Canons Of Public Expenditure

Canons Of Public Expenditure

 

INTRODUCTION

The term public expenditure refers to the expenses incurred by public authorities at the Centre, State and local governments, in order to fulfil their obligation to the people of a nation. The ultimate objective of public expenditure should be the well being of the people.

These canons were down by economist George Findlay Shirras (1885-1955). 

1. Canon of Economy

According to Prof. Findlay Shirras, while incurring public expenditure, governments must avoid wasteful and unnecessary expenditure. Public expenditure should be productive, that is, the end result of expenditure must achieve the pre-determined objectives.

2. Canon of Surplus 

According to the canon, as far as possible, deficits in government budget should be avoided. It is always wise for any government to aim for surplus budget. If the canon of surplus is not aimed at, government may increase their spending and incur increasing deficit, leading to increased debt burden.

3. Canon of Sanction

 Every public expenditure must have prior approval of the appropriate authorities in order to prevent misuse and wastage. In democracies, the proposed budget is made known to the general public by tabling it in the houses of parliament or state assemblies for discussion and sanction.

4. Canon of Benefit

According to this canon, public expenditure should result in maximum social advantage and social welfare of all the people in a country. The benefits of public expenditure should not be restricted to a select few groups.

5. Canon of Elasticity

Public expenditure policy of a country must be flexible. The policy should be easily adaptable to changing requirements of the economy. The government should be able to divert resources from one area of expenditure to another, if the need arises.

6. Canon of Productivity

Government expenditure should ideally be done to increase a country's productive capacity as well as improve productive efficiency. Expenditure on infrastructure like transport network and irrigation, help increase production.

7. Canon of Neutrality

The effects of public expenditure should be neutral in the sense, that it should not generate bad effects on economic activities. For example, public expenditure to promote production may cause damage to environment or result in violation of human rights. The government has to take care that such negative effects are taken care of through other policies, like taxation and appropriate laws. Thus, every negative effect of public expenditure will have to be countered by positive actions on part of the government.

8. Canon of Equitable Distribution 

Public expenditure should be incurred in such a manner that it reduces inequalities of income and wealth distribution. The aim of public expenditure should be to improve income distribution in order to maximise social welfare. Importance should be given to expenditure to benefit the poor, generate employment and improve the standards of living through education, health and welfare Services.