultimately fiscal retrenchment can be achieved in one of two ways

(1) Raising indirect and direct taxation

(2) Making cuts in the real level of government spending

Both are painful - tax hikes might choke off a tentative recovery and slashing government spending must hit the availability of public services - but fiscal retrenchment is the inevitable consequence of governments who have lost control of their own finances. The UK government was running sizeable budget deficits even when growth was strong - it forgot to mend the roof when the sun was shining.

Featured
CPD courses

Teaching the New A Level Economics: Quantitative Methods

This course focuses solely on teaching & learning resources and approaches to delivering the wider range of quantitative methods contained in the new A Level and AS Level specifications. We've put together a comprehensive collection of teaching materials that will help accelerate your planning and preparation for the extended QM elements for A Level Economics.

Learn more ›

Teaching & learning products

AS Macroeconomics Revision Guide

This 44-page, full-colour printed revision guide is designed to support students preparing for their AS Economics exams on macroeconomics. tutor2u's Geoff Riley provides comprehensive coverage of all the core macroeconomic topics for AS Economics

£4.00

AQA AS Economics Worked Answers (2014)

Exemplar A Grade answers to the AQA ECON1 and ECON2 exam papers in summer 2014

£5.00