GoodPracticeinParliamentaryBudgetScrutiny:
InternationalComparisons
PreparedfortheBudgetProcessReviewGroupestablishedjointlybytheFinance
andConstitutionCommitteeandtheScottishGovernment
By
JoachimWehner
AssociateProfessorinPublicPolicy
LondonSchoolofEconomicsandPoliticalScience
Finaldraft,27February2017
Contents
Executivesummary
1Introduction
2Globalnormsandrelatedliterature
Internationaltransparencystandards
Standardsforlegislativefinancialscrutiny
Relatedliterature
3Casestudies
Germany
Sweden
NewZealand
Australia
4Summaryandrecommendations
Acknowledgments
References
2
Abbreviations
BPRG BudgetProcessReviewGroup
BPS
BudgetPolicyStatement(NewZealand)
FIAG FinancialIssuesAdvisoryGroup
GIFT GlobalInitiativeforFiscalTransparency
IBP
InternationalBudgetPartnership
IMF
InternationalMonetaryFund
MSP MemberoftheScottishParliament
OECD OrganisationforEconomicCo-operationandDevelopment
PEFA PublicExpenditureandFinancialAccountability
VAT
Value-AddedTax
3
Executivesummary
ThisresearchwascommissionedbytheBudgetProcessReviewGroup(BPRG)to
helpestablishasetofprinciplestounderpinaworldclassfinancialscrutinyprocess
inScotland.Thereportsurveysexistingglobalnormsforbudgetarygovernanceand
legislativebudgetscrutiny.Italsoexamineslessonsfromtheexperienceof
legislaturesinfourcountriesthatexercisedifferentdegreesofinfluencein
budgetarydecisions:Australia,NewZealand,SwedenandGermany.
Globalstandardsrecognisethelegislature’sroleinbudgetapproval,andcallforinyearparliamentaryoversightofbudgetexecution,aswelleffectiveparliamentary
auditprocedures.Moreover,thereisincreasedrecognitionthatparliamentary
involvementshouldbecontinuous,coveringallstagesofthebudgetprocess,
includingmedium-termbudgetingandprioritysetting.Yet,manydetailed
institutionalchoicescannotbesettledwithreferencetoglobalnorms.
Recommendation1:TheBPRGshouldspelloutaclearvisionforthefuture
developmentofparliamentaryfinancialscrutinyinScotland.Inparticular,it
shouldclarifywhetheritendorsestheFinancialIssuesAdvisoryGroup’s
(FIAG)callforaparliamentaryprocessthatentails“muchmorescrutiny”
thanatWestminsterandthepossibilitytoinfluencethebudget.
Thecasestudieshighlightpracticesfromlegislaturesthatofferalternativescenarios
forthedevelopmentoffinancialscrutinyinScotland.Onbalance,theAustralianand
NewZealandexamplesareclosesttothedefaultmodeloftheWestminster
Parliament,whichFIAGexplicitlyrejected.Thefollowingrecommendationsare
premisedonFIAG’svision,anddrawonthesurveyofnormsandinternational
experiencetosuggestimprovementstotheexistingarrangements:
Recommendation2:Thediscussionofthedraftbudgetshouldbepreceded
byaformalmedium-termbudgetpolicystatementthatistabledannually
anddiscussedinParliamentpriortothetablingoftheannualbudget
proposalintheautumn.Themedium-termbudgetpolicystatementshould,
withinthecontextoftheeconomicoutlook,setoutthegovernment’sfiscal
policyobjectivesanditsbroadprioritiesforthebudget.Itshouldbetabled
sufficientlyfarinadvance,aboutsixmonthspriortothestartofthefiscal
year,toallowmeaningfulparliamentarydiscussionthatisinformedbypublic
consultationandengagement.
Recommendation3:Thegovernmentshouldtableasinglebudgetproposal
intheautumnthatshouldbescrutinisedbyparliamentarycommitteesand
debatedintheplenary,withthepossibilitytotableandadoptamendments.
Thiswouldreplacethecurrentdraftbudgetstagewiththetablingofaformal
budgetproposalduringtheautumn.Maximumamendmentauthoritywould
allowanychangestogovernmenttaxandspendingproposals.Ataminimum,
itshouldbepossibleforMSPstoamendthebudgetbyshiftingfundsfrom
oneitemtoanotherorbyreducinganexpenditure,andtoamendtax
4
measuresinawaythatdoesnotresultinalowerbudgetbalancethaninthe
governmentproposal.Amendmentsshouldnotbetiedtoavoteof
confidenceinthegovernment.
Recommendation4:AcentralrolefortheFinanceCommitteeisessentialfor
co-ordinatingparliamentarydecisionsonthesinglebudgetproposaltabledin
theautumn.SimilartotheprocessinSweden,theFinanceCommittee
shouldfirstconsiderthebudgetaggregatesandallocationsacrossthemain
spendingareas,andmakerecommendationsthataredebatedandputtoa
voteintheParliament.
Recommendation5:Basedontheframeworkestablishedinthefirst
parliamentarydecisiononthebudgetaggregatesandallocationsacrossthe
mainspendingareas,asecondstageofparliamentaryreviewshouldinvolve
detailedscrutinyofexpenditureprioritieswithinspecificsectorsbythe
relevantsubjectcommittees.Anyamendmentsproposedbythecommittees
atthisstageshouldbeconsistentwiththeframeworkestablishedinthefirst
parliamentarydecision.
Recommendation6:Givenincreaseddevolutionofauthorityovertaxation,
theScottishParliamentshouldconsidertheestablishmentofseparate
committeestoscrutinisespendingandtaxation.Aseparatecommitteeon
taxationcouldhelptoensurethatappropriateattentioncanbegiventothe
expenditureaswellastherevenuesideofthebudget.
Recommendation7:TheBPRGshouldexploreoptionsforincreasingthe
provisionofequalityrelevantinformation.Thisshouldincludegender
incidenceanalysisthatquantifiestheimpactofbudgetmeasuresonmen
andwomen,alongsideotherdistributiveimpactsbasedonageand
householdincome.
Recommendation8:TheBPRGshouldadoptacautiousapproachtothe
incorporationofperformanceinformationintobudgetdocuments.Only
performanceinformationthatisdirectlylinkedtospendingfiguresshouldbe
presented.Outputscanbeattributedtoaspecificprogrammeandfiscalyear,
whichmeansthatgovernmentbodiescanbeheldtoaccountfortheir
delivery.Incontrast,anexcessivefocusonoutcomesislikelytoweaken
accountability,asmanyimpactscannotbeclearlyattributed.Programmes
shouldbelinkedtooutcomes,sothattheireffectivenesscanbeassessed
againststatedobjectives.However,thelarge-scaleintroductionofoutcome
informationintoannualbudgetdocumentsisnotrecommended.
Recommendation9:Parliamentaryapprovalofspendingshouldbeatthe
programmelevel.Thebudgetdocumentsshouldspelloutthefinancialcost
ofeachprogrammeforatleastthecurrentyear,thebudgetyear,aswellas
themediumterm,undertheassumptionthatcurrentpolicyismaintained.
Ideally,thebudgetshouldalsocontainpastexpenditureinformationatthe
programmelevel.Parliamentshouldbeconsultedtodeterminetowhat
extentspendingshouldalsobepresentedonthebasisofotherclassifications,
5
inparticulareconomicandfunctional.Virementrulesshouldsetlimitsfor
shiftingfundsbetweenapprovedprogrammestoensureparliamentary
oversightandcontrolofin-yearadjustments.
Recommendation10:TheAuditorGeneralforScotlandandtheScottish
Parliamentshouldconsiderbroadeningtheflowofrelevantaudit
informationtoparliamentarycommitteesbeyondthePublicAudit
Committee.ThiscouldinvolvetheAuditorGeneralgivingevidenceand
advicetodifferentcommitteesincludingduringthebudgetapprovalprocess
tohighlightrelevantaspectsofaudits.
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1Introduction
ThisresearchwascommissionedbytheBudgetProcessReviewGroup(BPRG)to
supportitsreviewoftheScottishParliament’sbudgetprocess.1TheReviewGroup
wishestoestablishasetofprinciplestounderpinaworldclassfinancialscrutiny
processthatareinformedby(a)statementsofbestpracticeonbudgetary
governanceandtheroleoflegislaturesinbudgetscrutinyissuedbyrelevant
internationalbodies;and(b)examplesofinternationalgoodpracticefromother
jurisdictions.Inthiscontext,thereportisalsotoconsiderwhethertheprinciples
developedbytheFinancialIssuesAdvisoryGroup(FIAG)andwhichinformthe
currentScottishbudgetprocessmayrequirerevisiontofullyreflectthegood
practiceidentified.
CertaindevelopmentsmakeitparticularlyrelevanttorevisittheroleoftheScottish
Parliamentinthebudgetprocessatthistime.Additionalpowersdevolvedunderthe
2016ScotlandActincludetheabilitytosetincometaxratesandbands.TheScottish
Parliamentwillauthoriseandscrutinisetheuseofthesepowers.Inaddition,inhis
2016AutumnStatement,theChancelloroftheExchequerannouncedplanstomake
taxchangesonlyonceayearintheautumn(HMTreasury2016).2Thesechanges
raisethequestionofwhethertheScottishbudgetprocessshouldbeadjustedtotake
accountofthesedevelopments,withpotentialimplicationsfortheroleofthe
ScottishParliament.
