5 Canons of Public Expenditure | Principles of Public Expenditure- Master Class

Public expenditure Explained! There are 5 canons of public expenditure which are presented for you one by one. Generally, government expenditure on public activities is much higher than the revenue collected through various sources. The deficit is made up of public debts and other sources. The biggest items of Non-Plan Expenditure are interest payments and debt servicing, defence expenditure and subsidies. These are not considered in public expenditure. 5 canons of public expenditure are:

(1) Canons of Maximum Social Benefit:

The principle of maximum social benefit, as canons of public expenditure, implies that the Government should plan it’s expenditure in a manner as to promote the greatest good of the greatest number. Public expenditure refers to expenses Incurred by public authorities central, state and local on its various activities. The activities of public authorities Include the primary activities as the civil administration and defense of  the country etc.

(2) Canons of Economy:

The canon of economy , as canons of public expenditure, suggests that the State should be economical in spending. It implies two things, Firstly; the Government should not spend more than the amount required to be spent on particular item of expenditure. Secondly, The State should spend money in such a way that might develop the productive capacity of the community as much as possible. The first consideration has reference to the present while second consideration has reference to the future. The main aim of the canon is to avoid the wastage and extravagance of any kind. In this reference, it is necessary to check duplication of expenditure. In this connection, the Government should see that the expenditure should not produce , any adverse effect on production and on the will and the power of the people to sue .

(3) Canons of Sanction:

What it implies is that the Government, before incurring any expenditure on any item should obtain the proper sanction and approval of the competent authority. Without its approval, the Government department cannot incur any expenditure or any expenditure beyond the specified limit. In a democratic country, competent authority is the legislature. The government  presents its budget before the legislature and gets approval and only then the government departments can incur expenditure.

(4) Canons of  Surplus or Balanced Budget:

According to this  canons of public expenditure, the state must avoid resort to deficit financing as far as possible. The classical economists always preferred surplus budget just like an ordinary citizen. But in modern time, balanced budget (no deficit no surplus budget) is preferred. It implies that the balanced expenditure must be balanced to public revenue. The policy of deficit financing is not tenable for long. Surplus budget also cannot find favor because it implies that the government is spending much less than what it should. The tax payers will realize a burden in paying tax. So, the government should prepare a balanced budget.

(5) Canons of Flexibility or Elasticity:

Flexibility must be there in public expenditure. It implies that the expenditure may be expended or contracted according to the requirement of the time. At a time of crisis, the expenditure should be cut down because the income of the government is expected to be short at such a time.

The principles or 5 canons of public expenditure should be followed by the government which taking up the project. Sanctioning authority should think well before sanctioning a budget.

 Read more: (1) Canons of Maximum Social Benefit: