The Concise Oxford Dictionary of Politics (29 page)

 
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The process of determining the financial resources necessary to meet the cost of given policy aims. The origins of modern budgeting may be traced to the reorganization of French finances, on the restoration of the monarchy in 1815. An
ad hoc
system of tax raising was replaced by a systematic process of presenting to parliament an evaluation of government financial needs and means of raising the necessary resources. Following this it was established that the budgeting process should occur annually, that it should embrace all government finance needs, that on being passed by parliament it should give legal effect to appropriate tax raising powers, and that at the end of a financial year the accounts of an implemented budget should be open to official audit. The political economy underpinning the content of budgeting in the nineteenth century was free trade. Hence, indirect taxation, notably import tariffs, were replaced gradually by levies for direct taxation in order to pay for public expenditure. The annual ritual of British budget day, created by Gladstone in the 1850s, developed precisely because of the need to legitimize new forms of direct taxation with an account of the state of the nation and an explanation of the benefits that would flow from free trade. The principle of balancing outgoings against revenues in each year also commonly underpinned budgeting. Hence, in this period governments of whatever party were locked into fiscal rectitude and had little room to play party politics with budgeting.
Public budgets grew as a proportion of gross domestic product in North America and Europe in the late nineteenth and early twentieth centuries as welfare expenditure was increased. In addition, the First World War necessitated greater public expenditure to meet immediate needs, but also initiated state expenditure which became permanent as citizens in the victorious countries sought a ‘peace dividend’. Budgeting merely expanded in scope as a process to meet these new demands, drawing most heavily on increases in direct taxation, notably taxes which were progressively related to income. The interwar recession provided the context for new approaches to the actual process of budgeting. The problem of mass unemployment confronted governments in a period when many electorates were newly expanded and expectant of government solutions. At the same time Keynesian political economy argued that balanced budgets were not required every year. Opposition parties such as the Lloyd George Liberals in Britain took up the new economics. The immediate reaction of most governments was caution in budgetary policy.
Nevertheless the influence of public expectations and Keynesian economics on budgeting expanded from the 1940s. In most countries the budget remained an integrated statement of expenditure and taxation plans for the coming year, but in Britain expenditure plans were revealed in an autumn statement, and the budget in the following spring became the means for announcing the tax plans only (a variation from the norm which ended in 1993). Also in Britain, the administrative impact was felt in the expansion of the information basis upon which budgeting was conducted, national income and expenditure accounting replacing simple government revenue and expenditure accounting. Governments increasingly accepted a responsibility for macroeconomic management, and saw budgetary
(fiscal) policy
as a key instrument for achieving aims. In particular, budgeting became an instrument for fine-tuning aggregate demand: raising taxes and creating a budget surplus to reduce aggregate demand when inflation threatened; or reducing taxes and creating a budget deficit when unemployment threatened. However, it is increasingly recognized that whilst public expectations were of macroeconomic management, the long postwar boom in the economies of Western Europe and North America ensured that conducting an anti-unemployment budget policy rarely became necessary. The more important effect of Keynesianism was perhaps in bringing about the demise of the orthodoxy of balanced annual budgeting for flexible budgeting over a given period, thus allowing governments greater freedom to indulge in party politics. Budget surpluses could be built up in the first years of a government to allow fiscal give-aways in the budget preceding an election. Hence, manipulation of the budget for economic ends, which was intended by Keynes , turned into manipulation for political ends via the logic of party competition.
The contemporary problems of budgeting arise from three conflicts which have emerged since the 1960s. First, continued incremental budget growth to provide for the needs of different sections of electorates has occurred simultaneously with relative economic decline or stagnation in large parts of the West. Budgetary control is hazardous because of uncontrollable commitments such as inflation-linked pensions, and because of the electoral implications of budget reduction for the party of government responsible. Secondly, continued expectations of governmental responsibility for macroeconomic management coexist uneasily with new political economies such as monetarism and old orthodoxies such as balanced budgets. Thirdly, the political imperatives of party statecraft in budgetary manipulation have conflicted with needs for long-term planning and/or stability in budgetary policy.
All countries face difficulties in resolving these conflicts. Those countries which have relatively controlled access for the representation of vested interests in the budgetary process, coherent government committed to a defined political economy of budgeting, and government which minimizes the imperatives of party competition, are the ones best placed to resolve them. However, the United States faces problems in meeting all of these requirements; the United Kingdom fares better on the first two but its tradition of one-party government undermines the chances of achieving the third requirement; and many European social democracies with their tradition of coalition government fare relatively well on the third requirement but poorly on the first two. The resolution of contemporary problems of budgeting will not be easy and seems likely to take a different path across countries.
JBr 

 
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(1888–1938)
A Soviet Communist politican and writer, Bukharin is best remembered for his association with the New Economic Policy (
NEP
) and for his execution after a show trial at which he was falsely charged with counter-revolutionary activity. He was also referred to by Lenin as the ‘darling of the party’, although Lenin thought he had never fully ‘understood the dialectic’. Bukharin was rehabilitated in 1988 with the return to vogue of many of his ideas during
perestroika
.
Despite his ‘liberal’ reputation, Bukharin was one of the ‘Left Communists’ who opposed the peace treaty with Germany and Austria-Hungary as a deal with imperialism. He favoured a rapid transition to total state control of the economy during the Civil War 1918–20. Moreover, in this period, he produced a rather doctrinaire textbook,
The ABC of Communism
. However, Bukharin became the leading proponent of NEP, advocating the radicalization of the policy at various critical junctures. Famously, he enjoined the Russian peasantry to ‘enrich’ themselves. With the NEP's demise, Bukharin's political career effectively ended. He was removed from the Politburo in 1929, although he was re-elected to the Central Committee in 1934 when he became editor of
Izvestiya
. In 1937 he was arrested and, after threats had been made against his wife and son, confessed to the charges.
SWh 

 
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Government by permanent office-holders. The term was coined in eighteenth-century France, and first appeared in English in 1818, in both cases with pejorative overtones built in from the beginning (‘the
Bureaucratie
, or office tyranny, by which Ireland has been so long governed’). The pejorative overtones are still current in everyday usage and in semi-jocular references to such maxims of bureaucracy as Parkinson's Law (‘Work expands to fill the time available for it’).
The first writer to view bureaucracy more favourably was Max
Weber
. Weber argued that working to the rules in a hierarchical office in which appointment and promotion went by merit was more rational than making appointments on other bases such as
patronage
. Weber also stressed the tension between bureaucrats and elected officials. The latter may wish to give favours to their supporters in return for votes. Bureaucrats may be expected to obstruct this.
Most subsequent sociological writing on bureaucracy has been an extended footnote to Weber. An important extension, due especially to Michel Crozier (
The Bureaucratic Phenomenon
, English edition, 1964) stresses the difference in motives between the bureaucrat at the top of the organization and the bureaucrat at the bottom. The latter wants a quiet life which may best be ensured by slavish adherence to the rules, whatever they are. The former may have more elevated aims for the bureaucracy which are frustrated by inability to force the routine employee to have the same aims as the bureau. Generally, means become ends in themselves. This difficulty is shared with firms. Indeed, the Weberian analysis of bureaucracy is intended to apply just as much to the firm as to the government office. Therefore it gives no support to the ‘New Right’ proposition that governments are less efficient than markets.
Many of the economists who have investigated bureaucracy, however, have made precisely that claim. W. A. Niskanen , in
Bureaucracy and Representative Government
(1971), argues that the bureaucrat seeks to maximize his or her budget and therefore systematically to overproduce bureau goods and services. The politician to whom the bureau reports would like to control its costs, but faces what economists call an ‘agency problem’. The only reliable information on the costs of the bureau comes from the bureau itself, unless the politicians erect a second bureau to check on the costs of the first. This is done to a limited extent (for instance by the
Office of Management and Budget
in the United States and the audit office, which has gone by various names and which serves the
Public Accounts Committee
, in the UK Parliament). But who is to check on the costs of the second agency, or check that the audit agency is not conniving with the agency it is auditing? Once again, however, note that these problems are shared by public and private bureaucracy. Auditing has not prevented a number of notable scandals in recent company history. And in Britain, a spate of financial scandals involving NHS agencies and local authority functions which had been put on a more ‘businesslike’ basis, run by businessmen, occurred in the early 1990s. Therefore, although the Niskanen model is elegant and has spawned many studies of bureaucracy, it provides less ammunition for the
privatization
programme of governments in the 1980s than its partisans claim.