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

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

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The Role of the Legislature in the Budget Process

The Role of the Legislature Varies Widely... LESSER GREATER UKUSA Canada Australia Ireland New Zealand

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

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

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

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

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

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

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

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

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

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

For further information OECD Journal on Budgeting