Hypothecation has also been used recently to name a system by which part of tax
revenue is allocated beforehand to certain
spending purposes, with which it has some link.
For example, in the UK all increases in motor fuel tax beyond the overall increase in the retail price index (RPI) are reserved to the improvement of roads and public transport. Similarly, rises in excise duty on tobacco above the RPI are allocated to the health budget.
A more radical form of hypothecation has been proposed by the Liberal Democrats among others, in which taxpayers can declare a part of their tax to go to their choice of government functions. Obviously there has to be a limit to this (the LDs are suggesting 1% or so) or too many people would opt out of defence entirely in favour of popular causes like health, social security, and environment: though it might be interesting to see what changes happened if it was tried for a year or two. I am reminded me of the old slogan wishing for the day when the army had to hold fêtes and raffles to buy their missiles.