Canons of Public Expenditure

 The following canons of public expenditure have been laid down by Prof. Findlay Shirras:

1. Canon of Benefit:

This canon suggests that every public spending must ultimately be used for the cause of social benefit — general well-being of the common people. It, thus, implies that State spending should confer benefits on the community at large rather than on an individual group or section. It means public funds should be spent in such directions which pursue common interest, and promote general welfare.

2. Canon of Economy:

It implies that public expenditure should be incurred carefully and economically. Economy here means avoidance of extravagance and wastages in public spending. Public expenditure must be productive and efficient.

Hence, it must be incurred only on very essential items of common benefit, without duplication, in a way that involves minimum cost. An efficient system of financial administration is, therefore, very essential in any country.

3. Canon of Sanction:

This canon suggests that no public spending should be made without the approval of proper authority. The procedure for sanction in public expenditure is required for the enforcement of economy as well as for the prevention of misuse of public funds. As a rule, therefore, money must be spent on the purpose for which it is sanctioned by the highest authority and accounts be properly audited.

4. Canon of Surplus:

This canon suggests that saving is a virtue even for the government, so an ideal budget is one which contains an element of surplus by keeping public expenditure below public revenue. In other words, it means that the government should avoid deficit budgeting in the interest of its own creditworthiness.

5. Canon of Elasticity:

This canon requires that the rules governing the expenditure policy of the government should not be rigid. It should be allowed to vary according to needs and circumstances. The expenditure policy should be elastic, rather than rigid in character.

There should be enough scope for change in expenditure policy, according to time and re­quirement. Government should be able to increase public expendi­ture during periods of economic emergency and to decrease during periods of normalcy.

Even though it is easy to increase expenditure during periods of crisis, it is a difficult process to bring down the volume of expenditure. For example, when an economy suffers from unemployment and deficiency of demand, the government should be capable of spending more to overcome this situation.

Under such a situation, government should go for a deficit budget, and inject addi­tional purchasing power into the economy, to increase effective de­mand and to generate more employment opportunities. In this con­text rigidity in spending will not help to overcome a crisis situation. Flexibility of expenditure should be provided under such circum­stances.

6. Canon of Neutrality:

Canon of neutrality implies that public expenditure should have no adverse effect on production and distribution activities of the economy. Public expenditure should only result in increased production, re­duced inequality of income and wealth and increased economic ac­tivity.

The spending activities of the government should always be directed to produce desirable effects and to avoid undesirable effect upon the economy. Public expenditure should only help to improve the production-distribution-exchange relationship in the economy.

7. Canon of Productivity:

This canon implies that, expenditure policy of the government should encourage production and productive efficiency of the economy. Public expenditure should be always directed towards enhancing the pro­ductive capacity of the economy.

Major part of public expenditure should be allocated for productive and development purposes. This will help to raise level of employment, income, effective demand etc. of the economy. The goal of public expenditure should be to maxi­mize higher incomes.

8. Canon of Equitable Distribution:

According to this canon, public expenditure should be incurred in such a way that the glaring inequalities in the distribution of income and Wealth are minimized. The expenditure pattern of the govern­ment should be so designed to benefit the poorer sections of the community.

Expenditure programmes should be ordained to provide more educational facilities, medical benefits, cheap housing facili­ties, old age pension and other social security measures to the vulnerable sections of the community. For achieving this canon, public expenditure should be planned according to specific programmes and prioritized as per the availability of funds.

A modern welfare state should incorporate all the canons of public expenditure. However the principle of maximum social advan­tage is the most fundamental canon of public expenditure. The other canons or principles are simple administrative rules which should guide the authorities, in the way of spending public funds, entrusted to them.

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