Zero-Based Budgeting

Zero-based budgeting (ZBB) is a budgeting method in which every programme must justify its proposed expenditure afresh for each budget cycle. Instead of treating the previous year's allocation as an entitlement, it examines the programme's purpose, cost, alternatives and expected results before funding it.

How fresh justification works

The analytical starting point is a zero base, rather than the previous year's expenditure. Unlike incremental budgeting, an ongoing programme receives no automatic presumption that its existing allocation should continue.

• Each department divides its activities into assessable units and prepares a decision package for each programme or activity.
• The package explains the programme's objectives, expected results, total cost, alternative methods or funding levels, and consequences of reduced or non-funding.
• Packages are evaluated and ranked by priority against government objectives and available resources.
• Funds are then allocated according to this ranking, so both existing and new programmes compete for budgetary support.

Meaning of the zero base

The zero base is an analytical assumption, not a requirement that every programme must actually be abolished before funds are granted. It shifts the burden of justification onto the spending department for the entire proposed allocation, not merely for an increase over the previous year.

Benefits and practical constraints

• Fresh scrutiny can identify obsolete, overlapping or low-priority programmes and redirect resources towards better uses.
• Linking expenditure with objectives and expected results can improve allocative efficiency and accountability.
• Preparing and comparing packages is data-intensive and administratively demanding, especially where public benefits are difficult to measure.
• Statutory obligations, salaries, pensions and other committed expenditures reduce the portion of the budget that can realistically be reconsidered from zero.