Analysing Public Expenditure: (I) Planning, Control and Price

This paper analyses the different cost bases in which public expenditure can be analysed as a policy problem related to the differing requirements of planning, authorising and controlling the various components of public expenditure. The analysis is applied to the United Kingdom, where in 1981 changes were announced in the method of making public expenditure decisions which had evolved over the previous two decades. The various components of public expenditure in the United Kingdom are described, and the decision-making process which led to the March 1981 Public Expenditure White Paper is outlined. The significance of the different price bases used in public expenditure (cash (at current or at expected prices), volume, cost, and constant) is then explored. The advantages and disadvantages for policy-makers of attempting to reduce the number of price bases used are analysed; it is shown that there is no cost-free route to reducing complexity. The significance of government's decision in 1981 to make greater use of the cash basis in decision-making is assessed. The analysis is applied specifically to the United Kingdom, but the issues raised are of policy relevance to the choice of price bases for public expenditure decision-making in any country in a time of inflation. (A second paper in a future issue of the Journal will examine the political purposes behind gross or net measurement, the earmaking of receipts, and the more precise relationships between figures used in the planning of public expenditure, in macro-economic analysis and forecasting and in Parliamentary and local control.)