Well, to meet an in-year shortfall it makes sense to move the money around. But the implication seems to be that underspending departments are "punished" with

Well, to meet an in-year shortfall it makes sense to move the money around. But the implication seems to be that underspending departments are "punished" with a smaller budget in subsequent years. I would naively hope a good manager would ask for a justification of the spending of both departments, and allocate the forward budget according to reasonably-evidenced projections of value for money based on the organisation's priorities or goals. Perhaps the answer is that that is just too hard, or even more prone to being gamed.