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
Exam coaching workshops

A2 Economics Exam Coaching Workshops (Micro & Macro Combined)

This exam coaching and revision workshop is designed to support A2 Economics students in the final phase of their preparation for exams in June 2015. The workshop combines exam technique advice with coverage of our selection of core business economics (micro) and macroeconomics topics.

Learn more ›

Teaching & learning products

AQA A2 Economics Worked Answers (2014)

Exemplar A Grade answers to the ECON3 and ECON4 exam papers sat in June 2014

£5.00

Edexcel AS Economics Worked Answers (2014)

Exemplar A Grade answers, with Examiner commentary, to the Edexcel AS Economics Unit 1 and Unit 2 exam papers sat in summer 2014

£5.00