In this article, we are going to define the meaning of budget and also describe the various functions and forms of budget.
The word “budget” is derived from the French word “Bourgettes” meaning leather bag or wallet. The term was used for the first time in 1733 by Mr. Walpole, the British Chancellor of Exchequer because he used to carry a leather bag containing papers on the financial plans for the country to the House of Commons. So when he set off to place his financial plans before the house, he used to open his budget, that is the bag, and it is because of this association of the financial plans with the bourgette that the financial statements of the country have come to known as a budget.
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Meaning Of Budget
A budget is a statement of expected income and expenditure over a given period usually one year. It could also be defined as a plan of action for an organization for a given year. On the other hand, it is seen as a financial and quantitative statement prepared and approved before a defined period of the policies to be pursued by the organization to achieve organizational goals and objectives.
In the government cycle, it is a statement of proposed revenue and expenditure for a given period usually one year. When this statement is approved by the executive; it becomes the basis for revenue generation and disbursement of expenditure. This of course is the national budget.
Every organization is entitled to a budget, and individuals are not left out either. Budget is planning and control instruments. The national budget has a constitutional attachment. The 1999 constitution S.81 (1-2) provides that the president shall cause to prepared and laid before each house of the National Assembly at any time in each financial year estimates of the revenue and expenditure of the federation for the following financial year. The heads of expenditure contained in the estimates shall be included in a bill to be known as an Appropriation Bill.
This implies that until the Appropriation Acts, no fund will be disbursed based on the bill. By extension, government activities will be grounded, to overcome this serious problem.
S.82 of the 1999 constitution provides that if the appropriation bill in respect of any financial year is not approved before the beginning of the fiscal year, the president may authorize the withdrawal of money from the consolidated revenue fund of the federation to meet the expenditures necessary to carry out the services of the government of federation for a period of not exceeding 6 months or until the coming into operation of the Appropriation Act whichever is the earlier.
Provided that the withdrawal in respect of any such period shall not exceed the amount authorized to be withdrawn from the consolidated revenue fund of the federation under the provision of the Appropriation Act passed by the National Assembly for the corresponding period in the immediately preceding financial year being an amount proportionate to the total amount so authorized for the immediately preceding financial year.
Features Of National Budget
The features of the National budget are those things that are associated with it. It refers to those things likely to be seen in the national budget and they include:
1. It should be as comprehensive as possible with a detailed review of the policies (fiscal) and programs of the previous year.
2. It should critically analyze the current economic conditions and the state of the economy.
3. The budget is named after a key objective for the year.
4. The budget is divided into heads and subheads.
5. Variation of any budgetary provision could be affected using a virement or supplementary budget.
Objectives Of The National Budget
The objectives of the National Budget include:
1. To act as an authorization to collect revenue and incur expenditure.
2. To act as plan and control instruments for the government.
3. To comply with constitutional provisions.
4. To provide a reference point for decision and policy-making processes.
Functions Of The Budget
The major functions of the budget include:
1. Stabilization
Some of the objectives of the government are to stabilize the price by controlling inflation and to curb social ills by reducing unemployment. By doing all these thing’s government tries to stabilize the economy and this can be achieved through budgetary provisions to vary taxation and government expenditure policies.
2. Income Distribution
The government tries to control the degree of inequality in wealth and income distribution in the economy.
Budgetary provisions become a ready-effective tool for narrowing the gap and ensuring equity in income distribution and redistribution. Surely, if the budget tilts towards creating employment opportunities and enabling an environment for robust economic activities in the economy, and varies its tax policies, there must be income distribution and redistribution as well as an increase in the standard of living.
3. Allocation
The budget is an effective means of allocating the nation’s scarce resources to their alternative uses. The government effectively uses it to favor the priority sector, to energize and activate the economy.
4. Protection Of Local Industries
Budgeting provisions can be used to protect local Industries from unfavorable competition from foreign firms. It can be done through tariff variations, tax holidays, and other incentives.
5. Management And Control
A budget is a planning and control instrument and therefore a means of managing and controlling government expenditure. By extension, it includes managerial efficiency in the use of scarce resources by government-financed Industries, extra ministerial departments, etc.
Forms Of Budget
The budget could take any of the following forms:
Balanced budget
Deficit budget
Surplus budget
1. Balanced Budget
This is a budget on which the expected revenue is equal to the expected expenditure. In this type of budget, the planners merely want to grease the wheels of the government structure without a desire for growth.
2. Deficit Budget
This is a budget in which the expected expenditure is greater than the expected revenue. It is inflationary as it stimulates demand in the economy.
3. Surplus Budget
This type of budget will exist when the expected revenue is greater than the expected expenditure. It could be rightly called “no growth budget”. And it is not ideal for a developing economy.
Conclusion
Discussed above are the meaning, functions, and forms of budget.
