Principles of public/government expenditure

Business studies study module

These are the considerations that are necessary before any expenditure can be incurred the government.

They include:

  1. Sanctions:Every public expenditure must be approved the relevant authority like parliament.
  2. Maximum social benefit:Any public expenditure must be incurred in such a way that majority of the citizens are able to reap maximum benefit from it e.g. improved living standards and quality of life.
  3. Flexibility /elasticity-The policy on public expenditure should be flexible enough to meet prevailing economic situations i.e. it should be possible to increase or decrease the expenditure on projects depending on the prevailing circumstances e.g. during drought, it should be possible to spend on famine relief.
  4. Economy-public expenditure should be planned carefully and prudently to avoid any possible waste.
  5. Proper financial management (Accountability)-public funds should be well managed. This should be facilitated maintenance of proper records which should be audited as required.
  6. Productivity-The biggest proportion of public expenditure should be spent on development projects and less on non-development projects.
  7. Equity-Government expenditure should be distributed equitably to all sectors of the economy in order to reduce income and wealth inequalities.
  8. Surplus-Surplus revenue collected should be saved for emergencies or for when collection of revenue is below projections.

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