A new way to budget

Once upon a time, planning a budget was supposed to have something to with how much an agency planned to spend.   My notes for students start off with this definition, from the Chartered Institute of Management Accountants:

“A quantitative statement, for a defined period in time, which may include planned revenues, expenses, assets, liabilities and cash flows.”

I’m going to have to rewrite this, because it seems I’ve been getting it wrong all this time.  The Chancellor of the Exchequer has just explained how he’s going to get a new round of cuts from government departments. According to the Treasury website, the cuts are going to be achieved through

Tightly managing departmental budgets in-year, so that instead of spending up to budget, departments deliver underspends.

So it seems that a budget isn’t about what you plan to spend at all.  It’s  about identifying the money that you might have spent under different circumstances but aren’t now going to spend.

The departments have all signed up to underspend something, it seems.  While the biggest underspend is going to be in Defence, the next from Education non-schools (marginal stuff like child protection, then), the smallest underspend will apparently be from … the Treasury.  I wonder how they pulled that one off?

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