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Critically analyze how successful the British government's use of Spending Reviews has been as a way of making government more - Essay Example
Finance & Accounting
Pages 10 (2510 words)
Critical Analysis of the Spending Reviews in the U.K. in Advancing Government Strategy Introduction Public fiscal policy is a vital tool of government in bringing about the economic progress of the nation. In the private sector, financial management of businesses impacts immediately in terms of profits or losses, revenues or costs…
From the chart it is evident that in the past government’s total expenditure persistently exceeded, often to a great extent, public sector revenues, forcing it to resort to borrowings. This situation is necessarily a temporary measure, because prolonged reliance on increasing levels of borrowing increases the default risk to the firm or the government. To ensure a sustainable financial approach, it is therefore important to control expenditures, for which an effective and responsive spending assessment process must be adopted. SRs and PES: How the SR system compares to the old PES system Before 1992, the level of government spending was ascertained through what are called annual Public Expenditure Surveys (PESs). The approach was fragmented and piecemeal because the Treasury negotiated bilaterally with each department. This prevented the government from developing a strategic outlook on the overall level of public spending and the balance or prioritization among its components. Another element that the PES was unable to do was to account for cyclicities among spending – that is, it does not distinguish which spending is cyclical and which is non-cyclical. This caused the total spending to ‘creep up’. ...
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