Budget, the forecast of expenditures and revenues for a specific period of time. As a planning document, a budget enables businesses, governments, private organizations, and households to set priorities and monitor progress towards selected goals. To achieve budgetary objectives, it may be necessary to set aside savings (surpluses) or to borrow from outside sources (deficits).
The personal or family budget is a financial plan that helps individuals to balance income and expenses. A business budget is generally used as a tool to formulate intelligent decisions on the management and growth of a business venture. The most complicated budgetary process involves a government budget, which is a plan for the collection and expenditure of monies needed to carry out the social, military, and economic policies of an administration.
II GOVERNMENT BUDGET
Governments usually deliver a budget once a year, in which taxation and expenditure proposals are presented. In Great Britain, the budget is delivered annually in November. The main sources of taxation constitute income tax, indirect taxes on expenditure (such as Value Added Tax), corporation tax, and National Insurance contributions. The main categories of expenditure are social security payments, the provision of goods and services (such as education and health), and interest payments on the accumulated national debt. If government expenditure equals tax receipts, the budget is said to be balanced. If taxation exceeds expenditure, which is more likely to occur during an economic boom, the budget is in surplus. A budget deficit occurs when government expenditure exceeds tax receipts. Budget deficits have usually been the norm in Great Britain in the post-war era, although budget surpluses were observed during the 1980s. In the United States, the budget has been in deficit since the late 1960s. As a result, the US federal debt is now several trillion dollars.
III FISCAL POLICY
The national budget also expresses the government’s fiscal policy. Governments are faced with numerous, often conflicting, objectives: promoting maximum employment, fighting inflation, and pursuing economic stability and growth. To assist in achieving these objectives, the government may decide to stimulate the economy by operating with a budget deficit. If inflationary pressures persist, the government may choose to reduce the deficit, bring the budget into balance, or produce a budget surplus to restrain the economy. To be effective, fiscal policy must accord with monetary policy decisions of the central bank.