Policy, budgeting and oversight Legislatures in the Budget Process 2005 Budget Reform seminar Managing Complexity: From Fragmentation to Coordination 30 November, 1 and 2 December 2005 Maputo, Mozambique Alta Fölscher

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

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?

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

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)

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

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

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

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

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