Thefundamentalpremiseofthisreportisthatitcannotdeliverananswertothe
normativequestionofhowinfluentialaroletheScottishParliamentshouldhavein
thebudgetprocess.Ultimately,thisisforthepoliticiansandpeopleofScotlandto
decide.Theaimofthisreportistohighlighthowdifferentpracticescansupportthe
roleofthelegislaturethatisenvisaged,andtosketchalternativescenarios.Put
differently,whatconstitutesa“good”oreven“best”practice,ifthelatterexists,can
inmostinstancesonlybeevaluatedagainstanormativeandcontext-specific
decisionabouttheextenttowhichlegislativeinvolvementinbudgetingisdesired.
Whiletherearesomeglobalnormsandminimumstandards,theseleavesubstantial
roomtoshapelegislativeinvolvementinawaythatisdeemedappropriateina
particularcontext.ThismeansthattheBPRGshoulddefineclearobjectivesforthe
futureroleoftheScottishParliamentinthebudgetprocess.
Withtheabovecaveatinmind,thisreportaimstosupportthediscussionof
alternativescenariosforthefuturedevelopmentofthebudgetaryroleofthe
ScottishParliament.InmappingoutitsvisionoftheScottishbudgetprocess,FIAG
outlinedabudgetprocessthatinvolvestheScottishParliamentatanearlystageto
debatestrategicpriorities(stage1),priortotheintroductionofadraftbudget(stage
2)thatgivesMembersoftheScottishParliament(MSPs)anopportunitytodebate
1
Inthisreport,thegenericterms“legislature”and“parliament”areusedinterchangeably.
2
Duringthe1990s,theUKexperimentedwithaunifiedbudgetprocesswherethegovernment
announceditstaxandspendingplansatthesametime(Dorrel1993).
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alternativesandproposechanges,followedbyformalapprovalbasedonasuitably
updatedbudgetandpriortothestartofthefinancialyear(stage3).FIAGalso
envisagedbroadcommitteeinvolvementdrawingontheFinanceCommittee,
subjectcommitteesandtheAuditCommittee,aswellasparliamentaryoversightof
budgetexecution.Theaimofitsproposalswastopromote“muchmorescrutinyby
ParliamentoftheExecutive'sspendingproposalsthanispresentlythepracticeunder
theWestminstersystem”(ConsultativeSteeringGroup1998:AnnexI,para.1.7).
WhetherthisremainsadesirableobjectiveforScotlandhastobeclarified.
Thecasestudiesinthisreportillustrateapossiblecontinuumofparliamentary
involvement.Ontheonehand,theAustralianParliamentplaysalargelyceremonial
roleinthebudgetprocess,especiallytheHouseofRepresentatives.TheNew
ZealandParliamenthasseensomechangesinrecentdecadesthatmaketheprocess
moreconducivetoparliamentaryparticipation,includingtheintroductionofaprebudgetdebate,andrevisedpowersofamendment.Inpractice,however,theprocess
remainsdominatedbythegovernment.Swedenillustratesaperhapsmorecooperativeapproach.TheSwedishParliamentdebatestheoveralldirectionofbudget
policyearlyintheyear,andapprovesbroadguidelinesinaSpringFiscalPolicyBill
aheadoftheintroductionoftheannualbudget.WhiletheSwedishParliament
amendsthebudgetlessfrequentlythaninpreviousdecades,itretainsthepowerto
doso.TheGermanParliamentillustratesthemoreactiveendofthespectrum.The
Bundestagmakeshundredsofamendmentstotheexecutivebudgetproposaleach
year,whichoftenservetoreduceexpenditures.Thefourreferencecountrieschosen
forthisreportillustratealternativebutpossibletrajectoriesforthebudgetaryroleof
theScottishParliament.3
InlinewiththeTermsofReference,thisreporthastwosubstantiveparts.Thefirst
surveysinternationalnormsonbudgettransparency,highlightingthoseelements
thatarerelevantforassessinglegislativefinancialscrutiny.Italsogivesabrief
overviewofrelevantaspectsoftheacademicliteratureontheroleoflegislaturesin
publicfinance.Thesecondpartconsistsofaseriesofcasestudiesthathighlight
practicesrelatedtolegislativefinancialscrutinyfromfourdifferentcountries.A
detailedevaluationandoverviewoflegislativebudgetingacrossfourcountriesis
impossiblewithintheshortspaceavailableforthisreport,norisitnecessary.The
focusisonspecificelementshighlightedintheTermsofReferenceissuedbythe
BPRGforthisresearchreport.Theconclusionsummarisesthekeyfindings,relates
thesetotheFIAGprinciples,anddevelopsspecificrecommendations.
3
Theexperienceofmoreactivebudget-writinglegislatures,suchastheUSCongress,isdeliberately
excludedfromthisreport.Anapproachwherethelegislaturewritesthebudgetisfarfromexisting
practiceinScotlandandfromtheprinciplesespousedbyFIAG.
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2Globalnormsandrelatedliterature
Legislativescrutinyofthebudgetanditsimplementationisgenerallyregardedasan
integralpartofatransparentbudgetsystem.TheOrganisationforEconomicCooperationandDevelopment(OECD)providesperhapsthemostcompactdefinition
ofbudgettransparencyas“thefulldisclosureofallrelevantfiscalinformationina
timelyandsystematicmanner”(OECD2002:7).Givingabitmoredetail,the
InternationalMonetaryFund(IMF)definesitas“thecomprehensiveness,clarity,
reliability,timeliness,andrelevanceofpublicreportingonthepast,present,and
futurestateofpublicfinances.”4
Severalorganisationshavedevelopednormsandstandardsinthisareathatare
relevantforthisreport.Whiletherearedifferencesinemphasis,thereiswide
agreementaboutthedesirabilityofbudget(orfiscal)transparencyandmostofits
coreelements(Petrie2003,WehneranddeRenzio2013:97-99).Thereisalso
agreementonsomeminimumstandardsfortheroleoflegislaturesinthebudget
process,butthisaspectislessdeveloped–thusfar.TheOECDiscurrentlyengaged
inworktodefinebestpracticesforlegislativebudgeting,whichshouldhelpto
furtherentrenchnormsinthisarea.Thestandardshighlightedhereapplytoboth
nationalaswellasthesubnationallegislatures.
Thispartofthereportstartswithanoverviewofinternationaltransparency
standards.Itthendiscussesspecificelementsofthesestandardsthatrelateto
parliamentaryscrutiny.Thefinalsectionofthispartdrawsoutrelevantkeyfindings
fromtheacademicliteratureonlegislativebudgetscrutiny.
2.1Internationaltransparencystandards
TheOECDBestPracticesforBudgetTransparencyrecommendthefollowingseven
typesofbudgetreports:(i)acomprehensivebudgetthatincludesperformancedata
andmediumtermprojections;(ii)apre-budgetreportthatstateslong-term
economicandfiscalpolicyobjectives,andeconomicassumptionsandfiscalpolicy
intentionsforthemediumterm;(iii)monthlyreportsthatshowprogressin
implementationandexplaindifferencesbetweenactualandforecastamounts;(iv)a
mid-yearreportthatprovidesacomprehensiveupdateonimplementation,including
anupdatedforecastofthebudgetoutcomeforthemediumterm;(v)ayear-end
reportauditedbythesupremeauditinstitutionandreleasedwithinsixmonthsof
4
TheIMFdefinitionisfromitstransparencyportal:http://www.imf.org/external/np/fad/trans/.
AnotherwidelyciteddefinitionwasputforwardbyKopitsandCraig(1998:1):“FiscalTransparency
is…opennesstowardthepublicatlargeaboutgovernmentstructureandfunctions,fiscalpolicy
intentions,publicsectoraccounts,andprojections.Itinvolvesreadyaccesstoreliable,comprehensive,
timely,understandable,andinternationallycomparableinformationongovernmentactivities–
whetherundertakeninsideoroutsidethegovernmentsector–sothattheelectorateandfinancial
marketscanaccuratelyassessthegovernment’sfinancialpositionandthetruecostsandbenefitsof
governmentactivities,includingtheirpresentandfutureeconomicandsocialimplications.”
9
theendofthefiscalyear;(vi)apre-electionreportthatilluminatesthegeneralstate
ofgovernmentfinancesimmediatelybeforeanelection;and(vii)along-termreport
thatassessesthelong-termsustainabilityofcurrentgovernmentpolicies.Inaddition,
theOECDrecommendsseveralspecificdisclosuresrelatedtoeconomicassumptions,
taxexpenditures,andvarioustypesofassetsandliabilities.Afinalsectionaddresses
integrity,controlandaccountabilitypractices,someofwhichwillbediscussed
furtherbelow.
TheOECDBestPracticeshavenotbeendirectlyrevisedorupdatedsincetheir
publication.Moreover,unliketheIMFandsomeotherorganisationsdiscussed
below,theOECDdoesnotdirectlyusetheBestPracticestoscoreandcompare
transparencypracticesacrosscountries.In2015,theCounciloftheOECDdeveloped
itsworkinthisareawhenitapproveda“RecommendationonBudgetary
Governance.”Amongstothers,itadvocatesforbudgetdocumentsanddatatobe
“open,transparentandaccessible”andforbudgetdebatestobe“inclusive,
participativeandrealistic”(OECD2015a:sectionsII.4.andII.5.).
