Using the data of Chinese province, we build panel data model based on total and classification of local government’s livelihood fiscal expenditure to prove how the expenditure influences the gap of urban-rural consumption. The result shows that the livelihood fiscal expenditure of local government has an important impact on the consumption gap between urban and rural. Expect culture and health expenditure, increasing education expenditure, social security expenditure and agriculture expenditure is able to narrow the urban-rural consumption gap. While steadily increasing the livelihood expenditure, government should pay more attention to the structure optimizing, urban-rural and regional balancing of the livelihood expenditure, to improve the efficiency of the livelihood expenditure on narrowing the urban-rural consumption gap constantly.