What tells you more about a government’s budget performance?

A government’s budget performance is reflected in its budget inputs, outputs and outcomes:

• Budget inputs are the resources allocated to produce certain results. Budget inputs may include, for example, money, labour and time.

• Budget outputs are the results produced by budget inputs. For example, the output of an education budget may be reflected in the number of pupils receiving schooling.

• Budget outcomes are the changes in the quality of life brought about by budget outputs. It is how lives are changed for the better as a result of the outputs. For example, the outcome of pupils receiving schooling may be reflected in reduced unemployment levels over time.

It is important to measure government’s budget performance by looking at its budget inputs, outputs and outcomes. The following criteria are useful to consider when looking at the relationship between inputs, outputs and outcomes: 

• Economy is about how government manages inputs in relation to costs. In other words, a budget is economical when the best possible inputs are being secured with the funds available.

• Efficiency is about how government works with inputs in relation to outputs. A budget is managed efficiently when inputs are used in such a way as to produce the most possible outputs. For example, a budget for the establishment of a high-turnover clinic would be efficient if the clinic is built to accommodate the most possible doctors, nurses and patients.  

• Effectiveness is about how government manages outputs in relation to outcomes. A budget is managed effectively when spending brings about the outcomes it set out to achieve. For example, even if the budget for the clinic is economical and efficient, it would only be effective if spending brings about the desired results. If it is built too far from transport routes, or does not provide the health services needed in the area, public resources have not been spent effectively.

• Equity is about the fairness of inputs and outputs in relation to outcomes. Even if government budgeting is effective, efficient and economical – it may not be equitable. The principle of equity derives from a government’s obligation to deliver to those people who need it most, and to manage resources in a way that is fair to all citizens. For example, in budgeting for the establishment of a new clinic, due regard should be given to who is most in need of primary health services. A budget is managed equitably when it helps to correct imbalances in access to services, and provides benefit to those most in need.