TheOpenBudgetSurveyconductedbytheInternationalBudgetPartnership(IBP),a
civilsocietygroup,assessesbudgetinformationandotheraspectsofthebudget
process.Itmeasurestransparencyacrossasetofbudgetdocumentsthatisvery
similartothoselistedintheOECDBestPractices.Oneadditionaldocumentthatthe
IBPpromotesisa“citizenbudget”designedtocommunicatekeypublicfinance
informationtothewiderpublic(IBP2015).The2017versionoftheOpenBudget
Surveywillalsoincluderedesignedindicatorsonpublicparticipationandoversight
practices,includingtheroleofthelegislatureandthesupremeauditinstitution.The
OpenBudgetIndexandotherindicatorsderivedfromthesurveyarespecifically
designedtoassesspracticesacrosscountriesandovertime,withupdatesthatare
publishedeverytwoyears.5
TheIMFfirstpublishedaCodeofGoodPracticesonFiscalTransparencyin1998,
whichitupdatedin2001and2007.Adecadeafteritslaunch,interesthadwaned
andadecreasingnumberofcountriesrequestedassessmentsagainsttheCode.
Fiscaltransparencyregainedprominenceinthewakeofthe2007-8financialcrisis,
whentheIMFidentifieditasacentralplankinitsresponse(IMF2012).In2014,the
IMFrelaunchedasubstantiallyrevisedFiscalTransparencyCode.Thisrevisionput
greateremphasis,amongstothers,onforecastingandfiscalriskanalysis.Thenew
Codecontainsasetofprinciplesbuiltaroundfourpillars:(i)fiscalreporting;(ii)fiscal
forecastingandbudgeting;(iii)fiscalriskanalysisandmanagement;and(iv)resource
revenuemanagement(thelatterisstillunderpublicconsultationatthetimeof
writing).Foreachprinciple,theCodesetsoutstandardsthatcanbeusedtoassess
practicesasbasic,goodoradvanced.
Inaddition,severalotherorganisationshavedevelopedrelevantprinciplesor
standards.Themulti-stakeholderGlobalInitiativeforFiscalTransparency(GIFT)has
publishedHigh-LevelPrinciplesonFiscalTransparencythattheUnitedNations
5
TheOpenBudgetSurveywebsiteincludesausefuldataexplorertoolandotherresources:
http://www.openbudgetsurvey.org.
10
GeneralAssemblyendorsedinDecember2012.Also,thedonor-ledPublic
ExpenditureandFinancialAccountability(PEFA)initiativehasdevelopeda
methodologyforassessingpublicfinancialmanagementacrosssevenbroadpillars,
withelementsthatarerelevantforthisreport.ThePEFAframeworkhasbeen
appliedextensivelyacrossdifferentlevelsofgovernment,toassessnationalaswell
asregionalandmunicipalgovernments.
2.2Standardsforlegislativefinancialscrutiny
Providingabroadstartingpoint,oneoftheGIFTPrinciplesrelatesdirectlytotherole
ofthelegislatureinthebudgetprocess.Principle8demandsthat“Theauthorityto
raisetaxesandincurexpenditureonbehalfofthepublicshouldbevestedinthe
legislature.Nogovernmentrevenueshouldberaisedorexpenditureincurredor
committedwithouttheapprovalofthelegislaturethroughthebudgetorother
legislation.Thelegislatureshouldbeprovidedwiththeauthority,resources,and
informationrequiredtoeffectivelyholdtheexecutivetoaccountfortheuseof
publicresources.”Inaddition,theGIFTPrinciplescallforrolesandresponsibilitiesto
beclearlyassignedtodifferentactorsinthebudgetprocess,includingthelegislature
(principle7).
TheOECDBestPracticesmakethreereferencestotheroleofparliament.Themost
specificoftheserelatestothetimingofbudgetapproval(para.1.1):“The
government’sdraftbudgetshouldbesubmittedtoParliamentfarenoughinadvance
toallowParliamenttoreviewitproperly.Innocaseshouldthisbelessthanthree
monthspriortothestartofthefiscalyear.Thebudgetshouldbeapprovedby
Parliamentpriortothestartofthefiscalyear.”Thisestablishesclearminimum
standardsforthetimingoftheparliamentaryprocess.TheBestPracticesalso
demandthatparliamentmustscrutiniseauditreports(para.3.3)and,more
generally,thatitmusthave“theopportunityandtheresourcestoeffectively
examineanyfiscalreportthatitdeemsnecessary”(para.3.4).
TheOECD’sRecommendationonBudgetaryGovernancepromotestheideathat
parliamentaryengagementinbudgetingshouldbecontinuous.Itrecognisesthe
“fundamentalrole”ofparliamentinbudgetapprovalandaccountability,butadds:
“Theparliamentanditscommitteesshouldhavetheopportunitytoengagewiththe
budgetprocessatallkeystagesofthebudgetcycle.”Notably,thetextsuggestsa
roleinmedium-termbudgetingandprioritysetting(OECD2015a:sectionII.5).
FutureworkoftheOECDonbestpracticesforlegislativebudgetingmayalsosuggest
minimumstandardsforamendmentauthority.AbouthalfofallOECDcountrieshave
legislatureswithunfetteredauthoritytoamendthebudget,whereasthe
amendmentlimitsoftheUKHouseofCommonsareamongthemostrestrictive
(DownesandNicol2016;seealsoWehner2006).
TheIMF’s2014FiscalTransparencyCodemakestwomainreferencestotheroleof
thelegislature.Itcontainstheprinciplethat“Thelegislatureandthepublicare
consistentlygivenadequatetimetoscrutinizeandapprovetheannualbudget”
(principle2.2.2.).InlinewiththebenchmarkestablishedintheOECDBestPractices,
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ascoreof“advanced”againstthisprinciplerequiresthebudgettobe“submittedto
thelegislatureandmadeavailabletothepublicatleastthreemonthsbeforethe
startofthefinancialyear”and“approvedandpublishedatleastonemonthbefore
thestartofthefinancialyear.”InitsevaluationoftheUKbudgetprocess,theIMF
concludedthatthelatesubmissionandapprovalofthebudgetfalloutsidethe
internationallyacceptedrangeofreasonablepractices,sothatbasicrequirements
are“notmet”(IMF2016:42).
AsecondIMFprinciple(2.4.2.)demandslegislativeoversightofbudgetexecution:
“Anymaterialchangestotheapprovedbudgetareauthorizedbythelegislature.”
Here,apracticeisconsidered“advanced”where“[a]supplementarybudgetis
requiredpriortomaterialchangestototalbudgetedexpenditureorsubstantially
alteringitscomposition.”Inthisregard,theIMFconcludedthattheUKbudget
processallowedstrongparliamentaryoversightandmetthe“advanced”standard
(IMF2016:47).6
Inaddition,theIMFCodementionsthelegislatureontwofurtheroccasions.
Regardingbudgetdocuments,theCodereiteratesthewell-knownprincipleof
budgetunity(2.1.1.):“Revenues,expenditures,andfinancingofallcentral
governmententitiesarepresentedonagrossbasisinbudgetdocumentationand
authorizedbythelegislature.”AmajorshortcomingoftheUKcentralgovernment
budgetprocessisthat“thebulkofrevenuesandexpendituresprovidedareonanet
basis”(IMF2016:34).TheIMFratedUKpracticesonthismeasureas“basic”and
identifiedthisasareformpriority,citingcalculationsthatownsourcerevenues
worth8percentofexpenditureareunreported.
Intermsofthelegalframework,theIMFdemandsthatit“clearlydefinesthetime
tableforbudgetpreparationandapproval,keycontentsofthebudget
documentation,andthepowersandresponsibilitiesoftheexecutiveandlegislature
inthebudgetprocess”(principle2.2.1).Againstthisprinciple,theIMFattestedthat
UKstandardsare“basic”withsignificantgapsduetothelackoflegislationregulating
thebudgetprocess,includingtheroleandpowersoftheHouseofCommons(IMF
2016:41).
Finally,thePEFAFrameworkcontainsthreeindicatorsthatrelatetotheroleofthe
legislature(PEFA2016).Notably,PillarIV(policy-basedfiscalstrategyandbudgeting)
includesanindicator(17)thatlooksatthebudgetpreparationprocess,withone
dimension(3)thatisrelatedtothebudgetsubmissiontothelegislature.Here,the
highestpossiblescoreisachievedwhenthebudgetwassubmittedtothelegislature
atleasttwomonthsbeforethestartofthefiscalyearineachofthelastthreeyears.
ThisstandardislowerthanintheOECDBestPracticesandlessdemandingthanfor
thetopcategoryintheIMFCode.ThismayreflectthefactthatthePEFAframework
iswidely,althoughnotexclusively,usedtoassesspublicfinancialmanagementin
developingcountries,wherebudgetprocessestendtobemorecompactthanin
industrialisedeconomies.
6
However,thehighlyaggregatedlevelatwhichtheHouseofCommonsappropriatesmoneymeans
thatParliamenthasfarlesscontrolthanotherlegislaturesthatapprovespendingattheprogramme
levelorbasedonmoredisaggregatedcategories(Wehner2015).Thenextpartincludesexamples.
