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a projection of the revenues and expenses of the office, a statement of the estimated financial position at the beginning and end of the year, a description of the classes of outputs to be produced by the office, and an estimate of cash flows for the upcoming year. The HR, after considering the information provided, communicates to the Governor General, an estimate of costs to be incurred in respect of classes of outputs, an estimate of the other expenses to be incurred, and an estimate of the capital contribution to be made, and requests that these estimates be included as a vote in an appropriation bill for that year.

4.2. Budget process in Parliament

Failure by Parliament to enact the budget would represent a lack of confidence in the government and would be likely to precipitate a general election. Since the introduction of mixed member proportional government, most governing parties control only a minority of the HR. Therefore, to ensure that the introduced budget will be enacted, the governing parties consult each other to maintain sufficient political support for the budget to be presented.

Once the budget is submitted, Parliament has very few powers to affect the size and composition of the budget, which is determined almost exclusively by the government, as it has a financial veto over any amendment proposals. Even the timing of the brief parliamentary debate on the budget is determined by the government. As in other Westminster countries, procedures governing parliamentary budget process are not included in the law. Rather they are regulated mainly by the Standing Orders (SOs) of the House of Representatives (see Parliament, 2004).

4.2.1. The timetable for budget adoption and constraints on the budget debate in Parliament

The key steps governing the Parliament’s involvement in the pre-budget and budget debates are:

●The FEC must report to the House on its review of the budget policy statement within six weeks of the publication of that statement (SO 318).

●Debate on the budget policy statement and the FEC report take place shortly after the FEC report is tabled (SO 318). The debate provides the opportunity for all parties represented in Parliament to express their views on the parameters for the upcoming budget, prior to the government taking final detailed budget decisions.

●Following delivery of the budget, the estimates are referred to the FEC, which may examine a vote itself or refer it to any subject select committee for examination (SO 322).

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●Each select committee determines whether to recommend that the appropriations for a vote be accepted. All committees must report to the House on their examinations of the estimates within two months of the delivery of the budget (SO 323).

●The FEC must report to the House on the fiscal strategy report and the budget economic and fiscal update within two months of the delivery of the budget (SO 321).

●The debate on the third reading of the main Appropriation Bill must be completed within three months of the delivery of the budget (SO 325). The debate on the third reading may include reference to the content of the fiscal strategy report, the budget economic and fiscal update and the FEC report on these documents.

●When the bill has been read a third time, it is passed by the House and becomes law (the annual appropriation act) once it receives the assent of the Governor General.

Parliament’s Standing Orders also allow the government to select the day for the estimates debate. The Government determines which votes are available for debate on a particular day and how long in total is to be spent on the debate that day. In countries where the executive and legislature are separate, it would be inconceivable for the government to have such a strong agenda-setting role.

4.2.2. Provisional budgets

“Imprest supply” is the provision by Parliament of interim spending authority. Imprest supply authorises the Government to spend money or incur expenses or liabilities for any purpose up to a specified limit, so long as this is subsequently sanctioned by an appropriation act. An imprest supply act is passed just before the start of the financial year which applies (usually) for the first two months of the year prior to the passing of the main appropriation act. A second imprest supply act is passed with the appropriation act which can be invoked by Cabinet when increased appropriations are required for particular outputs. Cabinet approves the proposed amounts under the imprest supply act and agrees to submit these to Parliament in a supplementary estimates bill prior to the end of the financial year. In the case of a fiscally neutral transfer within a vote, Cabinet has delegated this requirement to the joint approval by the Minister of Finance and the vote minister. Every imprest supply act contains a provision requiring all public money spent and all expenses and liabilities incurred under its authority to be charged in the manner specified in an appropriation act for the same year.

Imprest supply acts are self-contained pieces of legislation. The PFA does not provide any guiding principles governing their use. Usually, the first

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imprest supply is for two months, since the budget is usually not adopted as law until after the beginning of the fiscal year (it must be passed by end September). Imprest supply can be extended if the budget is late or if there is likely to be an election.

4.2.3. Powers of amendment

Since February 1996 the HR Standing Orders allow committees to propose changes that would affect the size and allocation of votes. However the same regulations allow the government to exercise a financial veto over proposed changes. In particular, the House is prevented from passing a bill, amendment or motion which the government certifies would have more than a minor impact on: 1) the government’s fiscal aggregates and/or 2) the composition of the vote (SO 312). This is an extremely strong constraint, as Parliament is unable to change the totals or the composition of operating expenses, operating revenues, the operating balance, public debt and net worth. Once a financial veto has been exercised and the certificate issued, the veto cannot be overturned by the House. The proposal that is the subject of the veto cannot proceed to a vote in the House. However, the reasons for exercising the veto may be debated when the House debates the bill, amendment, or motion (SO 313).

