CHALLENGES IN ESTABLISHING FISCAL POLICY SURVEILANCE The case of the Hungarian Fiscal Council Ljubljana, 8 July, 2015 | Balázs Romhányi

Content Legal mandate Staffing Information Communication

Legal mandate Fiscal discipline – Monitoring the fiscal rules – No direct power (like a SAO) Transparency – Impartial analysis of the state of the economy likely fiscal effects of policy decisions – Clients: Parliament Public at large Nothing normative, only positive

Legal mandate „Quantitative” – Macro forecast – Baseline scenario – Fiscal impact assessment of the budget law and bills affecting mandatory items (upon submission and before final vote) – (For discretionary items fiscal impact assessment is only optional) „Qualitative” – Answers questions of the President of the Republic, ombudsmen, SAO, central bank, parliamentary committees – Methodological proposals for budget planning and fiscal impact assessment – Legal proposals to foster fiscal discipline and transparency – Gives its opinion about changes of the accounting rules

„Warming up” May 2009: establishment of the secretariat August 2009: medium term macro forecast and fiscal risks November 2009: macro model and fiscal baseline for 2010 March: 2010: medium term macro-fiscal baseline June 2010: first fiscal impact assessments November 2010: assessment of the budget bill (December 2010: Abolishment of the secretariat)

Why to have a „big” staff 1.Fiscal discipline is not possible without a medium term framework 2.Any well functioning fiscal rule is embedded in a MTBF 3.Only looking at the annual budget law is less than half of the story Mandatory budget items are much more important for the medium term fiscal space 4.Mandatory legislation (and budget amendments) can happen (and happens) almost any time of the year 5.The parliament will not – refuse to debate about any proposal just for the lack of a fiscal impact assessment – wait several weeks for the fiscal impact assessment of the FC 6.For a fiscal impact assessment one needs – a fresh baseline – sometimes ad hoc data to quantify direct and indirect effects – micro level panel-data to assess behavioral effects – a (sometimes new) methodology to assess second round effects

Staffing of the secretariat AreaSenior staffOther Macro14 Micro14 Taxes14 Entitlement programs12 Discretionary items and Loc.Gov.13 Finance, debt, state property12 Statistics and database12 Administration37 Directors (gen., macro, fiscal)30 Total1328

Staffing of the secretariat Total staff: 30 economists + 10 administrative By size a FC would be a ministerial department Staff has to be paid by its (very high) quality, not by position Salaries: Ministry < FC ≈ Debt Management Agency < Central Bank economist in the FC ≈ head of division in the Ministry

Information In theory: – Full access to information („level playing field” with MoF) In practice: – Lack of coherent database – Many data are dirty – Ministry staff is reluctant to disclose dirty data – Signed agreements for cooperation Cement dries fast!

Communication Government – ready to enter necessary conflicts – avoided unnecessary conflicts (e.g. based on misunderstanding) – No surprises – behind the scenes communication only about facts Parliament: – mainly with the budget committee – one-day course on budgeting for all deputies Media – Direct and regular contact with the professional media – Documents have to be (more) readable Public – web page (with all documents) – no Facebook, Twitter, etc.

Main challenges for fiscal surveillance Professional challenges – Mandatory legislation is more important than the budget – The FC has to be „on line”, part of the legislative process – Timeliness is not possible without technology and adequate staff – Warming up phase (huge workload) Lack of ready made database and methodology Budgeting is new for most FC staff Compliance – Communication with the administration Political challenges – Rich Hungarian experience – for another conference

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