Principles of Public Expenditure
Just as there are well-known canons of taxation, similarly it is possible to formulate some canons or principles to which prudent public expenditure should conform. These principles are: —
1. Maximum Social Benefit. It is necessary that all public expenditure should satisfy one fundamental test, viz., that of Maximum Social Advantage. Every rupee spent by a government must have as its aim the promotion of the maximum welfare of the society as a whole. Care has to be taken that public funds are not utilized for the benefit of a particular group or section of society. The aim is the general welfare. Government exists for the benefit of the governed and the justification of the government expenditure is, therefore, to be sought in the benefit of the country as a whole.
2. Economy. Although the aim of public expenditure is to maximize the social benefit, yet it does not exonerate government from exercising utmost economy in the expenditure. Economy does not mean niggardliness. It only means that over-spending and misuse of all kinds must be evaded.
3. Canon of Sanction. An added significant principle of expenditure is that prior to it is in reality sustained, it must be authorized by a expert power. Unofficial spending is bound to lead to profligacy and misuse.
4. Canon of Elasticity. Another sensible principle of public expenditure is that it must be reasonably flexible. It ought to be achievable for public establishment to fluctuate the expenditure as per requirement.
5. Balanced Budget. Ever-recurring deficits in the budgets should be avoided. Every effort should be made to balance a budget. A sensible State is expected to cut its coat according to its cloth.
6. Beneficial result on Production as well as Distribution. It is in addition essential to observe that public expenditure must work out a fit control on both production as well as distribution of wealth in the society. It must kindle productive activity so that the amount of production in the nation amplifies, and it might be doable to elevate the living standards.
These are the principles of public expenditure. It may, however, be added that all these canons do not have the same importance. In fact, the principle of maximum social benefit is the only principle worth talking about. The principle of maximum social advantage and that of economy should be regarded as most fundamental. The other principles are simply administrative rules which should guide the authorities in the matter of spending public funds entrusted to their care