The Role of the Legislature in the Budget Process

1. The Role of the Legislaturein the Budget Process Santiago de Chile, 26 January 2005 Jón R. Blöndal Deputy Head of Division Budgeting and Management Division

2. Agenda The wide variety of roles for the legislature No aspect of the budget process varies more among countries No direct link between role of legislature and fiscal outcomes Typical parliamentary treatment of the budget

3. The OECDand Budgeting

4. Senior Budget Officials(SBO) Founded in 1980 Consists of the budget directors from Member countries “One of the most senior bodies within the OECD.” Forum of senior officials Research and analysis

5. SBO Subsidiary Networks

6. SBO Regional Networks

7. Research and Analysis • Holistic reviews of individual Member countries’ budgeting systems • Comparative analysis of specific budgetary issues across Member countries • Comprehensive database of budgeting practices in Member countries

8. The Role of the Legislaturein the Budget Process

9. The Role of the Legislature Varies Widely... LESSER --------------------------------------------------------------------------GREATER UK USA Canada Australia Ireland New Zealand

10. The Role of the Legislature Depends On... Constitutional Provisions Political Traditions and Climate Institutional Capacity

11. Constitutional Role • Presidential vs. Parliamentary System • Specific Constitutional Restrictions • No Changes Permitted • Government Must Approve Any Changes (Finance Minister’s Veto) • Can Only Decrease Expenditures • No Net Increase in Expenditures (i.e. can reallocate) • Balanced Budget Amendments

12. Political Traditions and Climate • Same Political Party in Control of executive and legislature(Presidential systems) • Vote on the Budget is Automatically a Vote of Confidence in the Government • Minority Governments • Coalition Governments

13. Institutional Capacity • “To give effect to the power” • Specialised staff of budget committees • Independent budget research organisations • Specialised funding for political parties to hire budget experts

14. Parliamentary Treatment of the Budget • Timeframe • Top-Down Approach • Pre-Budget Reports • Role of Committees • Fiscal Reports Submitted by Executive Branch • Transparency and Role of Civil Society

15. Timeframe • Budget is Approved Prior to the Start of the Fiscal Year • Parliament Should Have Sufficient Time to Scrutinise the Budget -- 3 months • Fiscal Year = Calendar Year • Half of the Legislature’s Deliberations

16. Top-Down Approach • Approving budget aggregates prior to approving individual appropriations • Demonstrating fiscal responsibility • “Focus on the forest, not the trees”

17. Pre-Budget Reports • Presented to the legislature several months prior to the budget • Links with top-down approach --- focus on aggregates and the linkages with the economic impacts • Serves to create appropriate expectations for the budget

18. Role of Committees • Key importance • Most of the legislature’s scrutiny of the budget takes place in committees (supported by specialised staff) • Division of labour between the budget committee and the sectoral committees • Committee dynamics • Open to the public • Appearance of ministers • Appearance of officials • Appearance of experts • Representatives of Civil Society Appear

19. Fiscal Reports Submitted by the Executive • The Budget • Pre-Budget Report • Monthly Report • Mid-Year Report • Year-End Report • Long-Term Report • Pre-Election Report

20. For further information • www.oecd.org/gov/budget • OECD Journal on Budgeting • jon.blondal@oecd.org