AKHIL VATHALLOOR JOHN

Student ID:20181243

POLS 3111
Canadian Public Administration

Essay Assignment
Q. Provide a critical analysis of the Formulating a Provincial Budget case study in light of relevant

academic literature on public sector financial management and the federal 2019 budget. What

management theories best explain how and why public sector budgets get formulated? And how

are these theoretical approaches reflected in both the case study and the actual federal 2019 budget?

Does the case study help to illustrate how policy prioritization and governmental trade-offs occurs

in the real world of budget making? How do we see such prioritization and trade-offs being

reflected in the federal budget for 2019? What management theory best explains how and why the

federal budget 2019 exists as it does?

World is growing year by year, and the base of this growth is the policies and projects formulated

by the federal government during each budget. On formulating a budget, the skills of a better

economist come into action. Because it is very important to allocate the funds for every policy

with no one gets more or no one gets less. It is the critical thinking of the finance minister or the

officers mainly the chief finance officer who helps the minister in formulating the annual budget

for the year for a government. The development of the country is based on the type of budget

policies they are trying to implement for the coming years. It is the one which is rested to each

other. Because the policy is not formulated for one year, it should be a long one or a short one. If

it will, be along one, it takes time to get finished , so its very important to give the necessary funds

for the following project and need to support it by increasing the funds if it needs more. So, the

one who that’s is the finance minister he should be aware about the long run policies and should

regulated according to the demands of the policy. All budgets are very important on the aspect of

considering the growth of the country. It is because of the policies and the tax criteria’s which

determine the financial standing of the country.

Budget is important considering the efforts of the government in dealing with the various

departments of the public sector. Each government is divided into different departments and for

this each department they have different plans. The case study Formulating a Provisional budget

deals with the aspects of how we can formulate a provisional budget. Considering to a federal

budget the provisional budget also has same complications as of the federal one. The one benefit

of the provisional budget is that the provinces can easily find out the areas need more care and

how to regulate the budget by giving focus on the annual budget by supporting with the funds and

new polices. (Johnson, 2017, p. 205)

Government runs on a huge amount of money. Mainly the money comes from the securities ,tax,

credit, income tax, liabilities and all. The other sources of the income are the trade. The country

Canada is a big trader, esp. in the fields of agricultural products and the oil and the main trade

partner of Canadian business ins United States. (Johnson, 2017, p. 21)The main trade relationship

agreement is the NAFTA its between United States and Mexico. Now it become a problem to

Canada in the field of oil industry so that they can, to sell the oil to any other countries that is

because now the government stated working on the pipe lines. (Burney, 2018).Canada has no other

trade partner on oil, and it depends completes on US, but they gave only a small money for the oil.

It is to decrease the American domination and to sell the oil from the country to other countries

through the ports Canada is now expanding the pipe lines from Alberta through British Columbia.

(Burney, 2018)A strong protest is going on against this . But government through its medias and

through the advertainment gave an Idea and aware the people regarding how important this pipe

line for the country is and how it affects the entire economy of the country. (Burney, 2018)It is

very funny that the one who read this matter in an essay related to the Formulation of provisional

Budget, the importance of this topic is that now among all the other matters the Canadian
Government spend money and gave importance to this pipe line project as supreme importance. It

will be a huge turnover in the oil business of the country. The dependence on United States is not

longer (Alberta, 2019);possible so that it is very essential to find new trade relations ships with

other countries so that it creates a lot of money for the country and which will paly an important

role in the economic development of the country. I think this is the main aim in the mind of the

one who formulating the budget to secure the country through these types of policies which help

the country ,s growth not for today and tomorrow but for a long time period. (Burney, 2018)

(Alberta, 2019)

So, the budget comprises of all these factors. The important process of formulating the provisional

budget are illustrated in the IPAC case studies. They illustrated it in a good order in order to

understand those who are not familiar with his type of topic. The budget process includes

Creation of a Budget Strategy

Forecasting of revenues

Tax rate determination

Fund allocation to policies. (Leger, 2006, p. 2)

In this case study Leger deals with the descriptive process of initial fiscal framework for the

