Public Management and Administration - Owen E.hughes

170 Public Management and Administration
The line-item budget does have some points in its favour. It is a good control
mechanism, although it is difficult to transfer spending between items, and
managers have little flexibility. As Wilenski (1982, pp. 168–9) pointed out, the
traditional budget is:
First, an ideal mechanism to limit expenditure to the amounts and to the items voted in
the appropriations. Secondly, it provides a certain degree of flexibility if across-the-board
cuts have to be made mid-year for macro-economic purposes. Third, the traditional
budget makes budgeting easier and more manageable: arguing from a historical base is
easier than having to justify each item from scratch; choice is routinised, conflict about
objectives and methods of achieving them, which might otherwise reach unmanageable
proportions, is strictly limited so that the budget is in fact prepared in time. Finally, supporters
of the traditional budget claim that it is adaptable to all economic circumstances
and conditions.
The system is highly conducive to a meticulous form of financial supervision,
in that it can be easily seen whether money was spent on the items for which it
was voted. Also, the system fits in well with an annual budget cycle, where
agencies are asked to compare their actual expenditure with the amount allocated,
and thence to make estimates as to what those items and additional ones
will cost in the forthcoming year. Across-the-board cuts can be made and there
is even some advantage to incremental budgeting, in that the funding for next
year starts with a base in the current year, reducing arguments to the major
changes only. However, the advantages of line-item budgeting are insufficient
to outweigh its faults. The smallest amount of government expenditure may be
accounted for in the traditional budget, but by itself, this kind of retrospective
control does nothing to improve managerial efficiency. Managers may be too
concerned with demonstrating that they have spent the money ‘correctly’, or
have spent exactly the monies allocated, irrespective of whether their expenditure
was either efficient or achieved its purposes.
There are several problems with line-item budgeting. First, it is not clear
from budget figures what departments or agencies actually do, or whether they
do it well; that is, it stresses inputs rather than outputs. There is no necessary
relationship between input costs and the achievement of any goals as these two
are quite unrelated in any documentation. Secondly, line-item budgeting is
quite short term, usually only one year in duration. This means that items of
long-term budgeting tend to continue unchanged and are not considered in any
detail. Instead of spending being decided on a basis of assessed need, it tends
to be carried out incrementally, with inadequate critical appraisal. With such a
short-term view of the budget there is often no idea of the future cost of new
programmes to a second, third or even tenth year. Thirdly, the specific items of
expenditure within a budget are quite rigid in that managers have little flexibility
in moving resources from one kind of spending to another. If amounts are
allocated to particular inputs they are invariably spent, otherwise the budget for
the next year may be reduced. Departments might employ extra staff, or spend