How do I change the spacing between the slides on the handouts in Powerpoint?

There's no simple way to change the way it works, unless you have a printer
whose driver supports "n-up" printing (ie, printing multiple pages per sheet).
Many do nowadays.

My HP laser printer, for example, has a Finishing tab in the printer properties
dialog box. I can choose anything from 1 to 16 pages per sheet there. If I then
print slides, they'll be considerably larger, with less wasted space, than if I
printed the same number of slides per page via PPT's handout feature.

If you are prepared to spend $40 then Shyam's Hand Out Wizard is a good bet
http://skp.mvps.org/how/
There's a fully functioning free trial.

Researched by Shabbir Hazari