Government of New Brunswick for a particular year. Formulation of a provisional budget is a

herculean task. Because it is very important to include all departments in all the budgetary plans

which is important to the development of the country and to satisfy the needs of the common

citizens inside the country. In the first process of the formulation, the one who formulates the

budget has a good idea about the budget plans. In a country like Canada with this vast area of land

and not enough people compared to the land lives , the policy implementation to all sectors of the
society is very critical. Because of these diversities, and due to the presence of aboriginal

communities , considering them in budget also important. The strategic plan should be the one

which emphasises the importance of these types of the issues which should be benefitable for all

the communities including the common people, aboriginal communities, foreigners, disabled

people and the main criteria is that all should be acceptable for all. In the financial management

they tell like the prioritization, that is the one project which needs more priority should be given

the highest priority and the one policy is less important goes down . In a managerial level, the one

who determines the priority should be aware about the current issues and the government debt in

the following period. (Leger, 2006, p. 2) Once these priorities are made, they work together with

the available resources and formulate a global view regarding the plans and submit in front of the

corresponding Financial Minister. (Johnson, 2017, p. 205)

The Canadian policies is sticks to the macro financial management both provisional and federal

level with implications of budget deficits surplus and debt. The policy should always be like that

to try to reduce the debts .The main policies which should be given priorities by the government

of Canada as a trend in the last few years are the budget cuts and employment cuts in public sector,

privatizations, use of consumption taxes, fee imposition to government services etc. These are

some of the initiatives and some polices which gets more priority during the preparation of the

budget strategy. (Johnson, 2017, p. 205)

Other important process in formulating the budget is forecasting the revenue. Revenue forecasting

includes individual and corporate taxes, fees and duties, borrowing from other sources and other

particulars. These revenues compute together to form the total income source for a country in a

financial year. (Johnson, 2017, p. 214). It is very important to calculate the value of all of these

particulars because according to the income and the expected borrowing for the sources the funding
and the expenditure plans are demonstrated. It was the responsibility of the Prime minister and the

minister of finance to calculate the sum total of all revenues. It was same for all governments from

the first o now. (Johnson, 2017, p. 214). The officials develop these plans after consulting with the

officials who are closely related to these departments include The Privy Council Office, The

Treasury Board of Canada, The Prime Minister’s office. Sometimes it may extent to other senior

officials including the director of finance and the other consultants of the finance department in

the case of any issues oar sometimes if there is an urgency in any of the policy decisions. The

department of finance usually hold a prior budget hearing and it contains the officials from

business labour and representatives of the people having social interest. Usually in Canada by the

end of February or by the end of march the budget is presented in the House of Commons. The

revenue budget is very important and it has got a high media publicity among the citizens because

it is the one which determines the tax rate which may affect the each and every citizens of the

country because of this the budget speech is something highly theoretical . (Johnson, 2017, p. 214).

There is another process called the expenditure process which has also the same importance as the

revenue process. The expenditure budget involves the officials from each department commutate

there expenditure and they calculate the expenditures for there department and they submit the

expenses for there departments and the government authorities valuate these expenses and they

approve the expenditure budget plans. (Johnson, 2017, p. 214) Each department of the government

has there expenditure plans and the federal and provisional government studied thee request and

evaluated it by the PCO,PMO and TBS. The annual federal expenditure budget is massive

compared to the revenue process so it should be in the foam of Massive Main Estimate because

considering its length and breadth and because of its complexity and its effect on the functioning

on the government running. (Johnson, 2017, p. 214).

Financial management was best explained by using the basic financial budgetary theories like

budgetary incrementalism, performance budgeting and budgetary rationalism. (Johnson, 2017, p.

216)Each of these theories has here plus side and the minus side.

The budgetary incrementalism is one of the main managerial theories which demand for the

approaches on the finance management. It will be followed from 1960 and being a theory of lot of

complications still the authorities are satisfied by this theory. In budgetary incrementalism, the ere

is a set of values or funds which is allocated for the policies like salary, rental, equipment, vehicles

and travel and the senor finance officer compare the values of these with the previous years values

and make slight changes to the values. So that they make and incrementalistic approach to the

current years budget management. The one who makes these adjustments will not be aware about

the policies and requirements needed in their organisation or the department. The problem will, be

here and the one who deals with his rationalistic approach was not will be in the direct contact

with them also. Only the middle level managers have the direct contact with the organisation, and

they are the only person who know what amount or fund’s actually the organisation needs.

(Johnson, 2017, p. 216)

This was one of the worst systems of budget management because of its centralised approach. It

will be oriented in one individual and he is the one who don’t know who is needed and who is not.

It is because of this the one who needs more gets less and one who needs less gets more. The

supreme problem among these issues is that the departments wont gets enough funds for there day

to day activities and it will be led to a great crisis. The only one who took the decision don’t know

what’s actually happening down his or her authority. So according to me the mangers or the one

who is in command should be the one who should be well aware about the running policies on

different departments and must know about the requirements of the funds for each of the projects
(Johnson, 2017, p. 216).The benefit for this type of approach is only for the front line managers.