12
PillarVII(externalscrutinyandaudit)includesanindicatoronexternalaudit(30),
withonedimension(2)thesubmissionofauditreportstothelegislature.Thisaspect
isratedstrongestwherefinancialauditsaretransmittedthreemonthsafterthe
accountsweresenttotheauditinstitution.Anotherindicator(31)coverslegislative
scrutinyofauditreports,withseparatedimensionsontiming,hearings,
recommendationsandtransparency.Here,thePEFAframeworkratespractices
highlywherelegislaturesdebateauditreportswithinthreemonthsofreceipt;hold
hearingswithallentitiesthatreceiveaqualifiedoradverseopinionoradisclaimer;
issuerecommendationsonasystematicbasisandtrackthese;andconducthearings
inpublic,debatecommitteereportsinthefullchamberandmakethemavailableto
thepublic.
2.3Relatedliterature
Recentreviewsoftheacademicliteratureonfiscaltransparency(deRenzioand
Wehner2016)andtheroleoflegislaturesinpublicfinance(Wehner2014)are
availableelsewhere.Thissectionislimitedtosomebroaderpointsandspecific
findingsthataremostrelevantinthecontextofthisreport.
Theempiricalliteraturecomparingtheroleoflegislaturesinbudgetingfindswide
variationacrossmoderndemocracies(Lienert2005,Wehner2006,Stapenhurstetal.
2008).Somespecificdifferencesarediscussedinmoredetailinthenextpartofthis
report.Whiletheglobalnormssurveyedintheprecedingsectionsuggestthatthere
issomeagreementonselectedminimumstandards,thereisnoagreementonhow
extensivearolethelegislatureshouldplayinbudgetarydecisions.Insomecountries,
itisunthinkablethattheexecutivebudgetproposalwilleverbeacceptedunchanged
bythelegislature,whilstinothersthereverseapplies.Moreover,withinthesame
country,legislativebudgetingevolvesovertimeandadaptstochangingconditions
(Schick2002).
Wehner(2006,2010)reviewsseveralinstitutionalpreconditionsforlegislative
controlofpublicfinance,focusingontwodimensions.Oneistheformalauthorityof
alegislatureinbudgetarymatters.Thisincludesalegislature’spowerstoamendthe
executivebudgetproposal,thereversionarybudgetthatisimplementedshould
approvalbedelayedbeyondthestartofthefiscalyear,aswellasthedegreeof
executiveflexibilitytoaltertheapprovedbudgetduringimplementationwithout
havingtoseeklegislativeapproval.Asecondsetofvariablescapturesthe
organisationalcapacityofalegislature.Thisrelatestotheamountoftimeavailable
forparliamentarybudgetdiscussionspriortothestartofthefiscalyear,thedegree
towhichparliamentaryscrutinyinvolvesspecializedlegislativecommittees,aswell
asparliament’saccesstoindependentbudgetresearchcapacityintheformofa
parliamentarybudgetoffice.
Amajorconcernhighlightedbytheliteratureonbudgetinstitutionsisthatthere
mightbeatrade-offbetweenlegislativeinfluenceandfiscalprudence.Several
studiescautionthatstronglegislativeinvolvementinbudgetingmayleadtopoor
fiscaloutcomesincludingincreaseddeficitsanddebt(Alesinaetal.1999,Hallerberg
13
andMarier2004,Hallerbergetal.2009).However,carefullydesignedprocedures
maymitigatethesetendencies(Wehner2010:141):
Tosome,thefiscalcostofparliamentaryactivismmaysimplybean
acceptablesideeffectofdemocracy.Others,surely,willdisagree.Yetitmay
notbeimpossibleforlegislaturestobebothpowerfulaswellasfiscally
responsible.Thisrequirescarefullyengineeredinstitutionsthatforce
legislatorstofixprudentaggregateparametersandtofocusdebateon
allocativechoiceswithinahardbudgetconstraint.Seeminglyminor
proceduraldetailsplayamajorroleinanyattempttoachievethisgoal.
Somearguethatalegislaturemaynothavetoamendthebudgettoimpactonpolicy.
Theexecutivemayanticipatelegislativereactionsandfashionthedraftbudget
accordingly,therebyreducingthelikelihoodofamendments.However,itisunlikely
thataprolongedabsenceofamendmentsindicatesthatthelegislatureisgettingits
way.Anexecutivehasnoreasontoberesponsivetolegislativepreferencesunless
theabsenceofsuchconsiderationhasconsequences.Amodicumofamendment
activitymayberequiredtosignaltotheexecutivethatlegislativeactorshavethe
capacity,inpractice,forsubstantialrevisionshouldthedraftbudgetnottake
sufficientaccountoftheirpreferences(Wehner2010:57).Moreover,alackof
meaningfulopportunitiestoinfluenceprioritiesalsoreducetheincentivesof
legislatorstoinvesttheirtimeandefforttoscrutinisethebudget.Thecasestudiesin
thefollowingpartdocumentpracticesthathaveallowedsomerelativelyinfluential
parliamentstoreconcilelegislativeparticipationwithprudentbudgeting.7
7
Inaddition,fiscalrulescanbedevisedtopromoteprudentbudgets(Cangianoetal.2013,
Schaechteretal.2012).Theseimposeconstraintsonanindicatorofoverallfiscalperformance,and
bindboththeexecutiveaswellasthelegislature.Fiscalrulesarebeyondthescopeofthisreport.For
ausefuloverviewofdesignchoices,seeAndersonandMinarik(2006).
14
3Casestudies
NoscrutinyprocessisdirectlycomparabletothatoftheScottishParliament,with
transferablepackagesof“good”or“best”practices.Forthisreport,itisimpossible
andunnecessarytoattempttodescribeindetailthelegislativeprocessacross
differentcountries.Instead,thisreporttakesamoretargetedlookatrelevant
practicesinfourcountriesthatillustrateacontinuumofparliamentaryinfluence.Of
thelegislaturesconsidered,theGermanParliamentisbyfarthemostactivein
budgetarymatters.TheSwedishParliament,too,hashadanactiveandinfluential
roleinthepast,butlesssonowadays.TheexperiencesofparliamentsinAustralia
andNewZealandisperhapsmorefamiliar,duetothecommonheritageofthe
Westminstersystem.Nonetheless,thereareareaswherethesecountrieshave
reshapedparliamentarypracticesanddevelopedsometimesuniqueapproachesthat
areworthhighlightinginthecontextofthisreport.
AsspecifiedintheTermsofReference,thefocusofthissectionofthereportison
scrutinypracticethat:(a)takesa“fullyearapproach”tobudgetconsiderations;(b)is
informedbyadequateinformationpresentedinatransparent,accessibleand
relevantmanner;(c)isinformedbythelong-termimplicationsofpolicyandbudget
decisionsonaffordabilityandfinancialsustainability;8(d)considersandinfluences
draftbudgettaxandspendingplanspriortoconsiderationoftheBudget/Finance
Bill;(e)hassubject/departmentalcommitteeconsiderationofdepartmental
spendingplans;(f)hasaclearfocusontheroleofpublicbodiesandlinesof
accountability;(g)considerstheperformanceofpublicbodiesandimpacton
outcomesincludinghowspendingdecisionsareprioritised;(h)considerswider
performance,outputsandoutcomesandhowtheyinfluencespendingandtax
decisions;(i)considershowoutcomesarelinkedtothebudgetdocumentation;(j)
considersinyearchangestobudgetplans;(k)considersoutturnagainstbudgetsand
consolidatedaccounts;(l)considersgoodpracticeinscrutinyofequalitiesissues;(m)
considersauditfindingssystematicallyinbudgetscrutinywork.
Basedontheaboverequirements,thispartofthereportidentifiespractices
elsewherethatareusefulforthinkingaboutthescrutinyprocessintheScottish
Parliament.However,itisimportanttopointoutthatotherinstitutionswillbe
importanttofullyaddresssomequestionsthatariseintheScottishcontext.In
particular,intergovernmentalco-operationinfiscalmatterscanbeachievedthrough
avarietyofmechanismswithdifferentdegreesoflegislativeinvolvement(Shah2007,
Ter-Minassian1997).InGermany,regionalgovernmentsarerepresentedinthelawmakingprocessatthenationallevelviatheBundesrat,andthusplayanimportant
roleintaxdecisionsthataffecttheregions.InAustralia,theindependent
CommonwealthGrantsCommissionadvisesonrevenuesharingbetweenthefederal
8
Theassessmentoffiscalsustainabilityisincreasinglycarriedoutbyindependentfiscalinstitutions,
suchasfiscalcouncilsorparliamentarybudgetoffices(vonTrappetal.2016).Forexample,attheUK
centralgovernmentlevel,theOfficeforBudgetResponsibilitypublishesaFiscalSustainabilityReport
withlong-termfiscalprojectionsandanassessmentofthetrajectoryforpublicsectordebt.Thismay
beoneoptionforthefuturedevelopmentofthemandateoftheScottishFiscalCommission.
15
governmentandthestates.Otherfederations,likeCanada,havewell-developed
systemsforintergovernmentalnegotiationsthatinvolvefederalandprovincial
executives.TheUKcurrentlylacksanequivalentmachinery.Oneimplicationforthis
reportisthattherearelimitsindrawingoninternationalexperiencewith“scrutiny
processeswithinlegislatureswheresimilarinteractionsbetweentiersofgovernment
operate”,astheTermsofReferencephrasedit.
