Policy, budgeting and oversight Legislatures in the Budget Process

1. Policy, budgeting and oversightLegislatures in the Budget Process 2005 Budget Reform seminarManaging Complexity: From Fragmentation to Coordination30 November, 1 and 2 December 2005Maputo, Mozambique Alta Fölscher

2. Policy, budgeting and oversight • In most, all CABRI countries parliament affects budget management • Sometimes parliament too active in deleterious way • Sometimes not active enough • Vertical and horizontal accountability • Necessary part of public finance management system • Long history of parliamentary practice – type and scope of role shifts over time • Presentation aimed at stimulating further discussion • On relationship between executive and parliament • What central budget offices can do through changes to institutional arrangements to optimise parliamentary role

3. Where do legislatures fit in? • What is role of legislature? • legislating and policy making • representing citizens • overseeing executive • Rivalry or cooperation • Different systems result in different arrangements • Breaking or stabilising public finances • Incentives • Institutional arrangements count • Making budget policy; restriction and control; or policy accountability and performance • Representative democracy or direct? • Civil society engage through parliament?

4. History • Countries inherited parliamentary practices established over centuries • Magna Carta 1215 • Further concessions won and lost over time • Budgets emerged in 19th Century (US as late as 1921) • Early systems no comprehensive document • Increases in spending, bureaucratisation of government, aggregation • While on surface empowering parliaments, disempowered • Information asymmetry • Institutional issues • Preparing budget gradually became to be seen as executive’s responsibility (particularly parliamentary systems) • Some legislatures’ practices contribute to perception of fiscal risk

5. New roles for legislature • Improved information flows from executive • New budget committees (Zambia, Uganda and South Africa) • Building independent capacity (Uganda) • Utilising powers to amend; questioning executive decisions on funding (Kenya) • Channeling discontent with fiscal decisions (Ghana)

6. What threats? • Legislature duplicate or take over role of executive: deadlock • Legislature decisions lead to worse budgetary outcomes • 2nd bite at the funding apple • Loss of predictability of policy and fund flows in medium term framework • Legislature budget process at odds with public finance management vision • Legislature vulnerable to interest group lobbying

7. Separating roles and responsibilities towards budget objectives • Need to balance right to approve with oversight with sound management of public finances • Weak powers lead to weak legislatures, poor accountability and break-down of ‘rule of law’ in public finance • Unfettered powers may tip balance towards padding budgets • Ex post accountability arrangements insufficient • No bite, legitimacy and voice of parliament • Too little too late • Greater role means that legislature must either be involved in government budgeting process, or formulate own budget • Trade-offs between involvement in different stages of budget process

8. Mechanisms to manage role of legislature • No new spending / taxes • Substantive limits to amendments • Pay as you go • Fiscal rules • Selective limits / changes • Procedural limitations • Executive veto (full or partial) • Timing and information sharing • Party political based procedures • Voting rules and legislative processes and rules

9. Institutional arrangements for effective legislatures • Legal framework • Cooperative arrangements • Political space • Analytical Capacity • Legislative process and structure • Legislative budgeting rules • Information

10. What opportunities? • Partnership and changing role of the centre • Medium term frameworks • Influence, negotiation and ‘powers in the last resort’ • Performance orientation • Setting, approving performance targets • Reviewing performance