They don’t have any sort of work as this was the exact copy of the previous years budget with

some adjustments on the values. And he mangers do not have to justify the purposes and interest

of their organisation included in the activities of the government. (Johnson, 2017, p. 217) On the

other hand the negative side is that the budget is not a finished one. It should be the one which has

some abnormalities. It needs some fine tuning. In this aspect it will be a bad budgetary management

theory as the line item budget is not giving an exact idea about the next years expenditure and only

provide a limited information about the funds allocation and the one who deals with this only just

make some adjustments and the correct ideas should be known only by the middle level and low

level mangers. (Johnson, 2017, p. 217)

Performance budgeting is the next managing theory which explains the aspects of the finance

management. Its is not entirely same as that of budgetary incrementalism. In this performance

budgeting there should be a grater plan can be seen from the side of managers and also instead of

that there will a comparison between the service outputs and financial inputs done form the side

of the mangers. So that they can easily value the amount of funding’s need ed for the coming tear

and the part of the middle level managers also utilized by collecting the active information from

them. Because of this type of intense planning it will be based on the complete performance based

(Johnson, 2017, p. 218) In this approach the middle level mangers are aske to provide an not only

an annual expenditure but also a quantitative list of the services also.

This budget approach will help to increase the degree of nature of the budget and increase the

efficiency of the budget by its effective evaluations, since the efficiency of a single operation can

be measured overtime and the efficiency of different operations can be compared. There will be a

chance to evaluate the budgetary plans to all the senior officials and for political leaders. In this
approach the more efficient organisation will gets a reward and the less one gets more funds in

order to improve it functioning and to attain a better result in the next year. (Johnson, 2017, p.

218)So overall taking the plus side both the senior and the middle level mangers has a equal role

in the performance budgeting to make it into to a better one.

Still it has lots of advantages it has some weaknesses also. Because it will still stick on the

incrementalistic approach and it still be only applicable to the services which can be easily

measured. All services in the public sector are quantifiable but some of the important ;polices

which cannot be qualified easily using this type of approach like policies related to international

activities policy analysis etc. (Johnson, 2017, p. 218) Any thing which can be calculated according

to the value of there quality cannot be calculated by this performance budgeting. (Johnson, 2017,

p. 218)

The third a final management theory which explains the financial management is the budgetary

rationalism. This was implemented by the US Department of Défense between 1950s and 60s.The

weakness of both incrementalistic and performance budgeting arrive at a new approach like this.

As the name itself explained that it will be a fast approach and the policies which needs more

priority gets more benefits. It helps the authority to implement prioritization and comprehensive

policy making in formulating the budget plans. In Canada the budgetary rationalism was

implemented by the former PM Pierre Trudeau under the Liberal government. In 1969 the

government introduced a new system called Planning programming budgeting system to think for

a better managing in the financial budget planning’s. (Johnson, 2017, p. 219)It was from the

struggle that government faced during the policy implementation which force them to give initiate

to this plan. From this approach the policy of spending the public money was raised and the polices

are implemented much faster consider to the other two theories of the management. Performance
planning budgeting was implemented at the time of Pierre Trudeau augmented with Management

by Objectives(MBO),Operational Performance Measurement Systems (OPMS). Followed by

Policy and Expenditure Management System (PEMS) and Zero-Based Budget System (ZBB) and

these policies are revised by Harper government for the better output (Johnson, 2017, p. 218)

These all types of management theories gave better output for the smooth running of a financial

management. Because the financial management is an important thing considered to the smooth

functioning of a government. Because all the policies and projects on the current financial tear

depend on the financial budget. The department s also be smooth functioned only by getting

enough funds for the developments of sectors related to them and to the employees who depends

on the governments through these departments. According to me I prefer the third one which is

the rational budgetary approach is the best on which suits the government on regulating the

financial management. Because it has a vast area which clearly have an idea about the policy

making and the fund and money division which helps the financial ,manages and the middle level

mangers to work greatly on this financial, budget using the rationalist theory of management.

