Establishment of the Parliamentary Budget Office

Contents Act Preparations for PBO establishment Work-plan development Research Current Legislative Fiscal oversight Defining Legislative oversight Proposal for PBO: Functions, Organisational design, Stakeholder engagement, Implementation plan, Budget International seminar 2

Act The Money Bills Amendment Procedure and Related Matters Act came into effect in April 2009 Section 15 of the Act established a Parliamentary Budget Office Objective of the PBO is to provide independent, objective and professional analysis and advice to Parliament on matters related to the budget and Money Bills 3

Section 15(2) outlines the core functions of the Budget Office as follows: reviews and analysis advice and analysis on proposed amendments reports tabled and adopted in a House with budgetary implications abreast of policy debates unfunded mandates 4

Preparations for PBO Establishment DBSA Research Study tours- Kenya, Germany, Sweden, Japan and the Republic of Korea secondment of MI Jahed 5

Work Plan Development Critical Factors: Interaction with Exec Authority, Political Task Team for guidance and advice Political Task Team: o House Chairpersons-Committees: NA & NCOP o Chairpersons of finance committees: NA & NCOP o Chairpersons of appropriations committees: NA & NCOP o Co-Chairpersons: Review of Rules Committee 6

Work Plan Development Interaction Senior Management and Specialists Engage external stakeholders Research, international best practices, lessons of experience, understanding SA needs, implementing Act 7

Research What do PBOs do? evidence-based budget analysis economic forecasts fiscal projections examine proposals impact of alternative spending policies 8

PBOs: International trends PBOs relatively recent phenomenon Growth in PBOs in line with more democracies In many countries there is growing trend of rising Executive capacity over Parliament Legislatives generally lack technical, analytical capacity and information Decline in Legislative oversight abilities Limited oversights often leads to poor fiscal outcomes PBOs have improved legislators ability to interpret, review and make better decisions on Budget process 9

Study Visits Germany, Sweden, Japan, South Korea, Kenya Budget offices across the globe are influenced by the roles played by their legislatures in the budget process: – Budget approving legislatures: cant amend and approves Executive budget(Sweden, UK) – Budget influencing legislatures: can amend, but can’t formulate budget(Italy, Netherlands) – Budget making legislatures: has legal & technical capacity to amend or reject Executive budget proposals and substitute its own( Japan, USA) 10

Study Visits The varying influence of legislatures in budgeting reflects differing authority to modify executive budget proposals. Countries reported that their legislatures have unrestricted powers to amend the budget. Legislatures however, can make amendments only if they do not change the overall fiscal position, while they may only decrease, not increase, proposed spending. Legislative influence is also affected by the time available to consider requests: a legislature that has limited time to examine budget proposals is at a disadvantage. Legislatures established a more regularised process with more time to consider budget requests e.g. Mexico had changes requiring presidents to present their budgets earlier than before. Committee structure is the heart of legislative influence, legislatures have found it essential to divide the task of reviewing the budget into committees. 11

Study Visits Staff establishment, Reporting line, Functions PBO: International Experience and Lessons No “one size fits all model” Roles influenced by: type of political system, Legislature’s formal powers i.e. to amend, political environment, technical capacity of Parliament 12

Lessons for SA PBO Budget transparency (Parliament & Civics) Enhance credibility of budget process Increase accountability Discipline in public spending Capacitate Parliament to exercise oversight functions 13

Legislative Fiscal Oversight In SA, oversight takes place in Committees with significant part occurring in the Parliament Legislative oversight takes the form of: – Questions to the President, Deputy President – Questions to the Ministers, Deputy Ministers – Debates – Motions – Committee reports flowing from interaction with departments and oversight visits 14

Fiscal Oversight However fiscal oversight is about: Government expenditure Government Borrowing Tax Regulation 15

Fiscal Infrastructure Oversight over Institutions: Parliamentary Committees National Treasury SARB SARS Now: PBO 16

Fiscal Reform Fiscal Reform: Reform of the budgeting system and Public service reform 2 imperatives for reform of budgeting system: budgeting system is key for attaining objectives and ability of Govt to employ limited resources with maximum effect Budget systems have 3 basic functions: fiscal discipline: “allocative efficiency” i.e. resource allocation in line with govt priorities: “delivery efficiency” i.e. which means the least-cost provision of public services 17

Fiscal Oversight Budgeting System most important component of public service delivery Key instrument for translating govt priorities, strategic plans into public goods and services Any policy or plan which does not consider budget constraints is unlikely to be successfully implemented Good Governance: budget captures & implements principles of accountability, transparency, democracy, participatory governance 18

Functions Economic StreamPublic Finance StreamPublic Policy Stream  Macroeconomic evaluation  Economic projections  Tax review and analysis  Fiscal Framework review and analysis  Provide advice of proposed amendments to the Fiscal Framework  Fiscal projections  Revenue studies  Microeconomic evaluations  Spending trends review and analysis  Spending projections  Baseline studies  Provide advice and analysis on proposed amendments to the DOR Bill and the Appropriation Bill  DOR Bill review and analysis  Appropriation Bill review and analysis  Monitor legislative proposals with financial implications - Bill costing  Monitor reports adopted by the Houses with financial implications  Monitor committee reports adopted by a House with financial implications  Policy analysis  Policy implementation analysis  Outcomes analysis vs spending trends  Monitor policy proposals with financial implications  Monitor policy debates and development in key expenditure and revenue areas  Policy Evaluation 19

Organogram Director Deputy Director: Economics 2 Economic Analysts Deputy Director: Public Finance 2 Public Finance Analysts Deputy Director: Public Policy 2 Policy Analysts Executive Assistant Office Manager 20

PBO reporting line Executive Authority PBO 21

Internal Stakeholders Organisational Design Human Resource: JD, market- related performance contracts IT: Web design Process mapping between LOD and PBO Legal SCM 22

External Stakeholders State FFC Statistics SA Reserve Bank Academic Institutions Wits University UCT UWC PALAMA Partners National TreasuryDPME NPC Economic Dev 23 Auditor General

Amendments to the Act The Money Act envisages that the Director will appoint the Deputy Directors/Senior Analysts and other support staff. This process is currently with the Standing Committee on Finance. Amendments to the Act will focus on the following:  Time frames and sequencing  Section 15 on the Parliamentary Budget Office  Textual amendments 24

Implementation Plan The following must be considered during the Budget Period Policy Statement Revised Fiscal Framework DOR Amendment Bill Adjustments Appropriation Bill 25

Budget 2012/ / / / /17 R'0000 Total Employee Remuneration Total Operational Budget Total Capital Expenditure Total

Way Forward Implementation be prioritised Office space Support and advise on Act amendments Presentations: Exec Auth, Pol Task Team, POA Continue stakeholder engagement International Seminar 27

Thank you 28