Oran Hall The Government’s budget is a lot like yours
Minister of Finance and the Public Service Dr Nigel Clarke laid in the House of Representatives, on February 14, 2023, the Public Sector Consolidated Estimates of Expenditure for the financial year ending March 31, 2024.
He will tell us how the spending will be funded shortly as the Budget Debate between the Jamaican Government and the Opposition gets into full swing.
It will likely sound like Latin to many. But the country’s budget is not much different from yours.
The government’s budget runs on a one-year cycle but has implications for many years into the future It covers the period running from April 1 to March 31 the following year. This is called a fiscal year. Many people who use a budget tend to make it for one year, usually on a calendar year basis, from January to December.
If you are one of the people who use a budget, you know that you divide it into two portions: income and expenses. This is the same as the minister talking about revenue and expenditure.
The figures that the Jamaican government presents are estimates. It lays out how much it expects to collect from revenue sources, the main ones being GCT or general consumption tax, income tax, and SCT or special consumption tax. Your primary source of income is your salary if you are employed, your pension if you are a retiree, and your drawings from your business. It is also possible that you could earn income from your investment and savings.
Before estimating its spending, the government sets its spending priorities, which guides it in determining how much it will allocate to its ministries, agencies, and departments. Funding for its expenditures comes out of the Consolidated Fund. Similarly, you determine your priorities in the process of casting your budget, and that determines by and large how much you allocate to each item and what you exclude from your budget.
The national budget provides for recurrent expenditure and capital expenditure. The former includes the salaries of the employees of the government, rental, utilities, grants to educational institutions and employee benefits like health insurance. Capital expenditure includes spending on infrastructure.
Your budget also provides for recurrent expenses like utilities, rental, or mortgage, school fees, repayment of principal and interest payment on loans, food, and other expenses that you incur regularly to maintain your lifestyle. Some of your expenses follow a weekly cycle, but others may follow a quarterly, semi-annual or even an annual cycle. Some expenses are fixed, and others are variable. Some are required and others discretionary. Paying keen attention to the type of expense is key to making your budget work well.
Your budget also provides for items that have long-term value, for example, furniture, appliances, home improvement and a motor vehicle.
You can have your own budget debate by having your family examine it and critique it and commit to making it work. In fact, it is good practice to allow the family to make an input into the making of the family budget.
Like you, the government has the option of borrowing to plug a hole in the budget, but whereas it has the power to increase taxes to close a gap in the budget as well as to improve its capacity to service its borrowings, you do not have such an option. In fact, there are limits on the ability of governments to borrow and to increase taxes.
The government also has the capacity to create a supplementary budget or several supplementary budgets during the course of a fiscal year to reflect new realities. Perhaps it could be that revenues are behind projections thus making it necessary to cut spending in some areas, or it could be a case where some items of expenditure are costing more than projected, in which case, it may be necessary to reallocate funds from other areas.
In a sense, you can make adjustments to your budget by reallocating funding to items as you see fit, but you are hardly going to have the flexibility that the Government has.
Ultimately, like the government, you must be able to balance your budget. If you are not able to do so, you are courting disaster, not just in a financial sense, but in the sense that your whole life, including your health, can be affected negatively if the situation is not brought under control in good time.
– Oran A. Hall, author of Understanding Investments and principal author of The Handbook of Personal Financial Planning, offers personal financial planning advice and counsel.finviser.jm@gmail.com