5 questions to ask about a budget

5 questions to ask about a budget

Gary Bandy5 December 2012

Fiveq u e s t i o n s you can ask about the budget

What is a budget?

It's clearly a budget.It's got a lot of numbers in it.

George W. Bush

Bernard:

Sir Humphrey:

Surely we want to save money?

Bernard, you know perfectly well that there has to be some way to measure success in the Civil Service. [...] we have to measure our success by the size of our staff and our budgets. By definition, Bernard, a big department is more successful than a small one.

Yes Minister, ‘The Economy Drive’ (1980)

A budget tells a story using numbers instead of words

“The budget is a representation in monetary terms of government activity. If politics is regarded in part as conflict over whose preferences shall prevail in the determination of policy, then the budget records the outcomes of this struggle.”

—Wildavsky, 1984

The ritual of budget preparation helps to establish “how things are done here.”

11How has the budget been made?

Hopefully, not like this ...

Incremental budgeting

Relatively easy to do

Understandable

Stable

Focus on departments

Focus on inputs

Over-estimation

Little review of base budget

and  it  can  lead  to  this  ...

salami slicing

Increments are not always best

Zero-based budgeting

Focus on priorities

Challenges service delivery

Budget adapts quickly to policy changes

Encourages ownership of budgets

Difficult to do

Time consuming

Resistance from losers

Many budgets “locked-in” by legislation

“rational incrementalism”

22What outputs will it deliver?

Budgets are about inputs but we need to think about outputs and outcomes

Policy-led budgeting?

Objective? Extinguish fires or save lives

Output Budgeting: Put out fires or save lives?

Community Budgets: complex families in Little Hulton

£0

£40,000

£80,000

£120,000

£160,000

Now Future?

Welfare BenefitsPlannedReactive

Focus on outputs/outcomes

More corporate than departmental

Multi-year view

Complex — e.g. some activities serve multiple outputs

Requires clear, consistent objectives

Harder to reach agreement than with incremental changes

33Who has been consulted?

In my experience it left nobody happy

The law and culture of consultation is stronger in some other countries.

Participatory Budgeting

Credibility and ownership by the public

Transparency

Good for rationing capital schemes

Risk of over-simplification of issues

High interest in some issues, none in others

44What assumptions is it based on?

Budget assumptions need to be clearly stated and understood

55How robust is the budget?

The chief finance officer has to make a statement about this

“It’s not the plan that’s important, it’s the planning.”

How was the budget made?What outcomes will it lead to?Who has been consulted?What assumptions is it based on?How robust is the budget?

Contact me

gary.bandy@mac.com

07871 389500

www.garybandy.co.uk

@garybandyuk