In a parliamentary Democracy, the political executive is responsible to the Parliament. The control exercised by the Parliament over the executive is its control on financial expenditure.
Parliamentary Control
The Parliament is the custodian of public Money, and what better way to keep an eye on the authorities spending the money than through the representatives of the public sitting there?
The methods adopted by the Parliament for controlling expenditure may be broadly classified into two categories:
Built-in techniques in parliamentary procedure, and
Committees appointed by the Parliament To begin with the first category, there are certain techniques which are part of the parliamentary procedure. Some of these are general, in the sense that they are employed for both financial and other matters, while specific techniques help the Parliament to exercise financial control. Among the in-built techniques in the parliamentary procedure, questions are the most significant.
Questions
Questions represent a very powerful technique of parliamentary control over expenditure. The right to ask questions was given for the first time to the legislators by the Act of 1892 and for asking supplementary questions in 1909. A question is a request made by a member for an oral explanation from the concerned minister. However, a notice of 10 days has to be given to the concerned minister before a question can be asked. But if a matter is urgent, then, a shorter notice is enough. The questions are classified into two categories-starred and unstarred. The questions marked with a star are answered orally and the unstarred ones get a written answer.
In the Indian Parliament, the questions raised by members on the various issues of the conduct of government, including its finance, have had great impact. It is well known how Feroz Gandhi’s one set of questions led to the unravelling of the Mundra Scandal, that eventually shook the whole Central government. It added a new chapter to India’s parliamentary history. The report of the Chagla Commission of inquiry on the LIC financial deals is a document that can still provide useful guidelines of right conduct for the ministers and the civil servants.
Resolutions
The term ‘Resolution’ is used in respect of certain kinds of motions only. These are of two kinds: those which recommend a particular course of action to the government and those which seek to censure an individual minister or the whole ministry. A member can also move a resolution on a matter of public interest. Fifteen days notice is required for moving a resolution. The resolution must raise some definite issue and should not deal with the conduct of anyone except in his official capacity.
Motions
When a member of the Parliament feels that a particular matter or report ought to be discussed in the House, a motion for that has to be brought before the House. A notice for such a motion has to be given according to set rules. When a member moves a motion, he may speak on it and so can the other members. Then, the debate over it takes place.
Annual Financial Statement
According to ARTICLE 112 of the Indian Constitution, the President of India causes to be laid before both the Houses of Parliament an ‘annual financial statement’ containing the statement of the estimated receipts and expenditure of the Government of India for that year. In the estimates of expenditure, the figures for the charge on the Consolidated Fund of India and the sums required for meeting expenditure outside the Consolidated Fund of India are given separately. Besides, the expenditure on revenue account is also distinguished from other expenditures.
Estimates Committee
Estimates Committee was first established during British Era in 1920s but Independent India’s first Estimates Committee was established in 1950. This committee examines the estimates included in the budget and suggests ‘economies’ in public expenditure.
The Estimates Committee has 30 members and all these members are from Lok Sabha. There is no Rajya Sabha member in Estimates Committee. The members are elected by Lok Sabha members from amongst themselves every year by principles of Proportional Representation by means of a single transferable vote , so that all parties get due presentation in it. A minister cannot be elected as member / Chairman of estimates committee.
The Public Accounts Committee is charged with a critical function of the legislature – overseeing government finances. The PAC holds ministries accountable to the audit reports of the Comptroller and Auditor General, inquires into whether government funds were spent for purposes for which they were allocated, and into the reasons for any excess expenditure by government bodies. By convention, the chairperson of the committee is an opposition MP. Members are elected to the committee for a period of one year.
In addition to Public Accounts and Estimate Committees, a special committee on public undertaking was constituted by the Indian Parliament in May 1964. It consists of not more than fifteen members, ten from the Lok Sabha and five from the Rajya Sabha, elected by the concerned house every year from amongst its members according to the principle of proportional representation by means of the single transferable vote.
However, a minister cannot be elected as a member and in case a member of the committee becomes a minister in future he ceases to be a member of the committee with immediate effect. The term of office is one year but there is no bar to re-election of the same members. One of the members is elected as the chairman of the committee.
,
Control over public expenditure is a critical issue in any country. It is essential to ensure that public funds are used efficiently and effectively, and that there is no Corruption or waste. There are a number of different mechanisms that can be used to control public expenditure, including BUDGETING, accounting, Auditing, procurement, financial management, performance management, risk management, INTERNAL CONTROL, Transparency and Accountability, public participation, legislative oversight, Judicial Review, and corruption prevention and control.
