Parliamentary Consideration of the Budget

Transcription

1 Parliamentary Consideration of the Budget Kerry Jacobs Professor of Accounting College Business and Economics Australian National University Associate Member La Trobe PSGARC La Trobe University/ World Bank Institute/ Commonwealth Parliamentary Association Seminar Beech Association Seminar Beechworth worth Australia 2007

2 Historical Public Sector Accountability Conflict between Crown and Parliament No taxation without consent Parliamentary control over funds Control over inputs (follow the money) Supply procedure and control cycle Parliamentary appropriation acts Independent Controller & Auditor

3 History 1341 King Edward III Citizens should not be charged not grieved to make common aid or sustain charge without asset of Parliament Parliament granted role in policymaking in return for funding to conduct wars George Bush in the USA

4 Resulting Principles of Public Sector Control Annularity money is appropriated for only one year and any unspent money had to be paid back to the centre Centralisation of government funds all funds are held by a central Treasury rather than funds being held by individual officers or departments Strict input controls

5 Historical control & accountability Democracy Consent of the elite to be taxed Voice not just exit (revolution) Strict control over the cash Reduce misappropriation Less scope for kingdom building / war Clear what is going on Strong parliamentary control If you are bad we take away your money!! (& toys) Resources not used as well as could be Other abuses of position Accountability without governance

6 Steps in Parliamentary Oversight of Budgets Focus on these two Preparation of Draft Budget Legislative Phase Follow-up & performance measurement Implementation of the Budget Rendering of the accounts and control and year end

7 Preparation of draft budget Generally dominated by government / executive Rules and criteria Maastricht Fiscal responsibility act, iron rule (intergenerational) Constitution limits on borrowing and deficits Informal contacts gain support for budget Pre budget consultation with Minister of Finance German legislative rules All revenues and expenses included in single budget Revenues not earmarked for particular expenditure Amount and source of estimated revenue Purpose for expenditure and justification of amounts

8 Issues What should the role of parliament be in the development of the budget? Good and effective use of resources Interference in government s s policy Should the head of state (president/king) have any practical or constitutional role in the budget process? To what extent should a budget be limited by pre-existing existing legislative rules? One party binding the next?

9 Legislative Phase Appropriation Bills Separation of powers Executive propose and legislature approve (not) Some jurisdictions the executive both proposes and approves budget consequence... Can parliament amendment the budgets Few and minor in the UK and Australia tantamount to a vote of no-confidence Presidential systems tend to have greater amendment power combined with right of veto

10 Types of Appropriation Main / Annual Ongoing vs. new (bill 1 and 2) Supplementary / Additional (bill 3 and 4) Other special appropriations Parliamentary departments Judiciary Military Special purpose (Regional telecommunications)

11 Appropriation or Supply An appropriation or supply bill is a legislative motion which authorises the government to spend money. In most democracies, approval of the legislature is necessary for r the government to spend money. In a parliamentary system, the defeat of an appropriation bill in a parliamentary vote generally necessitates a resignation of a government or the a general election. Famous defeat of a supply bill in Australian in 1975, Senate refused to approve a package of appropriation and loan bills, Prompting then-governor General Sir John Kerr to dismiss then-prime Minister Gough Whitlam and call a double dissolution, Appointing Malcolm Fraser as caretaker Prime Minister until the next election (where the Fraser government was elected)

12 Structure and Rules A comprehensive budget- all revenue & expenditure Pre-budget report Long-term fiscal & economic objectives & projections Reports Monthly - implementation & variances Midyear - implementation & forecasts Year end - audited by Auditor General (within 6 mths) Pre-election election general state of gvt finances Long-term sustainability of current gvt policies Should expenses be matched against a specific revenue/tax income stream and reduced if the tax drops?

13 OECD Best Practices for Budget Documentation An appropriation or supply bill is a legislative motion which authorises the government to spend money. In most democracies, approval of the legislature is necessary for r the government to spend money. In a parliamentary system, the defeat of an appropriation bill in a parliamentary vote generally necessitates a resignation of a government or the a general election. Famous defeat of a supply bill in Australian in 1975, Senate refused to approve a package of appropriation and loan bills, Prompting then-governor General Sir John Kerr to dismiss then-prime Minister Gough Whitlam and call a double dissolution, Appointing Malcolm Fraser as caretaker Prime Minister until the next election (where the Fraser government was elected)

14 International Practice Krafchik & Wehner (2004) International Budget Project Some parliaments have no role Some any modification is a rejection of the budget (failure of supply) s Most have power of minor modification

15 Effective Budget Committee May reduce and increase expenditure and revenue May reduce but not increase expenditure May reduce expenditure but only increase it with permission of government May reduce and increase expenditure if alternative provisions are made elsewhere No rights to make changes

16 How is the budget debated? Plenary whole house Special budget committee Existing committee(s) Public Accounts Committee Specialist subject area committees Time allocated for debate Ability of individual MPs to raise issues and challenge budget Budgets in a multi-party (or non-party) environment

