Does PFM need to be rebuilt?

Contemporary public financial management (PFM) is, according to an emerging school of thought, in a parlous condition and needs a complete rebuild. I disagree. An influential recent formulation of the views of this school of thought can be found in the 2020 report Advice, Money, Results (AMR). This report issues a challenge to contemporary PFM […]

A Net Worth Rule: Higher Debt for Higher Investment?

Yet another call for governments to abandon debt limits and focus instead on net worth! This time it’s in the United Kingdom, where an influential think tank, the Resolution Foundation, has proposed the replacement of the country’s debt rules with “a target to see net worth improving.” This is a bad idea that must be […]

Ending the Confusion on Medium-Term Expenditure Ceilings

Expenditure ceilings are a key instrument for achieving the objectives of medium-term budgeting. This is why the question of how to set appropriate and workable expenditure ceilings has been a major focus of public financial management over the past two decades. Erroneous notions as to what constitutes best practice in ceiling-setting have, however, been a […]

Budget Baselines & Public Employment

Knowing the budget baseline is an essential part of good budgeting, which makes the methodology for estimating the baseline important. What follows focuses on the need, in many countries, to include within the baseline estimation methodology a wage bill model that is capable of quantifying the budgetary impact of public employment policies. The budget baseline […]

Attacking Budgetary Incrementalism

There is wide agreement that attacking budgetary incrementalism is an important objective of budget reform. But when we go into battle against incrementalism, we need to be clear on what exactly we are fighting against. Like many other people, I use “incrementalism” to refer to the tendency of budgeting to treat baseline expenditure as given, […]

Unit Cost Budgeting: Use Selectively (4/4)

The idea that governments should base their budgets on output unit costs is very influential. Everywhere in the world one finds people who think that unit costs are the key to making performance budgeting work. Nowhere is this more true today than in the developing world.* I know of several developing countries where the budget […]

Unit Cost Budgeting: The Uncertainty Problem (3/4)

In this blog piece – the third in a series of four – I look at why budgeting based on unit costs doesn’t work well for services where there is a lot of uncertainty about the quantity of output which government will need to deliver. This is one of the key reasons why unit cost […]