Thefollowingsectionsproceedbycountry,startingwithasummaryofsalient
featuresoftheapproachtolegislativebudgetscrutiny.Thisisfollowed,ineachcase,
byadiscussionofspecificelementshighlightedascentralintheTermsofReference
forthisreport.Insomeareas,thishighlightslackofconsensusaboutwhatmightbe
“best”practice,andbringstotheforenotabledifferences.Someofthediscussion
referstorelevantsubnationalexperiences.However,theexperiencesofnational
legislaturesarenolessrelevant.InSwedenandNewZealand,theirunitarystructure
meansthattherearenoobvioussubnationalcounterparts,butthesecountriesare
particularlyinterestingbecauseofthechangesinbudgetpracticestheypioneeredin
recentdecades.Moreover,theyhaverecentexperiencewithminorityandcoalition
government.WithregardtoAustraliaandGermany,thereportnotessimilaritiesand
differencesbetweennationalandsubnationalpractices.
3.1Germany
TheGermanParliamenthas“anunusuallystrongandinfluentialengagementinthe
annualbudgetprocess”(OECD2015b:73).Itreceivesthebudgetproposalaboutfive
monthspriortothestartofthefinancialyear,andhasunlimitedauthoritytoamend
it.Thescrutinyofthefederalbudgetmainlytakesplaceinthelowerhouse,the
Bundestag.Theregionalchamber,theBundesrat,hasamoreimportantrolein
changestothemostimportanttaxes,whicharesharedbetweenlevelsof
government(incometax,corporationtax,andVAT).TheBundestagmakesregular
useofitsbudgetarypowersandtypicallyadoptsseveralhundredamendments–
aboutonethousandonaverageinrecentyears–totheexecutivebudgetproposal
eachyear,evenwhenthegovernmentcommandsalargeparliamentarymajority.
Thesepowersareusedresponsibly.Amendmentstypicallyreduce,ratherthan
augment,totalspending(Wehner2001).ItisimportanttonotethattheBundestag
isunusuallylarge,withcurrently631seats.Thismeansthatscrutinytaskscanbe
distributedacrossalargemembershipandparliamentarycommitteesarelargeand
canbehighlyspecialised.Severalelementsoftheparliamentarybudgetprocessat
thenationallevelareinstructiveinthecontextofthisreport,asaresomeaspectsof
theexperienceoftheparliamentsinGermany’sregions,theLänder.
PowerfulBudgetCommittee.TheBudgetCommitteeisatthecentreoffinancial
scrutinyintheBundestag.Whilesectoralcommitteescanprovidefeedback,and
makesuggestionstotheBudgetCommittee,thelatterhasdecision-makingauthority
andisresponsiblefortransmittingrecommendationstotheplenary.TheBudget
Committeeiscomposedofmorethan40members,basedontheproportional
representationofallpartiesintheBundestag.TheBudgetCommitteedoesnot
recommendtaxchanges,andalltaxlegislationisdealtwithseparatelyintheFinance
16
CommitteeoftheBundestag.IntheparliamentsoftheLänder,thereistypicallya
singlebudgetandfinancecommitteethatconsidersbothspendingandtaxquestions.
Taxquestionsarelessprominentatthislevel,sincethemajortaxesareshared
betweentheLänderandthefederalgovernment,andaregovernedbyfederal
legislation.Forexample,theParliamentofLowerSaxonymaintainsaCommitteefor
Budgets,FinanceandPublicAccounts.
Roleofauditfindingsinbudgetscrutiny.IntheBundestag,theCommitteeonPublic
AccountsisasubcommitteeoftheBudgetCommittee,consistingof15ofits
members.AmemberofthelargestoppositionpartytraditionallychairstheBudget
Committee,whileamemberofthegoverningcoalitionchairsthePublicAccounts
Committee.Theintegrationofapprovalandauditfunctionsinasinglecommittee
helpstoensurethatauditscanfeeddirectlyintobudgetarydecisions.This
committeemodelisalsofoundinseveralparliamentsoftheLänder.Forexample,in
Saxony-Anhalt,thePublicAccountsCommitteeisasubcommitteeoftheFinance
Committee.9
Specialisedrapporteursystem.TheBudgetCommitteehasadecentralised
approachtoscrutiny.Rapporteursareresponsibleforthebudgetofaspecific
ministry,supportedbyassistantrapporteursfromeachpoliticalpartyrepresentedin
theBundestag.Rapporteurstendtokeeptheirpositionsforseveralyearsand
developahighdegreeofportfolio-specificexpertise.ThePublicAccountsCommittee
alsooperatesarapporteursystem,butwithoutassistantrapporteurs.Arapporteur
ofthePublicAccountsCommitteewillneverberapporteurforthesameministryin
theBudgetCommittee.
Full-yearapproach.Duringbudgetformulation,BudgetCommitteerapporteursare
keptinformedbytherelevantofficialsinlinedepartmentsandsectoralofficialsin
thebudgetdivisionofthefinanceministry.Duringthefirsthalfoftheyear,itisnot
unusualforrapporteurstoconductsitevisits,forinstancetoinvestigatethe
necessityofcertaindemandsforcapitalexpenditure,ortocheckonthestandardof
administration.Since2011,thecabinetdecidesbindingceilingsforeachlineministry
fortheupcomingbudgetinMarch,andthefinanceministerreportsthisdecisionto
theBudgetCommittee.Duringbudgetexecution,theBudgetCommitteereceives
monthlyexpenditureupdatesandquarterlyreportsondebtmanagement,andithas
toapprovein-yearadjustmentsabovethelimitsitgrantsintheannualbudgetact.
TheFederalCourtofAuditassiststheBundestagalsoduringthebudgetexecution
stage,andanswersseveralhundredparliamentaryquestionseachyear.
Uniquepowersoverin-yearchanges.Whenapprovingthebudget,theBundestag
hasthepowertoinserta“qualifiedfreeze”torequirethefinanceministrytoobtain
parliamentaryconsentbeforedisbursingfundsforaspecificitem,oracertain
percentagethereof.Theexecutiveiscriticalofthismechanism,asitcaninterfere
9
InsomecountriesinfluencedbyNapoleonictraditions,parliamentsuseaformaldischarge
proceduretoapprovetheimplementationofthebudgetforaspecificyear.Inmanycases,this
approvalisroutinelygranted,butthismaynotalwaysbethecase.Forexample,theEuropean
Parliament’srefusaltograntadischargein1998ultimatelyledtotheresignationoftheSanter
CommissioninMarch1999.
17
withbudgetimplementation.Ontheotherhand,itisapowerfulparliamentary
mechanismtoensuretheexecutiveprovidessufficientinformationtoParliament
andproperlyjustifiesitsspendingproposals.
Documentationwithdetailedinputinformation.Parliamentexercisescontrol
throughthedetailedscrutinyofabout6000lineitems.In2009,thefinanceministry
proposedtorestructurethebudgetintoprogrammesandtoreducethenumberof
lineitemstoabout1000.TheBudgetCommitteehaltedtheimplementationofthis
reform,fearinga“lossof…control”(JonesandLüder2010:269).Hence,the
Bundestagcontinuestoapproveahighlydetailedbudget.Theannualbudgetlaw
controlshowmuchflexibilitytheexecutivehastovirebetweenitemsandthereare
mechanismsforcarry-overs(OECD2015b:27).
3.2Sweden
TheSwedishRiksdagisaunicameralparliament.TheRiksdagfundamentally
restructureditsbudgetprocessinthemid-1990s,aspartofawidersetofreforms
adoptedinsupportoffiscalconsolidation(Blöndal2001).Amongstthemajor
changestothebudgetprocessmostrelevantinthecontextofthisreportarethe
movetoatwo-stageprocessofparliamentaryengagementwithbudgetformulation.
Inaddition,thereformsalsoredesignedtheprocessbywhichparliamentary
committeesscrutinisethebudget.Formanydecades,theSwedishParliament
adoptedseveraldozenamendmentstothegovernmentbudgetproposaleveryyear,
oftenresultinginadditionalexpenditures.Parliamentnowvotesonthebudgetasa
package,whichmakesitdifficultforoppositionpartiestopromoteamendments,
eveninaminoritygovernmentsetting.Ingeneral,sincethereformswereadopted
Parliamenthasamendedthebudgetlessfrequently,andrarelyinawaythataffects
totaloutlays(Wehner2007,2013).Thiswasnotthecasein2014,whenan
oppositionbudgetwastemporarilyenacteduntilarevisedgovernmentbudget
gainedparliamentarysupport(Mattson2014,OECD2017a).
Earlyparliamentaryinvolvement.Inthemid-1990s,theSwedishParliament
adoptedatop-downvotingprocessinwhichitvotesfirstonbudgettotalsbefore
decidingindividualappropriations.ThereformsintroducedaSpringFiscalPolicyBill,
inwhichthegovernmentproposedaggregateexpenditureceilingsfortheupcoming
budgetplustwofurtheryears,aswellasindicativeceilingsor“frames”forthe
allocationsacross27expenditureareas.ThisbillwastabledforthefirsttimeinApril
1996,precedingthepresentationofthedraftbudgetbyfivemonths.Following
parliamentaryapprovalofthebillinJunetheexecutivewouldproceedtofinalisea
draftbudgettobepresentedtoParliamentinSeptember,morethanthreemonths
beforethebeginningofthenewfiscalyear.In2001,itwasdecidedthatthisprocess
wastoocumbersome.TheSpringFiscalPolicyBillnowcontainsgeneralguidelines
forbudgetpolicy,ratherthanfixedceilingsandindicativeframes,whicharedecided
intheautumn.
