Discussion

Ex. 12. a) Read and discuss the texts.

b) Write down five questions about each text.

c) Say what you know about the use of multiyear budgeting and budget classification in Russia.

A) Multiyear Budgeting

It has become quite common for ministries of finance around the world to practise some variety of multiyear budgeting. For example, Canada, Germany and the United Kingdom all have multiyear expenditure plans which get reviewed and approved every year. In these countries, the starting point for the next year's budget is the expenditure level approved for this year in the multiyear expenditure plan. Any changes to these previously approved levels have to be treated as additions to the budget, to be financed by raising total spending or by making offsetting changes in other programs.

In Germany, the annual budget is integrated in a multiyear financial plan, which is presented to parliament at the same time the annual budget is presented.

The most important objective of the multiyear financial plan is to monitor the possible existence of excessive demands on public resources.

In Canada, each year the federal government reviews and rolls forward the Fiscal Plan which comprises in more detail the current fiscal year and three more years. Each spending unit develops its own multiyear expenditure plan with the levels needed to keep the current level of services running for the next three years, which are then negotiated with the Treasury Board.

In the United Kingdom, the multiyear public expenditure survey also covers the next three fiscal years.

Even when they do not have multiyear expenditure plans other countries carry out forecasts of the financial consequences of current expenditures (for example, the future liabilities implied by increases in pension plans) or capital investment projects (such as future expenditure on maintenance and operation). For example, in Denmark, there is an appendix to the annual budget showing the expenditure level for the next three years.

From: Fiscal Management in Russia, World Bank, 1996.

Words you may need:

multiyear budget многолетний бюджет

offsetting changes компенсирующие изменения

roll forward v переносить

B) Types of Budget Classification

A system of budget classification enables the myriad government operations and transactions to be organized into relatively homogeneous categories that facilitate the analysis of the impact, nature, and composition of revenues, expenditures, and other financing activities of government.

On the revenue, taxes are classified by the type of activity on which the tax is levied (income, sales, property and so on). Other current non-tax revenues are classified by the nature of the inflow, such as income from government property, sales proceeds, fines, and donations. Capital revenues are classified by the type of asset sold.

Grants are distinguished by whether they come from domestic or foreign governments and international institutions and whether they are for current or capital purposes.

On the expenditure, outlays are frequently classified by the responsible institution or organization. The two most useful types of classifications of government expenditures are the functional classification and the economic classification.

In functional classification, expenditures (and lending) are classified according to the main purpose or function, such as defense, education, and health. The three-level Classification of the Functions of Government published by the Statistical Office of the United Nations is commonly accepted. The value of functional classifications is that they permit analysis of trends in government expenditures even when the organizational structure of government changes.

The economic classification groups expenditures into current and capital and by whether they are requited or unrequited; if requited, for what kind of goods and services, and if unrequited, by the type of person or institution receiving the payment. The objective is to show the kinds of transactions through which the government performs its functions and their impact on markets, financial conditions, and the distribution of income. These transaction categories are wages and salaries, purchases of goods and services, interest on the debt, subsidies to enterprises, transfers to households and other governments, and lending.

One of the most useful ways to analyze government outlays is by means of a cross-classification by economic character and function. This classification reveals the means by which government performs its functions and the impact these activities will have on the rest of the economy.

From: Fiscal Management in Russia. World Bank, 1996.

Words you may need:

functional classification функциональная классификация

economic classification экономическая классификация

requited adj возвратный

cross-classification перекрестная классификация

Ex. 13. Read the dialogues, sum up their content and act them out: