Besides the commonly known aspect of the budget, which is the economic aspect, there is the legal aspect which forms a foundation for its operation account, on money to be spent by the government, how it is to be spent and where the money is to come from. In effect therefore, the budget may be regarded as a revenue-and-expenditure statement of the government.
The traditional view was that governments should have a balanced budget on all occasions: during slump, it would restrict expenditure and during boom it increases its spending. The modern view has been that Governments should try to stabilise the economy by increasing its expenditure when private demand is low and reducing its expenditure when private demand is rising.
The budget, therefore, is more than just a revenue-and-expenditure statement; as a tool changing the behaviour of the economy. From such circumstances, two more aspects of the budget may be identified: budget-deficit, where the Government expenditure exceeds tax revenue and budget surplus, where Government expenditure is lower than tax revenue. In the former situation, the Government must borrow money (from external and internal sources) and in the latter, the Government pays its debt.
Taxation and expenditure are inherent functions of the Governments. With the rise of democracy, where representations of the people in the law-making institutions became important, the law became the bulwark of the society. It was envisaged by the law-makers that the government, if left upon itself to fix taxes, without limitations by the law, could fix arbitrary taxes that are oppressive.
And left upon to extend, it could spend such funds in economically unviable projects or misappropriate such funds. This is where the old adage derives its significance. For this reason, the law-makers wrote into the law conditions that the Government must seek and obtain parliamentary permission to tax and obtain similar permission to undertake expenditure of monies derived from taxation or other sources.
All revenues, raised through taxation and received from internal borrowing by law, must be paid into a consolidated fund, or other public funds established by Parliament. Primary responsibility for management of the consolidated fund is entrusted to the Treasury.
At the beginning of each financial year, the minister in charge of finance lays before the National Assembly the estimates of the revenue and expenditure of the Government for the following financial year. These proposals are then given to a committee for revenue and supply of expenditure, upon whose approval, are embodied in a Finance Bill and the Appropriation Bill.
When the Finance Bill is passed into an Act, it authorises the Government to start on taxation. Since the process of enactment takes time, the Provisional Collection of taxes and Duties Act allows taxation to take effect immediately, until the Bill becomes law.
The Appropriation Bill is a request by the Government to the Parliament to allow withdrawals from the consolidated fund to meet expenditures specified in the budget. But when passed into an Act, it authorises such withdrawals by the Government. But if the appropriation Act for any financial year has not come into operation, the National Assembly may authorise withdrawals of monies not exceeding one-half of the estimated expenditure in the budget, for the purpose of meeting expenditure.
What happens if the money granted to the Government is not enough to meet the financial year’s expenditures? Or when there arises an urgent need not provided for in the Appropriation Act? The Government lays down before the National Assembly a Supplementary Estimate, when approved by the Estimates Committee, a Supplementary Appropriation Bill is introduced and when passed produces for the issue of such sums from the consolidated fund.
In addition, Parliament has established a Contingencies Fund and it authorises the minister of finance if he is satisfied that there has arisen an urgent and unforeseen need for expenditure to make withdrawals from that fund to meet need.
The question then arises: How does the Parliament make sure that these procedures are followed by the Government? Perhaps the most important check is provided by the office of the Controller and Auditor-General. He controls the collection of taxes making sure that all the monies so collected are paid to the Consolidated Fund.
He has to certify that all collections and withdrawals are authorised by law and make sure appropriated monies are spent for the purpose laid down in the budget. At least once every year he has to audit and report to the minister of Finance who has to present the report to Parliament. If the minister fails to do so, the Controller and Auditor-General may present it to the speaker of the National Assembly.
He may also report at any time he feels an irregularity committed by the Government. The Auditor-General is extremely crucial and his reports provide an indispensable means whereby the Government can be called to account by the Parliament. Further, there is the Public Accounts Committee. It is supposed to be made up of a majority of members of the opposition party, among who one must be the Chairman, and its primary responsibility is to examine the accounts showing appropriation of the sum voted by the Assembly as it may think fit.
Its primary concern is to see that the money has been spent for the appropriated purposes, basing its findings on the report of the Controller and Auditor-General. A similar body, the Estimates Committee, examines annual and supplementary estimates o expenditure. It recommends what economies or improvements of form should be made in such estimates for the future, consistent with the proper carrying into effect the policies of such estimates.
Kenya is now a de jure one party state, making some of the provisions relating to the public accounts committee inapplicable. On the same basis of one party state, the lack of opposition in Parliament and the fact that Parliament is made of members of the ruling party, make application of vote-of-no confidence impractical.