IRSHAD CV has been a student in Economics. Now he is doing Masters in Economics. He completed B.A. Economics from the University of Calicut.
Today, public expenditure has a wide scope in the planning process and the growth and development of an economy. Some of the common economic problems are unemployment, inflation, deflation, poverty, inequality etc. To solve these problems of an economy, it is very essential to follow certain measures of economic stability. Here the role of public expenditure is more significant. Anyway, economists like Shiras, Butcher etc were suggested some of the canons in public expenditure. It can be alternatively called as principles or rules of public expenditure.
It is clear that, public expenditure has certain definite objectives. For instance, public expenditure must promote the social and economic welfare to bring equality in the society. Public expenditure can also influence the degree of utilization of resources. Therefore proper utilization of social and economical resources is another important aim of public expenditure.
As mentioned above, there are some principles in public expenditure. Some of the important canons of public expenditure are listed below.
I) Canon of Benefit
Canon of benefit is one of the important canons put forwarded by Professor Kinley Shiras. By this canon, public expenditure should aim to achieve maximum social benefits. It is based on the principle of equality. Because maximum social benefits can be established only when the public expenditure spends based on the principle of equality. That is, this canon accentuates to eradicate inequalities and other social burdens in between different locations, uses of economic resources, benefits of each sectors etc.
II) Canon of Economy
Similar to the canons of taxation, canon of economy is a strategic one. It refers the economizing the public expenditure. That is public expenditure of an authority must aims to reap maximum benefits with limited costs. Canon of economy is again emphasis on the prevention of over expenditure and wastage in public finance. There must be proper planning in the economy for the better utilization of its resources.
III) Canon of Sanction
Canon of sanction in public expenditure is connected with the process of approval of various programs and schemes of government such as sanction of projects, researches, implementation of various recommendations etc. There should be a cost-benefit analysis in the canon of sanction. Then only maximum social advantages can be attained.
IV) Canon of Surplus
Canon of surplus is another principle of public expenditure. This says that, the government must follow reasonable policies in its budget. Canon of surplus accentuate on the avoidance of deficit budget. Even though deficit budget helps the economy to generate more employment and income particularly in times of depression, over spending will badly affect the entire economy and the control of government over the economy. In short, canon of surplus highlights the major issues of over spending and long run experienced deficit budget.
v) Canon of production and Distribution
This principle of public expenditure refers to the public expenditure must ensure maximum productivity. This will help the country to achieve growth and development. Along with that, the public expenditure aims at the sustainability. Similarly on the side of distribution, public expenditure must be based on the principle of equality. It should help the country to eliminate inequality in gender, community, classes etc.
VI) Canon of Elasticity
The principle of elasticity says that, public expenditure must have the character of flexibility. This is because, sometimes, the economy may in need of huge public expenditure particularly in the time of depression. Therefore, it must be elastic in nature. Then only, economy can maintain stability.
VII) Canon of Certainty
Canon of certainty refers that, there should be a surety in public expenditure. Because, there are so many groups in the economy, whose are interested to know about public expenditure. Surety in public expenditure denotes the government support. This is very essential for the creation of inspiration among producers, consumers and other economic agents.
VIII) Canon of Neutrality
This principle talks about the equilibrium in public expenditure. This means public expenditure must keep an equilibrium level which is favorable to the entire parts of the economy. It should not badly affect the economy such as production, distribution, exchange tec. In fact, canon of neutrality is emphasis on the sustainability of an economy.
IX) Canon of Program and Canon of Performance
Canon of program says that, there should be a good programs and schemes in the public expenditure which ensure the equality in the economy. The programs may be in the forms of welfare schemes, social insurance tec. Similarly, canon of performance is emphasis on the evolution of programs and schemes implemented in the economy. Good system of auditing will ensure the better maximization of the society by eradicating corruption, unlawful practices etc.
As mentioned above, there are many canons or principles in public expenditure. These principles are suggested by different economists. Some of the most important canons are suggested by Professor Shiras and Butcher. Anyway, all these canons are aims at the optimum utilization of resources through the public expenditure.
Juan on February 20, 2015:
The ablitiy to think like that is always a joy to behold