Canada is now at the time of its annual budget , it may be around 19th or 20th March. In this time

the discussion about the Canada’s financial budget is very complicate. But at the time being and

when we watch the country’s growth and day by day movement, we can assume the projects which

gets more importance in this budget. (Canada, 2019). According to the Finance Minister Bill

Morneau, the main emphasis on the current budgets on the middle class , he told that in the coming

budget the government plans to invest more to the middle class , so that only improving the quality

of the middle class the country can achieve the growth. He also told that Canada is one of the most

growing countries in G7 for the coming years. Canadian government plans to build an economy

for every one with good facilities good paying jobs for the middle class and creates opportunities
for whom who likes to work hard for the country (Canada, 2019) From the analysis of last years

annual budget it was clear that the policies formulated and implemented by the government to

reduce the levels of unemployment and for increasing the salary of the employees are going in a

good effect so that people should be more approachable for the government because of these type

of success in the policy making. (Canada, Department of Finance Canada, 2019)It was from that

success government now realize that the investment in the idle class is the trump card for the

success and growth of the country. If more people get jobs, it will increase the work force inside

the country which helps in the overall growth of the country in all fields. So, I think this type of

policies help the government in the coming years as well as the country itself (Canada, 2019). The

other most important policy making is in the field of education sector, from his saying it is clear

that the government is planning to create more opportunities for the children and the grandchildren

supporting for the country’s economic growth as a long term process in a balanced and fiscally

responsible way. (Canada, 2019)

It was from the thought that since 2015 the governments plan and policies in the middle-class

people get a good result by encouraging them to save invest money and by that they can help the

country in the growth. (Canada, Department of Finance Canada, 2019)So, government introduced

a middle-class tax cut. As a support for the families who was suffering form difficulties to grow

children the government introduced Canada Child Benefit which indexed with a help with the

increasing cost of life prior to two years of the implementation of the program (Canada, 2019). For

workers in this new budget government plans to change the previously run Working Income Tax

Benefit program with some more reliable and easy pan called Canada Workers Benefit program

which mainly focussed on supporting the workers who got a low pay. By this the ultimate plan of

the government to encourage more people to get into job and add more workforce which was
benefited to more that 2 million Canadian workers. (Canada, 2019). More enhancements to the

Canadian Pension Plan gave Canadian workers provide a greater income security and it will help

the workers when they retire a good. (Canada, 2019) (Canada, Department of Finance Canada,

2019)

It was from the ideas shared by the finance minister it is clear that the government will focus on a

long-term policy implementation and it will be a rational one also. From the minister it was clear

that the policies are in benefit of the middle class, and government try to encourage the middle

class to get engaged into the work as well as by the help and tax cutting to the low class people

more people considering the benefits of the tax cut they are more attracted towards the benefits of

working for the country and if this continue surely by the next year a clear growth can be see in

various sectors of department and the country wide growth can be seen very soon. (Canada,

Department of Finance Canada, 2019)

And also, according to me the most important policy implementation and fund allocation for the

next budget may be for the Trans Mountain pipe line project across the British Columbia . Because

now the Canada’s trade relationship with US was not going good after the trade tariffs and Canada

now try to sell the oil by itself through, the water ways . (Burney, 2018)So that as a challenge to

the US by avoiding their trade relationships and it will help Canada to a new way of selling their

own oil by themselves, so that they can crate their own stand on this oil market. From the case

study it was clear that the main priority is given to the policies which need ore attention and it will

be the one which should be help for the long run development of the country. So according to me

this issue got the highest priority among all the other issues. This is because to aware the people

about the importance of the pipe line the Canadian government now introduce more

advertainments related to this in the social medias.

When we go through the case study it deals with all the department s of the budget making which

includes the valuation of the provisional economic frame work the revenue and expenditure

outlook financial constraints borrowing plans the capital availability economic fiscal and other

policy considerations sand the budget operational plans. It was clear that these all constitutes the

formulation of the budget. (Leger, 2006) The initial steps involved the performance valuation. In

this the government set a criterion to value the polices ad implementations of the last year and

from the extracted result they planned how much will the next budget can provide to that.

Considering the federal budget, the fund allocation is like that the provinces which utilise all the

funds and show s an excellency in the policy implementation will get a good grade and it helps

those provinces to get more funds for the coming budget (Leger, 2006, p. 8). They provide all the

details of these individual factors which helps to formulate a financial budget which was the mains

steps in the formulation to calculate the revenues and the expenditure turnover and to regulate the

fund allocations.

This case study will help to illustrate the policy prioritization and the government trade offs occurs

in the real world of budget making, because these case study will provide a vast information

regarding the formulation and also the minute things about the budget formulation. The processes

are well described, and it helps everyone who works on a budget can easily utilize the information

and the skills used in this case study. (Canada, Department of Finance Canada, 2019)

In the Budget 2019, the finance minister himself introduced the Budget as by the name of the

policy “Investing in the Middle Class”. Since the Canada’s federal debt to the GDP ratio on a

steady down ward track the government’s plan is to invest consistently for the growth of the

country. (Canada, Department of Finance Canada, 2019).The main policies and prioritization

implemented in the Budget 2019 are make the homeownership more affordable for a person who
first buy a house by that the buyer can reduce the investment on the house and the mortgage will

be shared equally through a First Time Home Buyer Incentive program , which helps to reduce

there mortgage and there by provide a great access to the Registered Retirement Savings Plan

savings to buy a new home. (Canada, Department of Finance Canada, 2019)

