Analysis/Jim O'Leary: In this country we have come to mythologise budgets. We imagine them to exert an influence on the economic affairs of the nation out of all proportion to reality.

Maybe this reflects our experience of budgetary policy during the 1970s and 1980s, a period during which the state of our public finances was taken to the brink of bankruptcy and then transformed in an extraordinary way. In the story of the period, budgetary policy is represented first as an instrument of self-destruction and then as an instrument of redemption.

In telling the story of the 1990s too, budgetary policy looms large. In some versions, successive Irish governments are represented as discovering the Holy Grail of economic management and one of the key ingredients of the Celtic Tiger - sound public finances.

In other versions, focused more on the latter years of the Celtic Tiger period, budgetary policy is seen as straying back into self-destruct territory, and the budgets of 1999 through 2001 are castigated as irresponsibly expansionary, incendiary devices with the capacity to push an overheating economy beyond the ignition threshold.

In all of this there is a preoccupation with budget deficits and surpluses rather than with the levels or composition of spending and revenue. This preoccupation is based on concerns that either belong in the past (a spiralling government debt that urgently needed to be reduced), or springs from models of the economy that attribute to fiscal policy a greatly exaggerated influence over aggregate demand.

Does this mean that budgets don't matter any more? Well, of course not. Distilled to fundamentals, a government budget is a statement of what it plans to spend and raise in revenue in the year ahead. A moment's reflection on the orders of magnitude involved (roughly €40 billion or 35 per cent of GNP in the case of total spending) should be enough to convey the point that this does matter a great deal. There is enormous scope for waste, inefficiency and distortion here. It is in this respect more than any other that the budget matters.

What does this mean for commentary and analysis? I think it means that attention should be focused primarily on spending programmes: what their objectives are; what strategies are being deployed to meet those objectives; whether these strategies are proving effective; what resources are being expended in pursuing the strategies; how efficiently are those resources being used. In order to permit this kind of analysis, each spending programme should be accompanied by a set of key indicators that permit performance to be evaluated.

There's nothing revolutionary in any of this. Twenty-two years ago, when he was finance minister, Mr John Bruton published a paper called A Better Way to Plan the Nation's Finances, which set out a framework for budgetary policy incorporating these ideas and others in the same vein. In 1997, the Public Service Management Act became law. It makes it a requirement that all government departments publish tri-annual strategy statements and prepare annual progress reports.

The strategy statements are supposed to clearly set out the departments' objectives and targets as well as a range of indicators for evaluating effectiveness and efficiency. The annual reports are supposed to monitor progress towards achieving targets.

So these strategy statements and annual progress reports should contain precisely the kind of data that would allow citizens to evaluate how well their money is being spent and, by extension, the kind of material that should inform resource allocation decisions by government.

Do they measure up? Is there any evidence to suggest that they form an input into the annual estimates campaign? Do they enter into public discussion of government expenditure?

The answer to all of these questions is a resounding no. An analysis of departmental annual reports, published in 2001 by Mr Richard Boyle of the IPA, catalogued serious deficiencies and concluded that "the reports are little more than promotional documents outlining activities undertaken by departments and offices". One's overwhelming impression is that little has changed in the meantime.

There is no evidence to indicate that departmental strategy statements and annual reports inform the allocation decisions that emerge from the estimates campaign. One might imagine that, if they did, departments would be explicitly penalised for chronic inefficiency and ineffectiveness.

At a minimum, one would expect that departments not in compliance with the Public Service Management Act would face sanctions, but this does not appear to be the case. Several departments that have been awarded significantly increased expenditure allocations in the recently-published Book of Estimates for 2004 have yet to publish annual reports for 2002.

And as for public discussion of government expenditure, when was the last time one heard a debate about spending on health, education or any other area for that matter, feature the relevant department's latest strategy statement or annual progress report? Never? This is more than a shame. Until these documents enter public discussion and debate in a meaningful way (a precondition for which is that the documents themselves contain the information required to facilitate meaningful contribution to such discussion and debate), much of what passes for comment on public spending will remain vacuous and ill-informed.

Perhaps there are people in positions of power who would prefer to keep things this way.

• Jim O'Leary is currently lecturing in economics at NUI-Maynooth. He can be contacted at jim.oleary@may.ie