Budgeting is the process of planning and allocating public Resources. It is important to ensure that budgets are realistic and achievable, and that they are aligned with the government’s priorities. Accounting is the process of recording and reporting on financial transactions. It is important to ensure that accounts are accurate and transparent, and that they provide a clear picture of the government’s financial position. Auditing is the process of reviewing financial statements and other records to ensure that they are accurate and that they comply with laws and regulations. It is important to ensure that audits are independent and objective, and that they identify any areas of concern. Procurement is the process of acquiring goods and Services for the government. It is important to ensure that procurement is conducted in a fair and transparent manner, and that contracts are awarded to the most competitive bidder. Financial management is the process of managing the government’s finances. It is important to ensure that finances are managed efficiently and effectively, and that there is no waste or fraud. Performance management is the process of setting and measuring performance targets for government programs and activities. It is important to ensure that programs and activities are meeting their objectives, and that they are delivering value for money. Risk management is the process of identifying and managing risks to the government’s finances. It is important to ensure that risks are identified and assessed, and that appropriate mitigation measures are taken. Internal control is the process of ensuring that the government’s financial and operational systems are Sound. It is important to ensure that systems are in place to prevent fraud and error, and to ensure that resources are used efficiently and effectively. Transparency and accountability are essential for ensuring that public funds are used properly. It is important to ensure that information about public expenditure is made available to the public, and that there are mechanisms in place to hold government officials accountable for their actions. Public participation is important for ensuring that the public has a say in how public funds are spent. It is important to provide opportunities for the public to comment on budget proposals and to hold government officials accountable for their decisions. Legislative oversight is the responsibility of parliament to ensure that the government is using public funds properly. It is important for parliament to have the power to investigate government spending, and to hold government officials to account. Judicial review is the power of the courts to review the decisions of the government. It is important for the courts to have the power to ensure that the government is acting within the law. Corruption prevention and control is essential for ensuring that public funds are not misused. It is important to have strong anti-corruption laws and institutions in place, and to ensure that these laws are enforced effectively.
By using these mechanisms, it is possible to ensure that public expenditure is controlled effectively and that public funds are used efficiently and effectively.
What is public expenditure?
Public expenditure is the total amount of money that a government spends on goods and services, transfers, and interest payments.
What are the different types of public expenditure?
There are three main types of public expenditure:
Current expenditure: This is spending on goods and services that are consumed in the current period, such as salaries for government employees, food for the military, and fuel for government vehicles.
Capital Expenditure: This is spending on goods and services that have a long-term lifespan, such as roads, bridges, and schools.
Transfer Payments: This is spending on payments to individuals or businesses that do not involve the purchase of goods or services, such as social security payments, Unemployment benefits, and subsidies.
What are the objectives of public expenditure?
The objectives of public expenditure can be divided into three main categories:
Economic objectives: These include objectives such as economic Growth, full EMPLOYMENT, and price stability.
Social objectives: These include objectives such as reducing POVERTY, inequality, and unemployment.
Political objectives: These include objectives such as winning Elections, maintaining power, and promoting the interests of certain groups.
What are the principles of public expenditure?
The principles of public expenditure are the guidelines that governments use to decide how to spend their money. The most important principles are:
Efficiency: This means that public expenditure should be used in the most efficient way possible, so that the government gets the most value for its money.
Effectiveness: This means that public expenditure should be used to achieve the desired objectives.
Equity: This means that public expenditure should be distributed fairly, so that no one group benefits at the expense of another.
Transparency: This means that the government should be open about how it spends its money, so that citizens can hold it accountable.
Accountability: This means that the government should be responsible for its spending, and should be able to explain how it has used its money.
What are the challenges of public expenditure?
The challenges of public expenditure include:
The need to balance the budget: Governments need to make sure that they do not spend more money than they raise in taxes, otherwise they will run a budget deficit.
The need to control Inflation: Governments need to make sure that they do not spend too much money, otherwise they will cause inflation.
The need to meet the needs of the people: Governments need to make sure that they spend their money in a way that meets the needs of the people, and that they do not waste money.
The need to be efficient: Governments need to make sure that they spend their money in the most efficient way possible, so that they get the most value for their money.
The need to be effective: Governments need to make sure that they spend their money in a way that achieves the desired objectives.
The need to be equitable: Governments need to make sure that they spend their money in a way that is fair, so that no one group benefits at the expense of another.
The need to be transparent: Governments need to be open about how they spend their money, so that citizens can hold them accountable.
The need to be accountable: Governments need to be responsible for their spending, and should be able to explain how they have used their money.
Question 1
Which of the following is not a function of the Ministry of Finance?
(A) Formulating and implementing the government’s Fiscal Policy (B) Managing the government’s finances (C) Collecting taxes (D) Providing financial assistance to state and local governments
Answer
(D) The Ministry of Finance does not provide financial assistance to state and local governments. This is the responsibility of the Department of the Treasury.
Question 2
Which of the following is not a source of government revenue?
(A) Taxes (B) Borrowing (C) Fees and charges (D) Fines and penalties
Answer
(B) Borrowing is not a source of government revenue. It is a source of government financing.
Question 3
Which of the following is not a type of government expenditure?
(A) Transfer payments (B) Capital expenditures (C) Current expenditures (D) Debt service
Answer
(A) Transfer payments are not a type of government expenditure. They are a type of government revenue.
Question 4
Which of the following is not a tool of fiscal policy?