Does Zero-Based Budgeting Actually Improve Resource Allocation, or Does Incremental Budgeting Provide Greater Fiscal Stability?

Abstract

This paper proceeds to analyse whether zero-based budgeting (ZBB) generates better resource allocation than the fiscal stability experienced with incremental budgeting. A literature-based secondary research design is employed to examine theoretical advances related to budgetary incrementalism and zero-based budgeting. These theoretical perspectives are connected to empirical evidence from studies of corporate adoption and consultancy surveys. Evidence from UK public sector practice is also considered, including HM Treasury’s Spending Review 2025. It represents the first fully zero-based multi-year spending review undertaken in eighteen years. This paper find evidence of Measurement but not Conformance via a quantitative synthesis of secondary data drawn from Bain and Company and Accenture Strategy. It finds that ZBB produces a measurable but inconsistent reduction in costs with bulk concentrating among firms subjected to powerful external discipline. Corporate case evidence from Kraft Heinz reveals the risk of destruction of long-term value. Research on punctuated equilibrium suggests that incremental budgeting does not always result in stability. Certainly, in the UK context (John and Bevan, 2012). The conclusion states that no one method is better. It all depends on the organisation’s complexity, the magnitude of change required, and the institution’s capacity to scrutinise.