The Budget is a contract between the State and the people

The number of supplementary budgets in a single financial year is evidence of how casually we take our budget process.

Perhaps it’s time we change our view of the national budget.

Conceiving the budget as a contract between the state and the people rather than a tool for sharing the national cake would make the process more serious.

At first glance, it may appear inappropriate but the notion of a budget as a national contract is not new.

Whether or not the contract is enforceable, or whether or not the parties agree about what the contract purportedly stipulates, is a matter for inquiry. 

To a certain extent however, the budget establishes rights, obligations, and expectations, assigns roles and stabilizes relationships among participants, promotes continuity in policies and allocations from one budget cycle to the next, and reduces both the volume of decisions and the intensity of conflict.

Viewing the budget as a contract has several advantages: The budget contract has to be achievable at the time it is negotiated. A contract that provides for parties to the agreement to perform impossible feats is not enforceable in law or achievable in politics.

Secondly, the notion of contract injects reciprocity into budget decisions. Rather than viewing the budget solely as a matter of what the government spends and does, a contract is built on the fundamental idea that all parties, including citizens, have mutual obligations.

More importantly, as a contract, the parties participate in negotiating the budget’s terms. Rather than being bystanders, citizens have a role in influencing what is decided and how public money is spent.

The Fiscal Contract: Contemporary societies are bound by a fiscal social contract between citizens and their elected governments which administer the states in the interest of all members.

The fiscal social contract implies that citizens should pay tax which is utilized by the government to execute programs for the collective good. 

The government has a fiscal responsibility to set limits for revenues, expenditures, and public debt.

While citizens rarely have a direct voice in setting its terms, in more sophisticated democracies Citizens can indirectly express their views on the government’s fiscal management at the ballot box,

The Social Contract: Evidently, social contracts have been grounded on the premise of sustained economic growth.

By pooling the social-economic risk from the households to the state, the people pay taxes and make social security contributions in the hope that the government will take care of them in the future.

Our traditional view of the budget is that it’s less than a full-fledged contract but more than a wish list. 

A government’s budget is a political appeal to voters, a statement of its programmed ambitions, a guide to economic policy, a means of organizing the work and activities of public agencies, a communication link within government, an opportunity for parliament to express its preferences and concerns, a ritual for legitimizing public expenditure, and a means of financing ongoing programs and operations. 

By being more than a contract, the budget becomes less of a contract. Its decisions carry significant weight, but not always or everywhere to the same degree. 

The budget demands both compliance and discretion and fidelity to its terms, along with the flexibility to deal with matters that arise during the year, including shifts in economic conditions or political circumstances.