Sometime in April, the annual budget debate will commence with Governor General presenting the throne speech outlining Government’s plans for 2009-2010. Finance Minister Audley Shaw will then table the 2009-2010 estimates of expenditure and the plan to finance this expenditure. The Prime Minister, Opposition Leader, Opposition Finance spokesperson as well as other selected spokespersons on both sides of the House of Representatives will weigh in on the budget debate. Eventually a vote will be taken to accept or reject the Government’s budget. Over the last few years, there have been criticisms that budgets were not credible and many are warning Minister Shaw and Prime Minister Golding to ensure the 2009-2010 budget is credible. But what is meant by a credible budget?
By credible we mean that all assumptions are grounded in reality and that all conclusions based on the assumptions are reasonable. A budget, first and foremost, projects the financial outflows a government need to meet its operational, capital and strategic expenditures to deliver on its mandate. Additionally it projects the inflows required to cover the outflows and includes revenues, taxes, grants and loan inflows. Better put, a budget is the quantification of a 1-year operational plan, which itself is derived from the strategic plan. The Strategic Plan is a framework that translates strategy into operational objectives and initiatives which drive both behaviour and performance. The strategy, which is really an integrated set of choices, is designed essentially to close a long term performance gap – difference between the Vision and the current reality. There must therefore be a line of sight between the Government’s budget and the 2030 Vision for Jamaica.
The minimum criteria for a credible budget should therefore be:
1. The 2030 Vision must be used as the main context
2. There ought to be at least 3-4 overarching performance metrics and targets for the 2030 Vision such as: GDP/capita; poverty rate; murder rate; and % Grade 11 cohort achieving 5 CXC subjects including Math and English. There should also be 2012 and 2010 targets for each metric.
3. The articulated current reality relative to the vision and consequently the performance gaps to be closed over the next year, 3 years and 21 years (to 2030).
4. A critical external (to Jamaica and to the Government) analysis of those key factors which will either enable or hinder the Government from achieving the Vision and performance targets
5. A critical review of Government capability, highlighting the strengths and the weaknesses that can either support or detract from achieving the performance targets
6. The strategic options facing the Government along with the key external or internal factors identified above that will be addressed by each option. This must be accompanied by a discussion of the options and justification, including assumptions, for the option(s) chosen.
7. The key success factors for the chosen strategic options(s) that will enable achievement of the over arching performance targets.
8. The transformation and reorganization of Government required to deliver on the key success factors. Included will be changes to structure, day to day operations and financial requirements.
9. The estimates of expenditure required to transform, reorganize and operate the Government to deliver on the key success factors
10. The financing plan, including timing of inflows, required to meet the Government’s operational, capital and strategic expenses to deliver on its mandate.
In the typical Private Sector Company, the CFO presents the budget to the Board of Directors for approval. If Board members deem the budget not credible, they will reject it and the CFO has to wheel and come again. This is because Board members act on behalf of shareholders and take decisions in their interest. In the case of Governments however, Members of Parliament tend to act not in the interest of the citizens, but rather in the interest of the party and vote accordingly. Hence the chance of a budget not being credible is fairly high. It is therefore the duty of the media, financial analysts and the general public to weigh in on this most important cog in our wheel of governance and democracy.
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Copious thanks for this post.I find it extremely informative and instructive, especially, the last paragraph with respect to the comparison and contrast between the private sector and public sector responses to a a credible or non-credible budget.The ten steps enumerated in terms of a credible budget are extremely illuminating and should be a must read for all Jamaicans who/that have an interest in the budget process,especially,in light of the current global financial and economic meltdown.Indeed, the April budget debates will be very interesting. With regard to 2030 and the larger question of first world status,from ny perspective this is considered ludicrous, specifically, in light of the fact that we cannot even grow the Jamaican economy.More on the subject of growth and development at another time. Nuff respect!!
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