Common Budget Jargon
Specific terminology and jargon is often used to mystify and confuse, and this can easily prevent people from working with budgets. Common terms include:
Budget: statement of expected income and expenditure over a specified period of time. The public budget is the income and expenditure of a government.
Budget heads: the different items in a budget, for example teachers’ salary, training, infrastructure.
Balanced budget: when the income and expenditure are equal.
Capital expenditure: expenditure on infrastructure and materials which are invested in and will last beyond the budget period.
Caps: In this context, these are limits placed on the PSWB (see below). The caps often explicitly limit the numbers of teachers a government is able to hire.
Deficit budget: when the expenditure is greater than the income (a surplus budget is when income is greater than expenditure).
Expenditure: the amount of money allocated to specific items (or actually spent) in a budget.
Fast Track Initiative (FTI): A global partnership between donor and developing countries, providing a platform for donors from over 30 agencies and banks to coordinate their efforts. It supports countries to develop quality education plans, and then helps them raise the resources to fund them.
Fiscal policy: This relates to the level of public expenditure – it includes how money is raised (generally through taxes and national and international borrowing) and levels of expenditure vs. income. Some believe that income and expenditure should be balanced, whereas others believe that you can spend more than your income (and develop a deficit) if there is good reason to do this (for example to invest more in education).
Financial year: The twelve months, on which a budget is based, this varies from country to country – often 1st April – 31st March.
Gross domestic product (GDP): This is the total value of goods and services produced in a country; it is used to measure the country’s overall economic activity – a growth in GDP means that the country’s economy is growing.
International Monetary Fund (IMF): Established in 1944 to encourage international cooperation in around monetary policy and practice. The IMF is charged with the ensuring the health of international macro-economic system, and it uses loans to help members balance their economy and hence stabilise the international system. This gives the IMF immense power in the developing world where it provides many loans.
Inflation: This relates to the increase in prices, hyper-inflation describes a context where prices are rising very quickly; disinflation refers to a decrease in the level of inflation, whereas deflation describes a decrease in the level of prices.
Macro-economics: This describes the behaviour of the whole (national) economy (whereas microeconomics focuses on individuals). Governments use monetary and fiscal policies to manage their economy.
Needs-based budget: A budget developed according to the different needs of different members of the population.
Recurrent expenditure: regular expenditure, for example on teachers’ salaries, school meals.
Redistributive: To distribute expenditure in a budget differently from income – this is usually done to achieve greater social justice, i.e. more of the income of the budget might come from the rich, and more expenditure is targeted at the poor.
Regressive: The poor pay proportionally more tax than the rich (a progressive tax is when the rich pay more than the poor).
Revenue: the income – or money coming into a budget, a government budget will have revenue from taxes, services (that it charges for), investments, loans and grants/ aid.
Tax: an amount of money charged on a particular item. Direct tax is sometimes called income tax, and is the tax charged on an individual’s (or company’s) income (salary). Indirect tax, or value-added tax is the tax on goods and services, it also includes import and export taxes.