An economic approach to budgeting…

Poor George. After 57 minutes of huffing and puffing he sat down to a universal – what? I mean, come on, what could the man do given the hand he’s been dealt? Frankly he should have saved himself the effort and just issued a press release. Shorn of all the political rhetoric it would have run to a page and a half and briefly outlined the key changes that were to be made.

Such an approach would obviously leave messers Flanders , Peston and Robinson at a bit of a loose end (which is no bad thing) but would have better reflected the true impact of the budget statement on everybody – very little.

To be honest virtually all budget statements in recent years have had little or no economic impact. Either their contents had been leaked in advance, or had already been announced the previous year, or anything of real impact had been tucked away in the forests of press releases that were available from the HM Treasury website within seconds of the chancellor sitting down.

It wasn’t like this in the seventies. Then a packed chamber of MPs (there was no television or even radio broadcasting in those far off times) would hang on the chancellor’s every announcement, which were then relayed to a waiting nation by two of the three television channels available at that time (the children’s programmes being shunted to BBC2 for the day) by studio presenters and guests.

Invariably booze and fags would go up and incisive questioning would extract from typical “working class” families the viewpoint that they expected to be worse off as a result of the budget. Oh well no change there then…..

It isn’t just politicians and pundits. People do like to make big things of budgets. Big corporates especially do, producing reams of paper incorporating three year visions and MBA techniques to produce a sizeable document that is often out of date by the time it is finished.

There are growing arguments that budgets are a tyranny that stifle business. They either prevent people seizing opportunities because they are not in the budget or encourage needless spending as people adopt a use it or lose it approach and spend what their budget says they should spend.

Rigid budgeting cultures can and do have a negative impact on businesses. However every business, whatever its size, needs a good financial plan both as a route map to where they want to go and as a tool for setting goals and targets. A plan that recognises the key profit and cash drivers of the business, and that can be easily and regularly adjusted to model different scenarios and that can quickly reflect changes in the business environment.

It therefore follows that if you do prepare annual budgets, you should adopt an economical approach in that they should be simple, be prepared with the minimum of fuss, be easy to understand and be able to be quickly updated. George, Ed, Vince or whoever please take note. It would save us all an awful lot of time….

Please leave a comment - we all like them