Subjectcommitteeinvolvement.Inconjunctionwiththetwo-stepdecision-making
procedure,thereformsadoptedinthemid-1990sgavetheFinanceCommittee
18
responsibilityfordiscussingaggregatespendingaswellastheframesforeachofthe
27expenditureareas.BasedontheworkoftheFinanceCommittee,thefirst
parliamentarydecisionintheautumnisnowontheexpenditureframesforthe
upcomingbudget,followingwhichsectoralcommitteeslookatbetweenoneand
fourexpenditureareasandproposeallocationswithintheapprovedceilings.
Sectoralcommitteesmayproposeshiftingfundsbetweenitemswithinan
expenditurearea,butnotinawaythatbreachesthetotalsetforthatarea.
Performanceofagencies.TheSwedishgovernmentusesadecentralisedstructure
withabout350agenciestoimplementpolicy.Sincethereformsofthemid-1990s,
agenciesenjoyaconsiderabledegreeofautonomyandreceivelumpsum
appropriationsfortheiroperations.Inreturn,therehavebeeneffortstostrengthen
accountabilityforresults(Blöndal2001:49-54).TheBudgetBillnowcontainsabout
twoorthreeperformanceobjectivesforeachofthe27expenditureareasthatare
approvedwiththespendingplans,andperformanceisassessedwithamixofoutput
andoutcomemeasures.Thisfollowsamorestrictlyoutcome-focusedapproach
discontinuedin2009,whichwasfoundtobeapoorsteeringinstrumentwhen
impactsarebeyondthedirectcontrolofanagency.Yet,theOECD(2017a)concludes
that“performanceinformationlacksinfluenceinparliament’sbudgetarydialogue”
dueto“weakpracticallinkagesbetweentheperformanceinformationprovidedin
theannualreportsofagenciesandtheproposedappropriationsfortheupcoming
budgetyear.”Workiscurrentlyunderwaytostrengthentheserelationships.It
remainstobeseenwhetherthisinformationwillbecomemorecentraltobudget
scrutiny,giventhatparliamentariansalreadyreceivelargevolumesofinformation,
andtheinherentdifficultiesindocumentingclearlinksbetweenfundingandimpacts.
Commitmenttoscrutinyofequalityissues.ParticularlynoteworthyareSweden’s
effortsoverseveraldecadestomainstreamgendersothatitisanintegralpartof
policyformulation.Thecurrentgovernmenthasannouncedamajornewinitiativeto
advancegenderbudgeting,whichiscurrentlyintheprocessofbeingdeveloped
(Quinn2016).Oneoftheprinciplesistoworktowardsthepresentationwiththe
government’sbudgetproposalofinformationontheimpactsofbudgetmeasureson
menandwomen.Anotheristomakemorerigorousgenderimpactassessmentan
integralpartofthebudgetdiscussionsbetweenthefinanceministryandline
ministriesatanearlystageduringbudgetformulation(OECD2017a).Itistooearly
toevaluatethesedevelopments.10
3.3NewZealand
NewZealand’sunicameralParliamentplaysaminorroleinthebudgetapproval
process.Itreceivesthebudgetaboutonemonthpriortothestartofthefinancial
year,andtypicallyapprovesitonlytwomonthsintothefinancialyear.Membersof
10
InAustria,genderbudgetingwasintroducedaspartofanambitiousperformancebudgetingreform
in2013.Foreachofthe32budgetchapters,ministriesdefineamaximumoffiveimpactobjectives
(andrelatedperformanceindicators)andoneofthesehastoberelatedtogenderequality.Foran
overviewofotherOECDcountries,seeOECD(2017b).
19
theHouseofRepresentativescaninitiatechanges,butthegovernmenthasa
“financialveto”overproposalsitconsidershaving“morethanaminorimpact”on
thefiscalaggregatesorthecompositionofavote(NewZealandTreasury2011:8384).Thefinancialvetoisusedinpractice,butnotoften.11NewZealandprovidesa
rareexampleofmanagingpublicmoneybasedonastrictlinkbetweenperformance
andtheallocationoffunding,whereanincrementinresourcesisdirectlylinkedto
anincrementinoutputs(Schick2003).TheestimatespresentedtotheNewZealand
Parliamentlinktheexpenditureofadepartment,orvote,tospecificoutputs,and
spendingisapprovedonthisbasis.12
Earlyparliamentaryinvolvement.TheBudgetPolicyStatement(BPS)setsoutthe
overarchingpolicygoalsandprioritiesfortheforthcomingbudget.TheMinisterof
FinancemustpresentaBPStotheHouseofRepresentativesby31Marcheachyear.
Inrecentyears,theBPShasbeentabledinDecember,precedingthepresentationof
thebudgetinlateMay,aheadofthestartofthefinancialyearinJuly.TheFinance
andExpenditureCommitteecallsforpublicsubmissions,considerstheBPSand
reportsitsfindingswithin40workingdaysofreceivingtheBPS.In2016,the
committeereceived33submissionsandheldhearingsontwodays,includingwith
theMinisterofFinanceandaselectionofninesubmitters.Thecommittee’sreport
formsthebasisforapre-budgetdiscussionintheplenary,whichisintroducedbythe
chairpersonoftheFinanceandExpenditureCommittee.
Output-basedappropriations.TheNewZealandParliamentisaskedtoapprove
spendingonspecificoutputs(NewZealandTreasury2013).13Theunderpinning
performanceinformationintheestimatesdocumentsthe“budgetedstandard”in
termsofoutputs.Thesearegroupedbysector,withanoverviewofthebroad
strategicprioritiesandreferencingoutcometargetspublishedbythegovernment.
Forexample,the2016-17estimatesfortheNewZealandPolicefallunderthejustice
sector.Oneoftheappropriationsinthepolicevoteisfortheroadsafetyprogramme.
Theestimateslistaseriesofoutputsofthisprogrammetowhichbudgeted
standardsareattached.14
11
InJune2016,theFinanceMinisterissuedafinancialvetotoblockabillextendingthedurationof
paidparentalleave,citinganoverallnetincreaseinspendingof$278millionoverafour-yearperiod.
12
NewZealand’sbudgetdocumentsareavailableathttp://www.treasury.govt.nz/budget.
13
Thesedistinguishdifferenttypesofappropriations:outputs(goodsorservicestobesupplied),
benefitsorrelatedexpenses(fordirectresourcetransferstoindividuals),borrowingexpenses(such
asinterestpayments),othersnotfallingintotheprecedingcategories,andcapitalexpenditure.There
isalsoaseparatesingle-lineappropriationtypeforintelligenceandsecurityservicesofasensitive
nature.Inaddition,areformin2013introducedanewtypeofmulti-categoryappropriationsthat
cross-cuttwoormoreofthecategories,whichallowsforgreaterflexibility.Theappropriationsalso
distinguishfundingforgoodsorservicesprovidedbythegovernmentdirectly(departmental)from
thosesuppliedonbehalfofthegovernment(non-departmental).Appropriationscancoverdifferent
timeperiods:annual,multi-year(butnotexceedingfiveyears),orpermanent(authorisedby
legislationotherthananappropriationact).
14
Examplesofthelatterarethenumberofvariousofficerissuedenforcementactionsundertaken
(e.g.590to635forspeed,per10,000population),thenumberofbreathtestsconducted(2-2.4
million),roadsafetysessionsdeliveredinschools(50,000),etc.Thisiscomplementedwithqualityrelatedmeasuresrelatedtotimeliness,suchasforthemedianresponsetimetoemergencytraffic
20
Subjectcommitteescrutiny.EstimatesarereferredtotheFinanceandExpenditure
Committeeandmaybereferredtootherselectcommittees.Selectcommitteeshave
twomonthsfromthedaythebudgetwaspresentedtoParliamenttoreportontheir
examinationoftheestimates.Thesystemforauditscrutinyissimilarlydecentralised.
In1962,thePublicAccountsCommitteewasdiscontinuedanditsfunctionsgivento
thePublicExpenditureCommittee,andin1985totheFinanceandExpenditure
Committee.Thelatterreceivesauditreportsandmayreceiveabriefingonspecific
reportsfromtheAuditorGeneral.Othersubjectcommitteescanreceivebriefings
fromtheAuditorGeneralonanyreportswithinthesubjectareaofthatcommittee,
butitisrarethattheyreporttotheHouse.Duringthereviewoftheestimates,the
AuditorGeneralsupportsselectcommitteeswithevidenceandadvice.Thisprovides
anopportunityfortheAuditorGeneraltohighlightpertinentinsightsfromauditsto
informparliamentaryscrutinyofspendingproposals.