17 Effective Budget Committee For legislative powers to change budgets Effective oversight requires ability to change Way to avoid rejecting budget (supply issues) Against legislative power to change budgets Generates an inordinate about of suggested changes Clear point scoring and political games Undermines fiscal prudence budget blow-outs outs

18 For and against amendments For legislative powers to change budgets Effective oversight requires ability to change Way to avoid rejecting budget (supply issues) Against legislative power to change budgets Generates an inordinate about of suggested changes Clear point scoring and political games Undermines fiscal prudence budget blow-outs outs

19 Members rights to amend budgets? May reduce and increase expenditure and revenue May reduce but not increase expenditure May reduce expenditure but only increase it with permission of government May reduce and increase expenditure if alternative provisions are made elsewhere No rights to make changes

20 Issues in Parliamentary debate budget Should the parliament have the ability to make amendments to budgets? Minor changes only Significant and major changes Changes but only from a Gvt dominated committee Should there be a particular role for committees in the budgetary process Should they have ability to call witnesses and examine information? on? How can independent research capacity be provided to support the budgetary process? What is a reasonable time-frame for budgetary debate? How can Parliaments ability to scrutinise budget be protected?

21 United Kingdom Budget in the hands of the executive Parliament plays no part in the preparation of budgets and only limited role in scrutinising their implementation through the PAC and AG Only the final results presented to Parliament Introduction of 2 year spending reviews made little different to traditional secrecy

22 United Kingdom Amendments only at instigation of Government Members move to reduce revenue or expenditure Amendment in Committee and floor of the House 3 month committee stage Can last several weeks in House of Commons Research capacity Standing Committee on Finance no researchers Treasury Select committee some and employ advisors Select Committee on Public Accounts AOs research Interaction Public Accounts NAO reports, other select committees lack info

23 Australia Federal Model Enhancing civil society an democratising Canadian citizen participation in budget debate ADB project in Indonesia, Marshall Islands and Pakistan Public dissemination and consultation of budget Training manuals and programmes Civil society organisations (small and large) Identified budget rules not followed Public budget forums National level conference Power of budget at a tool of communication Bottom-up directly impact budget process

24 United States Budget from President (executive) Elaborate ex ante review process Various financial committees decide Fiscal parameters, tax policy, allocation of funds Impact of Congress on allocations is substantial No dedicated committee for consideration of audit Office of Budget US Department of Commerce

25 United States Two types of legislation are used to spend money Act (mandatory program) and an annual appropriation (discretionary ry programs ) A discretionary programs Appropriation bills generally done on an annual basis (multi-year occasionally). Funds appropriated must be spent by the end of the fiscal year of the appropriation Military appropriations cannot be for more than two years at a time t New appropriation required for continued spending to occur (or continuing resolution) Anti-Deficiency Act - spending for which there is no current appropriation is void Mandatory program Enacted by a law & permitted to spend funds until the program expires. No additional appropriation - authority for spending is included in the authorisation legislation Social security benefits an example of a "mandatory" program All bills relating to revenue (tax) originate in the House of Representatives, Consistent with the Westminster system - all money bills originate from the lower house. Senate may propose or concur with Amendments as on other Bills In practice the Senate and House proceed separately, with each body b drafting and considering their own bills. The Senate amends its version of a particular appropriations bill l to the House-passed version in order to send the bill to a conference committee prior r to the bill becoming law. Therefore the majority of appropriations bills are House introduced legislation

26 Budgets beyond Parliament Public Participation Enhancing civil society an democratising Canadian citizen participation in budget debate ADB project in Indonesia, Marshall Islands and Pakistan Public dissemination and consultation of budget Training manuals and programmes Civil society organisations (small and large) Identified budget rules not followed Public budget forums National level conference Power of budget at a tool of communication Bottom-up directly impact budget process

27 Questions Where should the review of budget be located? Has the ability of Parliaments to review budget been reduced? How can MPs be better resourced and supported to review budget? Should MPs / Parliament be able to modify budget? Should the public be involved in the review of budget or is that a sole responsibility of Parliament?

28 References and Readings Krafchik, W. & Wehner, J. (1998) The role of Parliament in the Budget B Process, South African Journal of Economics, 66(4): Stapenhurst, R. (2004) The legislature and the Budget, World Bank Institute, Washington. Wehner, J. (2004) Back from the Sidelines? Redefining the Contribution of Legislatures to the Budget Cycle, World Bank Institute, Washington. Talbot, C. and Johnson, C. (2003) Budget Setting and Financial Scrutiny: S Experiences in Devolved / Regional Governments Open Accessible and Accountable to the People of Scotland, Public Futures F1/03/3/1a,, London. Ahmad, R.& Weiser, E.T. (2006) Fostering Public Participation in Budget- Making: Case studies from Indonesia, Marshall Islands and Pakistan, an, The Asian Development Bank, The Asian Foundation, Philippines