4.2.4. Approval of resources

The Constitution Act 1986 states that “the HR shall not pass any Bill for the appropriation of the public money and for the imposition of any charge upon the public revenue unless the making of that appropriation or the imposition of that charge has been recommended to the HR by the Crown” (s. 21). Furthermore, the same act specifies that “it shall not be lawful for the Crown, except by or under an Act of Parliament, to levy a tax; or to raise a loan or to receive any money as a loan from any person; or to spend any public money” (s. 22). Therefore, bills relating to the public money must be submitted to the HR and be approved before the government uses public money. The revenues of Crown entities are outside the scope of the definition of public money and these may be retained and used under certain conditions (see below).

4.2.5. The nature, structure and duration of appropriations

The PFA requires that, for the Crown and offices of Parliament, all expenses and capital expenditures in any financial year be made under an appropriation act. Expenses and capital appropriations may be incurred only within the scope of the appropriation and for no other purpose. Separate appropriations are made for:

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●Output expenses for each class of outputs or groupings of outputs to be supplied by departments, offices of Parliament, or on behalf of the Crown. Some classes of outputs may be grouped so that one appropriation applies to the group as a whole, rather than to each class of outputs in the group. Appropriation by output class is the usual mode of appropriation for departments.

●Each category of benefits and other non-recoverable expenses. These are payments by a minister on behalf of the Crown, generally to individuals. Examples include superannuation, unemployment benefits and domestic purposes benefits.

●Each category of borrowing expenses. Examples include interest expenses, premiums, borrowing, and other finance costs.

●Each category of capital expenditure.

Each of these appropriations is on an accrual basis and therefore the executive is constrained from incurring obligations relating to expenses or capital expenditure, in addition to the subsequent constitutional constraint on the disbursement of public monies to settle these obligations.

Permanent legislative authority, representing expenses or payments authorised other than by an appropriation act, is used in certain circumstances, such as where a measure of constitutional independence from government control is desirable (for example, judges’ salaries), the continuity of supply for essential services or transactions such as debt servicing, or to provide a commitment to the settlement of liabilities, such as repayment of debt and payment of tax refunds.

4.2.6. Carryover of appropriations and borrowing of future appropriations

Although the authority to incur expenses or capital expenditure under the appropriation act usually lapses at the end of the financial year, multi-year appropriations are possible. An appropriation act may provide authority to incur expenses or capital expenditure for more than one financial year, up to a maximum of five financial years.

4.2.7. Public debt approval

The PFA specifies that, unless expressly authorised by an act, it is not lawful for the Crown to borrow or any person to lend money to the Crown. The law authorises the Minister of Finance, on behalf of the Crown, to borrow money if it is expedient in the public interest to do so. This power cannot be delegated. The PFA contains a number of other provisions relating to borrowing, including the Crown not being liable for debts of Crown entities, the appointment of borrowing agents, the terms and conditions of borrowing

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and securities. It also prohibits the Crown from lending money except by statute.

No guarantee or indemnity may be given by the Crown except by statute. However, the Minister of Finance may, if it appears to be necessary or expedient in the public interest to do so, give in writing a guarantee or indemnity to a person, organisation, or government. The minister decides on the terms and conditions. However, if the contingent liability of the Crown exceeds NZD 10 million, the PFA requires the Minister of Finance to lay before the HR a statement on the guarantee or indemnity that has been given, with the minister providing details as he/she considers appropriate.

Although borrowing is formally authorised by laws adopted by Parliament, the total level of public debt – direct and guaranteed – is not subject to a formal limit in NZ dollars. However, Parliament reviews and reports on the FSR each year, which includes projections of financial statements, including future levels of total debt. Debt levels are controlled indirectly by Parliament, by approving new borrowings and/or operating surpluses in the context of the annual budget.

4.2.8. Promulgation, veto and publication of the adopted budget

The Constitution Act 1986 requires that an appropriation bill passed by the HR becomes law when the Sovereign or the Governor General assents to it and signs it (s. 16). As with all laws, the adopted appropriations act is published on the legislative Internet site.

4.2.9. Supplementary budgets (rectifying laws)

The PFA lays out provisions for supplementary appropriations bills, which are used to change any information provided for the first appropriation act or to provide information that was not contained in the first appropriation act. Supplementary budgets are used for altering the mix of outputs being delivered, raising their levels, injecting new capital into departments, etc. They may be needed to reflect increases in the amount of appropriation required for non-discretionary payments such as welfare benefits or to provide appropriations for new policy initiatives. However, because of the need for responsible fiscal management, supplementary appropriations are generally limited to switching resources within the overall budgetary level set in the main estimates. With the adoption of the amendments to the PFA in 2004, there is greater flexibility to group output classes and less recourse to supplementary budgets for reallocations between outputs can be expected. There are no limits in the number of supplementary budgets that can be adopted, although typically there are two each fiscal year.