The main principles or canons of
public expenditure are as follows:
(i) The Principle of Maximum Social Advantage: The government expenditure
should be incurred in such a way that it should give benefit to the community as
a whole. The aim of the public expenditure is the provision of maximum social
advantage. If one section of the society or one particular group receives
benefit of the public expenditure at the expense of the society as a whole, then
that expenditure cannot be justified in any way, because it does not result in
the greatest good to the public in general. So we can say that the public,
expenditure should secure the maximum social advantage.
(ii) The Principle of Economy: The principle of economy requires that
government should spend money in such a manner that all wasteful expenditure is
avoided. Economy does not mean miserliness or niggardliness. By economy we mean
that public expenditure should be increased without any extravagance and
duplication. If the hard-earned money of the people, collected through taxes, is
thoughtlessly spent, the public expenditure will not confirm to the cannon of
economy.
(iii) The Principle of Sanction: According to the principle, all public
expenditure should be incurred by getting prior sanction from the competent
authority. The sanction is necessary because it helps in avoiding waste,
extravagance, and overlapping of public money. Moreover, prior approval of the
public expenditure makes it easy for the audit department to scrutinize the
different items of expenditure and see whether the money has not been overspent
or misappropriated.
(iv) The Principle of balanced Budgets: Every government must try to keep its
budgets well balanced. There should be neither ever recurring surpluses nor
deficits in the budgets. Ever recurring surpluses are not desired because it
shows that people are unnecessarily heavily taxed. If expenditure exceeds
revenue every year, then that too is not a healthy sign because this is
considered to be the sign of financial weakness of the country. The government,
therefore, must try to live within its own means.
(v) The Principle of Elasticity: The principle of elasticity requires that
public expenditure should not in any way be rigidly fixed for all times. It
should be rather fairly elastic. The public authorities should be in a position
to vary the expenditure as the situation demands. During the period of
depression, it should be possible for the government to increase the expenditure
so that economy is lifted from low level of employment. During boom period, the
state should be in a position to curtail the expenditure without causing any
distress to the people.
