Public Expenditure: Meaning & Nature,Canons of public expenditure/Principles of Public Expenditure

4. Canon of Surplus

Findly Shirras states “ Other things being equal,public expenditure should be made in such a way that society gets major benefits which, in turn,may increase production,protect against external aggressions maintain the internal order,and may possibly reduce the economic inequalities.”

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

Another  principle is that it should be fairly elastic.  It should be possible for public authorities to vary the expenditure according to the needs.  A rigid level of expenditure may prove a source of trouble and embarrassment in bad times.  Alteration in the upward direction is not difficult.  But elasticity is needed most in the downward direction.  It is not so easy to cut down expenditure. Retrenchment of a widespread character creates serious social discontent.  Perfect elasticity is out of question.  But a fair degree of elasticity is essential if financial breakdown is to be avoided at the time of shrinking revenue.

6.Canon of Productivity

Public expenditure should stimulate productivity. It should be made in such a way that it fosters capital formation and generated employment opportunities alongwith increases levels of productivity and employment opportunities.

7. Canon of Equitable Distribution

Public  expenditure should help equitable distribution of wealth.The government should make expenditure  so as to provide more benefit to the backward section of the society.

8. Canon of Certainty

The areas in which public expenditure is to be made should be certain so that the development works may be carried out properly.The government should determine with certainty the allocation of public expenditure to various uses.

9. Canon of Co-ordination

The items and amounts on which public expenditure is to be made by central,state and local self governments should be clearly demarcated.Their should be proper co-ordination among different governments so that dual expenditure on same item can be avoided.

10. Miscellaneous

Some other canons are:

i. While making expenditure various works should be given priority according to their relative importance.

ii. Mode of expenditure should also be kept in mind

iii. Both short term and long term effects of public expenditure should be kept in mind

iv. While making public expenditure,population of the country,its area,its physical resources etc. should be kept in mind.