Problem

Wastage in governmental budgets and appropriations

Other Names:
Excessive governmental spending
Wastage of resources by government agencies
Extravagant waste of resources by government agents
Bureaucratic waste
Waste of public funds
Nature:
A recent report of the Organization for Economic Co-operation and Development (OECD) indicates that between 1960 and 1982, average government expenditure in relation to national income rose by more than 20 percentage points to 47%, representing an average annual increase of 2.75%. This is associated with a growing tendency to make transfer payments (benefits and interest payments) as opposed to providing goods and services; the former now account for over 50% of all public spending. At the same time, prices in the public sector increased more rapidly than in the private sector, although this tendency is starting to decrease.

There is little supervision of how the budget money has been spent by the several governmental agencies, because everybody is more interested in getting money than managing it afterwards. Agencies may have different accounting systems, no legislation or common rules to follow, no annual reports and many are just impossible to audit.

Incidence:
Brazil spends around 25% of gross domestic product on social programmes for health, education and nutrition. The result, however, places Brazil among the world's most backward nations. This is because spending is targeted away from the poorest sectors of society, allowing malnutrition, infant mortality and illiteracy to grow even as wealthier children improve their standard of living. Access to social benefits is not a right, but rather a favour provided by influential politicians or bureaucrats, making social expenditure priorities very difficult to change.

In the UK in 1994 for the first time a parliamentary committee consolidated 17 separate reports on public expenditure, cataloguing mismanagement, incompetence, waste and fraud, and noting 26 different scandals involving millions of pounds. These ranged from unnecessary first class travel and free house deals to massive waste under such headings as "doubtful and incorrect payments to training providers". The report indicated that it had noted a number of serious failures in administration, financial systems and controls within government departments and other public bodies which had led to money being wasted or otherwise improperly spent.

Nearly one-third of the $200 million spent by the government of the USA from 1988 to 1991, to clean up the worst toxic waste sites in the United States, was spent not to clean up anything, but to pay the administrative expenses of private contractors. The Environmental Protection Agency, which ran the cleanup programme, explained the money was gone to "programme management" - a loosely defined category of overhead covering everything from fringe benefits to office rents, business cards and parking fees of the engineering firms hired to carry out the work.

In 1992, 15% of Russia was unsafe for human habitation due to effects of toxic waste dumping. Britain, for comparison, had 0.002 per cent land area classed as contaminated.

Claim:
Public expenditure is invariably wasteful as it lacks the discipline imposed by the market on the private sector. A particular problem are the increases in public sector borrowing, the consequent interest payments causing further spiralling of government costs, and in taxation.
Counter Claim:
Many of the increases in public spending are related to the oil crisis of the 1970s and the reduction in economic growth, with the consequent burden of payments to the unemployed and increased costs in services. There is evidence to suggest that welfare payments do not, in fact, give rise to any significant tendency to cheat or abuse the system, nor to stay out of work longer than necessary. Privatization of services and the free play of market forces would bring little if any improvement in costs.
Narrower Problems:
Unchecked community spending
Problem Type:
D: Detailed problems
Date of last update
23.11.1999 – 00:00 CET