Budgetary Process in Different Countries

We have read earlier regarding the relevance of budget in the economies of the nations. Apart from the prioritization and allocation of resources and being an account of political compromises, victory and losses, budgets play one another important role. They are a mirror into the future; they create a picture of what the future consequences of current actions shall be, desirable or miserable. Budgets therefore have to be well thought out plans which should not aim at only short term benefits but also look at long term gains.

According to author Aaron B. Wildavsky, in the book, Budgeting: A comparative theory of budgeting processes, two very pertinent question which arises are:

  1. Who will plan the budgetary process, a central authority, decentralized or delegated authority or non-centralized independent authorities
  2. How will the planning occur, through a central body which will form regulations or a price system acting through non-centralized units

The budgeting process has a lot to do with the available resources and wealth of a country. If the country is poor but the environmental conditions are stable and certain, the most commonly found budgeting method is revenue budgeting. When the wealth is absent i.e. a country is poor as well as the environment is uncertain, the budgeting process if that of repetitive budgeting. Repetitive budgeting is a common phenomenon for the poor countries where the budgeting happens several times over the year due to changing scenarios, limited funds and misplaced strategies.

The rich countries which have certain environments go for incremental budgeting and in case there are uncertainties, the incremental budget is alternated with repetitive budget. The difference in the budgeting process amongst different nations also happens because of their respective taxing system and the how and choice of programs they spend money on. So while, Japan has an electoral party, the Liberal Democratic Party which plays an important role in the budgeting process, France has a mixed Presedential-Parliamnetary system, the USA has an independent legislature and executive and the cabinet in UK is responsible for important decisions regarding revenues, taxes and expenditure.

In the USA, The Office of Management and Budget steer the President in realizing the budget goals. The respective government agencies put their request for funds which are reviewed. The House Appropriations Committee decides how much money should be given for each purpose however the final deciding power lies with the Congress. After the budget reforms of 1974, many sub committees gave up their guardianship and the role played by them was taken over by the higher House bodies.

In India, the Union Budget is presented by the Finance Minister every year in February. The process begins with a budget speech in the parliament which has two parts, one outlining the general economic scenario and the second part which contains details of the proposed taxations for the next financial year. A general discussion on the budget happens after few days of its presentation and a voting happens on the request for grants.

An important aspect of this process is the Cut Motions which allows the members of the upper house to question the policies and programs of the government where the money is being spent. These cut motions are of three types namely:

  • Policy cut where the amount for demand is reduced by a meager Rs1 which also implies that the mover disapproves of the policy

  • Economic cut where the demand is reduced by a specific sum

  • Token cut is when the demand amount is reduced by Rs.100

The Parliamentary Committee plays a significant role only when the limited time of the parliament leads to the Guillotine situation where not all demands are discussed. In this situation the department related standing committees and financial committees undertake the task to scrutinize in details, the government spending, expenditures and performance.

The budgetary process in UK is lengthy too, where the departments submit their funding requests or Main Supply Estimates to the HM or the Her Majesty’s Treasury. The government then releases a consolidated document called the Central Government Supply Estimates for the year. Agencies have respective oversight committee in parliament which oversees the changes if any made in the requests submitted. The UK parliament does not take a decision upon the new budget until summer and therefore the funding for the respective agencies continue up until the new budget is enacted.

In the rapidly developing economy like China, the central agency that control budget is Ministry of Finance (MoF). The National Auditing Committee audits the MoF and the most common discrepancy cited by them was the over allocation than the budgeted amount or not allocating the sum mentioned in the budget requests. The Chinese legislature the National People’s Congress lacks any substantial control over the budgeting process which is often cited as the root of the budgetary problems in China.

It would be interesting to learn more about the budget processes of other nations as well however, it lies beyond the scope of this particular article. However, it is recommended to the readers and students that they try to explore the budgetary process of nations like France and Germany and the contrasting countries like Somalia and Zimbabwe in Africa, Afghanistan as well as Pakistan, Bangladesh and Thailand in Asia.

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