BUDGET. A budget is a balance-sheet of estimated revenue and expenditure designed for financing the business of a future period. In national finance the period is usually a year, called a financial year. A shorter period would not include a full round of seasons and harvests and would be unsuitable for purposes of comparison. A longer period would not only increase the diffi culty of forecasting, but would lessen the financial control of a representative assembly. For this reason, when Bismarck submit ted a two years' budget for 1883 and 1884 to the German Reich stag on the plea of saving time and trouble, the budget for 1884 was ignored by the Reichstag, which passed merely the 1883 bud get. Bismarck immediately presented the 1884 budget afresh, and the Reichstag solemnly threw it out vote by vote.
It will be seen that it is not sufficient to define a budget as an account, with Lord Buxton (Dictionary of Political Economy s. v. Budget) since accounts rest upon the basis of established fact, while a budget looks to the future ; nor as "a plan for raising rev enue," with Sir Hilton Young (The System of National Finance), since revenue is only one side of a balance-sheet. The word is de rived from the O.Fr. bougette, a little bag. The British chancellor of the exchequer is still said to "open" his budget, or receptacle of documents and accounts, when he makes his annual financial statement.
The commencement of the financial year is determined mainly by parliamentary convenience. In England the date was at first Michaelmas day. Jan 5. (old Christmas day) was adopted as the end of the financial year 1799-1800. In 1854, April I was made the beginning of the financial year by an act still in force. Since delay and uncertainty are prejudicial to business, the British chancellor of the exchequer lays before the House of Commons as soon as may be after April 1 a statement giving the out-turn of the previous financial year, as shown by the Exchequer (q.v.) account at the Bank of England, the estimated expenditure for the new year, the estimated revenue on the basis of existing taxation, and the changes, if any, which he proposes in order to balance the budget by reduction or increase of taxation. The budget speech is anxiously awaited by the taxpayer and is one of the most interest ing events of the parliamentary session. Not only do budget changes affect the pocket of the taxpayer, but the speech is often the occasion for announcing some new policy involving (as new policies are prone to do) additional expenditures for which pro vision must be made.
The budget system was first established in England, and has been followed with more or less variation in other countries.
It is desirable that the unity of the budget should be preserved by presenting the full estimates of revenue and expenditure in one mass and in one account. Some countries offend against this prin ciple by dividing the budget into two parts—ordinary and ex traordinary—and relegating to the latter exceptional or non recurrent revenue and expenditure. This tends to laxity and the manipulation of the ordinary budget by the transfer of doubtful items to the extraordinary side, and weakens the incentive to deal at once with emergency expense. Sometimes additional budgets are annexed to the main budget, providing apart for special services like posts, telegraphs, telephones, railways, etc. When such addi tions infringe the unity of the budget they are to be deprecated. No objection can be taken to them if they are merely appended for further information, the gross figures appearing in the general budget.
A trading company, desirous of concealing from its competi tors its rate of profit, will not disclose its gross trading profit in its balance-sheet, but only the net profit after deduction of ex penses. There is no such excuse for net budgets. The taxpayer is entitled to a full and frank disclosure of the purpose and amounts of public expenditure and of all sources and amounts of receipts. His constitutional right is to accept or reject taxation.
It is sometimes asserted that the British budget fails to show the full amount of national receipts and expenses owing to the device of appropriations in aid. Sums received by certain depart ments as fees, proceeds of sales of old stores, etc., are allowed to be used by the departments in reduction of the amounts which would otherwise require to be granted by parliament. They may thus appreciably reduce the grants and the apparent total expendi ture. As, however, both gross and net totals are printed in the estimates, the full information is available to the student of fi nance. If it should happen that the estimated receipts exceed the estimated expenditure, as in the case of the bankruptcy court, the mint, etc. the House of Commons requires a token or nominal vote to be presented for L I o or some other small amount, which brings the whole operations of the department within the scrutiny of the House. With this exception the British budget is a gross and not a net budget.