Canada training benefit program, Low interest rate Canada Students loan,Creation of new Canada

Drug Agency,Implemnetation of Guaranteed Income Supplement program, Municipality support

programs, High speed internet access to all Canadians, Reduce the cost of Energy ,Standard quality

assurance program for Indigenous People are the new proposed plans other that the above

mentioned program in the Budget 2019. (Canada, Department of Finance Canada, 2019)

Through the advanced reconciliation with the indigenous people the government try to improve

the basic standards of those communities like First Nation people, Inuit and the Metis People by

improving the standards in providing good quality water, promotion and preservation of there

traditional languages and cultures and improve the quality of Education and the Health care

facilities for the community and also proposed plans to encourage and hep them to promote

entrepreneurship and business from them. (Canada, Department of Finance Canada, 2019)

Other policies like lower of energy cost and the student support programs like low interest rate

Students loan programs are all proposed on along term based rationalistic approach which give

priorities to the now productive generation, Government (Canada, Department of Finance Canada,

2019)tries to encourage each citizen to contribute something to the country to help the country to

achieve the goals and ultimately to make their country the best among the world nations. So that

they gave more priorities to the youth and the working class which was considered as the great

wealth of a nation. (Canada, Department of Finance Canada, 2019). Clearly, I can say that the

Budget 2019 these prioritizations and trade off will be reflected in the budget and it will be a
beneficiary proposal aiming at the middle class working people and the young generation who was

considered as the leaders of the society for the next period of time. So, the plans of the government

underlined that the ultimate aim ids very clear and the government has a good vison and planning

to implement those polices well.

Budgetary incrementalism is the type of management theory still adopted in various departments

of the government to formulate the budget easily. But for the studies of the Statistics Canada some

important prioritized polices, the government took a rationalistic approach in order to activate the

polices very fastly among the people since the elections are coming near by in order to attain the

acceptance the government tries to do that in fast manner. Rationalistic approach on the

organisation is a fast one and the policies are implemented without any prior analysing, but it

aimed at fast effect of that policy to get better result with in a limited period of time. (Johnson,

2017, p. 193)

Concluding the essay, I think the governments areas till following the old fashion budgetary

incrementalism type of management in the case of the financial budget formulation. . But as the

time changes the technology grows in a drastic way the time to change the approach to formulation

should also need a new approach , before the policy implementation the government should make

a study from the previous budget about the next year priority and the areas which need more

importance. So that during the formulation it will helpful for the government to gave importance

to that specific are so that like providing little water for plants during their growth ,the little support

for that specific problems help to resolve it during that financial year. Actual fact is that it is very

difficult to go through the each and every corners of the country for the finance minister and for

the department. So even the importance one should always be the important. Because only with

good trade background and good skilled workers the country can develop. In order to keep the
skilled workers and the industrial sector alive , the government is dedicated to give priorities to

them during the budget , which we can seen firm the proposed Budget 2019. So according to me

the budget is an effective one and the case study deals with the formulation of a provisional budget

which provides vital information regarding how to approach and what are the areas which we

consider during the formulation and how we divide and give priorities to the programs and policies.

(Canada, Department of Finance Canada, 2019) (Johnson, 2017) (Leger, 2006) (Canada, Budget

2019, 2019) So the management theorist like the budgetary incrementalism and the budgetary

rationalism has equal importance in the formulation of a federal budget considering its advantages

and the application of its valuable theory parts which can be clearly seen in the formulation of the

federal budget 2109 by the Finance minister of Canada Mr. Bill Morneau.

Bibliography

Alberta, G. o. (Director). (2019). Introducing Canadian oil pipelines [Motion Picture].

Burney, D. (2018, December 6). Alberta’s oil problem is Canada’s problem. THE GLOBE AND
MAIL, p. 2.

Canada, G. o. ( 2019, March 19). Department of Finance Canada. Retrieved from Canada.ca:
https://www.fin.gc.ca/n19/19-022-eng.asp

Canada, G. o. (2019, February 20). Budget 2019. Retrieved from Canada.ca:

https://www.budget.gc.ca/home-accueil-en.html

Johnson, D. (2017). Thinking Government. In D. Johnson, Administrative Law (pp. 1-60).

Toronto: University of Toronto Press.

Leger, P. C. (2006). Formulating A Provinsional Budget. IPAC Case Study. Canada: The Institute
of Public Administration of Canada.