principles which should govern public expenditure and bring out their implications

The main principles or canons that should govern public expenditure are:

  • The principle of Maximum Social Advantage: The government expenditure should be incurred in such a way that it should benefit the community. The aim of public expenditure is the provision of maximum social advantage. If one section of society or one particular group receives the benefit of the public expenditure at the expense of society, then that expenditure cannot be justified in any way because it does not result in the greatest good to the public. So we can say that public expenditure should secure the maximum social advantage.
  • The Principle of Economy: The principle of the economy requires that the government should spend money in such a manner that all wasteful expenditure is avoided. The economy does not mean miserliness or niggardliness. By economy, we mean that public expenditure should be increased without any extravagance and duplication. If the hard-earned money of the people, collected through taxes, is thoughtlessly spent, the public expenditure will not confirm the canon of the economy.
  • Principe of Sanction: According to the principle all public expenditure should be incurred by getting prior sanction from the competent authority. The sanction is necessary because it helps in avoiding waste, extravagance, and overlapping of public money. Moreover, prior approval of the public expenditure makes it easy for the audit department to scrutinize the different items of expenditure and see whether the money has not been overspent or misappropriated.
  • Principle of Balanced Budgets: Every government must try to keep its budgets well balanced. There should be neither recurring surpluses nor deficits in the budgets. Ever-recurring surpluses are not desired because they show that people are unnecessarily heavily taxed. If expenditure exceeds revenue every year, then that too is not a healthy sign because this is considered to be a sign of the financial weakness of the country. The government, therefore, must try to live within its own means.
  • The Principle of Elasticity: The principle of elasticity requires that public expenditure should not in any way be rigidly fixed at all times. It should be rather fairly elastic. The public authorities should be in a position to vary the expenditure as the situation demands. During the period of depression, it should be possible for the government to increase expenditure so that the economy is lifted from the low level of employment. During a boom period, the state should be in a position to curtail the expenditure without causing any distress to the people.
  • No Unhealthy Effect on Production and Distribution: Public expenditure should be arranged in such a way that it should not have an adverse effect on production or distribution in the country. Public expenditure should aim at stimulating production and reducing inequalities in wealth distribution. If, due to unwise public spending, wealth gets concentrated in a few hands, then its purpose is not served. The money really goes to waste then.

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