Policy Instruments and Budgetary Processes: A Reflection on the Deficit Elimination Experience in the Canadian Provinces

Analyses of the deficit elimination experience in provincial governments in Canada in the 1990s show that provincial authorities used similar sets of policy measures to reach the goal of a balanced budget within a short period of time. We look at these measures as policy instruments and we try to make sense of their use through a theoretically informed reflection on the role of information and trust in the budgetary process. The principal-agent theory shows how the Premier and his team circumvented the problems caused by the information monopoly of managers through the implementation of a top-down process for setting budgetary targets and through the decentralisation of operational decision-making. However, this theory is completely silent concerning the use of rhetorical instruments. The convention theory suggests that regulatory and rhetorical measures were combined to influence guardians of the treasury and program advocates in their visions of the budget and thus changed the budgetary process from an incremental process to a fiscal crisis process. The same policy instruments take on a different meaning depending on the theoretical lens that one uses. Their use fosters identical outcomes (in this case, a balanced budget) through different paths. The knowledge of the process through which the use of a given policy instrument might lead to a given outcome is essential if we want to get a better grasp of the side effects of the use of any policy instruments.