3.4Australia
TheAustralianParliamenthasamarginalroleinthebudgetapprovalprocess.Its
formalpowerstoamendthebudgetarelimited.IntheWestminstertradition,itcan
onlyrejectorapproveanexpenditure,orreduceit.Moreover,partydisciplineinthe
lowerhouseisverystrong.Until1993,budgetswereonlyintroducedafterthestart
ofthefinancialyearandapprovedaboutfivemonthsintoit.Anewtimetablesince
thenisbasedonintroductioninMayandapprovalinJune,withthefiscalyear
startinginJuly.TheestablishmentofaParliamentaryBudgetOfficein2012hasgiven
membersaccesstoanewsourceofindependentbudgetanalysis,includingcostings
ofpolicyproposals.TheHouseofRepresentativessubjectsthebudgettohardlyany
scrutiny.ItisinthedirectlyelectedSenate,theupperhouse,thatmoredetailed
scrutinyoftheestimatestakesplace.Thisinvolvessectorallegislationcommittees,
whichconducthearingswithevidencefromexecutiveofficials.TheAustralian
experienceisparticularlyrelevantforhighlightingthepotentiallydetrimentalimpact
onparliamentaryscrutinyofaperhapsoverlyoutcome-focusedbudgetsystem.
Outcome-basedappropriations.Atthefederallevel,theAustralianbudgetsystem
wasamongstthefirsttomovetowardsastrongoutcomes-orientationinthelate
1990s(Kristensenetal.2002).Thisinvolvedappropriationsagainsthigh-level
outcomesinsteadofprogrammesordepartments.Forexample,theDepartmentof
Defencehadasinglelineforallitsoperations:“TodefendAustraliaandAustralia’s
interests”(Blöndaletal.2008:155).Appropriationscoveredthefullcostsofoutputs
calculatedonanaccrualbasisandwerenon-lapsingratherthanannual(Kellyand
Wanna2004:98).Thisallowedthegovernmenttofundnewactivitieswithreference
toanoutcome,eveniftheywerenotmentionedinthesupportingbudget
documentation,aHighCourtjudgmentconfirmed(Blöndaletal.2008:166).The
AustralianParliamentcontinuestoappropriatebyoutcome,althoughasingle
organisationcanhavemorethanoneoutcome.Whileinformationonoutputsis
events(8to9minutesinurbanareas,12to14inruralones).Foreachbudgetedstandard,the
estimatesalsoprovidethebudgetedand“estimatedactual”figuresfortheprecedingfinancialyear.
21
presentedinthePortfolioBudgetStatementsthatarealsotabledinParliament,
theseareforinformationonly(seebelow).15In2008,areviewoftheAustralian
budgetsystemconductedbytheOECDconcludedthatoutcome-basedbudgeting
“hadtheresultoffurtherlimitingParliament’srole”(ibid.:171).16
Programme-levelestimateslinkedtooutcomes.ThePortfolioBudgetStatements
containprogramme-levelfundinginformationandstatewhichprogrammesare
associatedwitheachoutcome.Programme-levelspendingestimatesareforthe
currentbudgetyear(“estimatedactual”),theupcomingbudgetyearandafurther
threeyears(“forwardestimates”).Forexample,theDepartmentofEducationand
TrainingPortfolioBudgetStatementsfor2016-17listnineprogrammesas
contributingtotheachievementofitsoutcome1(“Improvedearlylearning,
schooling,studenteducationaloutcomesandtransitionstoandfromschoolthrough
accesstoqualitychildcare,support,parentengagement,qualityteachingand
learningenvironments”),aswellasthree“linked”programmesrunbyotherentities.
Performanceinformationispresentedforeachprogramme,includingperformance
criteriaandtargets.
Approachtoperformanceatthestatelevel.Thebudgetapprovalprocessfollowed
intheAustralianstatesismoreoutput-focused.Forexample,theappropriations
authorisedbytheParliamentofVictoriaarefortheprovisionofoutputsinsteadof
outcomes.However,whileoutputsarespecifiedinthebudgetdocumentationthatis
providedtothelegislature,theappropriationsbundlefundingfordifferentbaskets
ofoutputsatthedepartmentallevel(e.g.educationandtraining,healthandhuman
services,etc.).Inotherwords,theappropriationsdonotfacilitateparliamentary
controloftheallocationofexpenditureacrossdifferentprogrammesandoutputs
withindepartments.
15
Australianbudgetdocumentsareavailableathttp://www.budget.gov.au/past_budgets.htm.
16
Ontheexperiencesofothercountries,seethecomparativeanalysisofperformancebudgeting
reformsbyMoynihanandBeazley(2016).Theynotethatthe“impact[ofperformancebudgeting]on
howannualbudgetsallocateresourceshasbeenminimal”(p.2).
22
4Summaryandrecommendations
Globalstandardsforbudgettransparencydisplayasignificantdegreeofoverlapand
consensusabouttheessentialingredientsofatransparentbudgetsystem,andthe
typesofreportsthatshouldbeproduced.Thereissomewhatlessdetailontherole
ofthelegislatureinthebudgetprocess,becauseofdifferentnationaltraditions,
althoughthereisagreementonsomeaspects.TheOECDandIMFbothagreethat
thebudgetshouldbetabledatleastthreemonthspriortothestartofthefiscalyear,
andtheOECDconsidersthisanabsoluteminimum.Internationaltransparency
standardsalsoacknowledgetheimportanceofin-yearparliamentaryoversightof
theexecutionoftheapprovedbudget,aswellastimelyandeffectiveparliamentary
auditprocedures.Moreover,thereisincreasedrecognitionthatparliamentary
involvementshouldbecontinuous,coveringallstagesofthebudgetprocess,
includingmedium-termbudgetingandprioritysetting.Yet,manydetailed
institutionalchoicescannotbesettledwithreferencetoglobalnorms.
Recommendation1:TheBPRGshouldspelloutaclearvisionforthefuture
developmentofparliamentaryfinancialscrutinyinScotland.Inparticular,it
shouldclarifywhetheritendorsesFIAG’scallforaparliamentaryprocessthat
entails“muchmorescrutiny”thanatWestminsterandthepossibilityto
influencethebudget.
Thecasestudieshighlightedaselectionofpracticesfromlegislaturesthatoffer
alternativescenariosforthedevelopmentoftheroleoftheScottishParliamentin
financialscrutiny.TheAustralianandNewZealandexamplesareclosesttothe
defaultmodeloftheWestminsterParliament,whereparliamentaryparticipationis
limited.FIAGexplicitlyrejectedthisapproach(ConsultativeSteeringGroup1998:
AnnexI,para.1.7).IftheBPRGreaffirmsthisvision,thiswouldpointtowardsa
trajectorywherefinancialscrutinyevolvestowardsalevelofengagementthatis
closertothatintheSwedishorGermanparliaments.Thefollowingparagraphs
identifypracticesrelatingtospecificaspectshighlightedintheTermsofReference
thatwouldbecompatiblewiththislatterapproach.
Afull-yearapproachtreatsfinancialscrutinyasacontinuousprocessratherthanan
event.Activefinancialscrutinyinvolvesparliamentsearlyintheformulationstage,
allowssufficientroomtomakeamendmentstothebudgetduringtheapprovalstage,
andenablesoversightofimplementationbothin-yearaswellasexpost.Anumber
ofparliaments,includingseveralofthosecoveredinthecasestudysectionofthe
report,haveadoptedpracticesthatsupportcontinuousscrutiny.
Animportanttrendinbudgetingisthatmoreparliamentsgettodebatethebroad
directionoffiscalpolicyandbudgetaryprioritiesaheadofthetablingoftheannual
budget.TheBPSinNewZealandisoneexampleofthis.Swedenhasgonefurther
andformalisedthisapproachinatwo-steplegislativeprocess,wheretheSpring
FiscalPolicyBillisdebatedandapprovedseveralmonthsaheadofthetablingofthe
budget.Thesepre-budgetdebatesprovideanopportunitytothinkbeyondthe
annualbudgetandaboutthemedium-termpathoffiscalpolicy,majorobjectives,as
23
wellaslong-runsustainability.Theycanalsohelptobuildconsensusaboutdifficult
trade-offsandcommitmenttomajorbudgetparameters,includingthroughpublic
consultationandengagement.ThebudgetprocessenvisagedbyFIAGclearly
envisagedparliamentarydiscussion“onstrategicprioritiesforthefollowingfinancial
year”aspartofa“stage1”priortothetablingofadraftbudget(Consultative
SteeringGroup1998:AnnexI,para.1.6).
Recommendation2:Thediscussionofthedraftbudgetshouldbepreceded
byaformalmedium-termbudgetpolicystatementthatistabledannually
anddiscussedinParliamentpriortothetablingoftheannualbudget
proposalintheautumn.Themedium-termbudgetpolicystatementshould,
withinthecontextoftheeconomicoutlook,setoutthegovernment’sfiscal
policyobjectivesanditsbroadprioritiesforthebudget.Itshouldbetabled
sufficientlyfarinadvance,aboutsixmonthspriortothestartofthefiscal
year,toallowmeaningfulparliamentarydiscussionthatisinformedbypublic
consultationandengagement.
Tobeameaningfulactorinthebudgetprocess,legislatorsshouldhavetheauthority
tomakeamendmentstothebudget,anditshouldbepossibleinpracticetousethis
authoritywheredeemedappropriate.TheWestminstertraditionsuppresses
outrightparliamentaryamendments,butmanyotherparliamentarybodieshave
amendmentpowersandroutinelymakechangestothegovernmentbudget
proposal,basedonthescrutinyofthebudgetproposalinparliamentarycommittees.
InScotland,FIAGrecommendedParliamentfirstdiscussingadraftbudgetpriorto
formalapprovalofadetailedbudgetwithoutthepossibilityofamendments.This
processmayreflectadesiretogivetheParliamentasay,butitalsorevealsa
hesitationtodecisivelybreakwithWestminsterconventionsinthisregard.Froma
comparativeperspective,thisisanunusualandcumbersomeprocess.Amore
naturalsequencewouldbeforthebudgettobetabledanddebated,withthe
possibilityofparliamentaryamendmentsinthisprocess.Ifthebudgetproposal
respondstoanyissuesraisedinParliamentduringthepre-budgetdebate,alarge
volumeofamendmentswouldbeunlikely.
Recommendation3:Thegovernmentshouldtableasinglebudgetproposal
intheautumnthatshouldbescrutinisedbyparliamentarycommitteesand
debatedintheplenary,withthepossibilitytotableandadoptamendments.
Thiswouldreplacethecurrentdraftbudgetstagewiththetablingofaformal
budgetproposalduringtheautumn.Maximumamendmentauthoritywould
allowanychangestogovernmenttaxandspendingproposals.Ataminimum,
itshouldbepossibleforMSPstoamendthebudgetbyshiftingfundsfrom
oneitemtoanotherorbyreducinganexpenditure,andtoamendtax
measuresinawaythatdoesnotresultinalowerbudgetbalancethaninthe
governmentproposal.Amendmentsshouldnotbetiedtoavoteof
confidenceinthegovernment.
Toensurethatparliamentaryreviewisdisciplinedandco-ordinatedrequiresa
strongrolefortheFinanceCommitteeinthisprocess.Someparliamentsbundlethe
scrutinyoftaxationandspendinginasinglecommittee,whileothersmaintain
24
separatecommittees,forexampleinGermanyandSweden.Parliamentsthatengage
activelyinthebudgetprocess,includingbymakingamendments,ensurethatstrong
financialcommitteesareinplacetoguidethisprocess.InSweden,theFinance
Committeeisinstrumentalinreviewingtotalspendingaswellasallocationsacross
thedifferentexpenditureareas,leavingsectoralcommitteestofocusonspending
withinsectorsundertheirjurisdiction.TheNewZealandParliament’sFinanceand
ExpenditureCommitteealsoplaysaco-ordinatingrole,althoughthepossibilityfor
changesislimited.TheprocessintheGermanParliamentcentralisesdecisionmakingintheBudgetCommittee,butbenefitsfromsector-specificknowledge
througharapporteursysteminwhichmembersdevelopspecialisedexpertiseand
scrutinisespecificpartsofthebudget.
Recommendation4:AcentralrolefortheFinanceCommitteeisessentialfor
co-ordinatingparliamentarydecisionsonthesinglebudgetproposaltabledin
theautumn.SimilartotheprocessinSweden,theFinanceCommittee
shouldfirstconsiderthebudgetaggregatesandallocationsacrossthemain
spendingareas,andmakerecommendationsthataredebatedandputtoa
voteintheParliament.
Recommendation5:Basedontheframeworkestablishedinthefirst
parliamentarydecisiononthebudgetaggregatesandallocationsacrossthe
mainspendingareas,asecondstageofparliamentaryreviewshouldinvolve
detailedscrutinyofexpenditureprioritieswithinspecificsectorsbythe
relevantsubjectcommittees.Anyamendmentsproposedbythecommittees
atthisstageshouldbeconsistentwiththeframeworkestablishedinthefirst
parliamentarydecision.
Recommendation6:Givenincreaseddevolutionofauthorityovertaxation,
theScottishParliamentshouldconsidertheestablishmentofseparate
committeestoscrutinisespendingandtaxation.Aseparatecommitteeon
taxationcouldhelptoensurethatappropriateattentioncanbegiventothe
expenditureaswellastherevenuesideofthebudget.
Anincreasingnumberofcountriesareattemptingtoincorporateagender
perspectiveintothedecision-makingprocessonbudgets.Thisisanongoingprocess,
anditisstilltooearlytoevaluatemanyoftheseinitiatives.Therearevarious
mechanismstoincreaseconsiderationofequalityissuesinthecontextofthebudget
process,suchasincidenceanalysisfromanequalityperspective,orrelevant
performanceinformation.
Recommendation7:TheBPRGshouldexploreoptionsforincreasingthe
provisionofequalityrelevantinformation.Thisshouldincludegender
incidenceanalysisthatquantifiestheimpactofbudgetmeasuresonmen
andwomen,alongsideotherdistributiveimpactsbasedonageand
householdincome.
Manycountrieshaveattemptedtostrengthentheperformanceorientationofthe
budgetprocessbyincorporatinginformationonoutputsoroutcomesintobudget
documents,sometimesincombinationwithtargets.TheNewZealandParliament
25
appropriatesonanoutputbasis(i.e.thegoodsandservicesproduced),creatinga
strictlinkbetweenoutputsandallocatedfunding,whichisveryrare.InAustralia,
Parliamentapprovesfundingonanoutcomebasis(i.e.theintendedimpacton
society).Theintroductionofthisapproachhasledtoalossofparliamentarycontrol
andgivensubstantialdiscretiontotheexecutive.InSweden,performance
informationhasbeenoflimitedusetoparliamentariansinassessingproposed
appropriationsforagencies.Impactscanrarelybeclearlyattributedtoaspecific
governmentprogramme.Moreover,theirachievementhasnoobviousrelationto
thegovernment’s12-monthaccountingperiod,i.e.thefinancialyear,andtypically
hastobeassessedoverlongertimeperiodsofvaryinglength.Enthusiasmfor
performancebudgetingisgreatestincountrieswherethebudgetprocessis
dominatedbytheexecutive.TheGermanParliament,themostinfluentialofthe
legislaturessurveyedforthisstudy,hasrejectedaninitiativebytheMinistryof
Financetoreducethenumberoflineitems.
Recommendation8:TheBPRGshouldadoptacautiousapproachtothe
incorporationofperformanceinformationintobudgetdocuments.Only
performanceinformationthatisdirectlylinkedtospendingfiguresshouldbe
presented.Outputscanbeattributedtoaspecificprogrammeandfiscalyear,
whichmeansthatgovernmentbodiescanbeheldtoaccountfortheir
delivery.Incontrast,anexcessivefocusonoutcomesislikelytoweaken
accountability,asmanyimpactscannotbeclearlyattributed.Programmes
shouldbelinkedtooutcomes,sothattheireffectivenesscanbeassessed
againststatedobjectives.17However,thelarge-scaleintroductionofoutcome
informationintoannualbudgetdocumentsisnotrecommended.
Recommendation9:Parliamentaryapprovalofspendingshouldbeatthe
programmelevel.Thebudgetdocumentsshouldspelloutthefinancialcost
ofeachprogrammeforatleastthecurrentyear,thebudgetyear,aswellas
themediumterm,undertheassumptionthatcurrentpolicyismaintained.
Ideally,thebudgetshouldalsocontainpastexpenditureinformationatthe
programmelevel.Parliamentshouldbeconsultedtodeterminetowhat
extentspendingshouldalsobepresentedonthebasisofotherclassifications,
inparticulareconomicandfunctional.18Virementrulesshouldsetlimitsfor
shiftingfundsbetweenapprovedprogrammestoensureparliamentary
oversightandcontrolofin-yearadjustments.
Whileanoutcomefocusprovidesapoorbasisforparliamentaryscrutinyofthe
annualbudget,itiscrucialthatparliamentsassesstheeffectivenessofprogrammes.
Ultimately,suchinformationshouldinformdecisionsabouttheallocationof
financialresources.However,abudgetproposalfilledwithoutcomemeasuresand
targetswillnotenablesuchanapproach.Performancecanbeassessedaspartof
17
Forexample,theScottishGovernment’sworkonplanningforoutcomesinreoffendingprovidesa
goodbasisforthinkingabouthowoutcomescouldbelinkedtobudgetsataprogrammelevel(Bisset
2015).
18
ProgrammebudgetingisdiscussedinKraan(2007)andRobinson(2007),andJacobsetal.(2009)
giveanoverviewofbudgetclassifications.
26
otherprocessesingovernment,basedoncredibleimpactevaluation.For
parliaments,valueformoneyaudits–especiallythosethatfocusoneffectiveness–
canbeavaluablesourceofinformationontheimpactofindividualprogrammes.
Thelinkbetweenauditsandthebudgetapprovalprocessisoftenpoorlydeveloped,
buttherearemechanismsthatpromotesuchalink.IntheGermanParliament,the
factthattheauditcommitteeisasub-committeeoftheBudgetCommitteeensures
thatmembersdirectlydrawontheirknowledgeofauditinsightsinmakingdecisions
aboutbudgets,includingamendments.InNewZealand,subjectcommitteescrutiny
oftheestimatesbenefitsfromtheevidenceandadviceoftheAuditorGeneral.
Recommendation10:TheAuditorGeneralforScotlandandtheScottish
Parliamentshouldconsiderbroadeningtheflowofrelevantaudit
informationtoparliamentarycommitteesbeyondthePublicAudit
Committee.ThiscouldinvolvetheAuditorGeneralgivingevidenceand
advicetodifferentcommitteesincludingduringthebudgetapprovalprocess
tohighlightrelevantaspectsofaudits.
27
Acknowledgments
TheauthorwouldliketoacknowledgehelpfulcommentsfromClareHammond,
DarrenHughes,ScherieNicol,LisavonTrappandthemembersoftheBPRG.The
viewsandopinionsexpressedinthisreport,andanymistakes,shouldbeattributed
entirelytotheauthorandnootherindividualororganisation.
28
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