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4.5.3. Performance-related information

Although all countries have moved to a performance-oriented budget system to at least some extent,15 law does not specify the need to present performance-related information. In Sweden, the State Budget Act simply requires that the government reports to Parliament on the objectives for, and the results achieved, in various areas of operations. This generally worded article, adopted in 1996, merely confirmed results-oriented budget practices that were becoming increasingly widespread as from the late 1980s.

4.5.4. Other information required by law

In general, there are very few legal requirements, apart from in the debt area. In Sweden, under the Instrument of Government Act (s. 9:10) the government is not allowed to borrow or to assume other financial obligations without prior consent of Parliament. The State Budget Act includes more detailed rules for the making of commitments and the issuance of guarantees. The State Borrowing and Debt Management Act requires the government to prepare annual guidelines for debt management, consistent with debt objectives established by Parliament (Sweden National Debt Office, 2002).

No country imposes a legal requirement to report tax expenditures to Parliament as part of the annual budget. This is an important omission if expenditure ceilings are used for expenditure control purposes, as those limits may be breached indirectly should tax expenditures increase (for Sweden, see Roseveare, 2002, p. 10).

Similarly, the reporting of major risks in the budget is not obligatory in law. In practice, only two of the four countries – Finland and Norway – report identifiable risks when presenting the budget (OECD, 2003, Q.2.7.a). In Norway, the risks discussed are mainly macroeconomic risks – the risks associated with particular budget items (for example, entitlement benefits) are normally not identified.

4.6. Parliamentary committees and budget procedures in Parliament

Parliamentary committees play a critical role in the budget approval processes in all four countries, but the degree to which these processes are specified in law or parliamentary regulations varies considerably. Draft budgets are first considered by committees and then approved by the full legislatures. These steps are not embodied in law, except in Finland and Sweden. Specifically, the Finnish Constitution requires that the draft budget be considered by Parliament’s Finance Committee, which is one of four standing committees named in the Constitution (s. 35). Sweden’s Parliament Act provides the Committee on Finance with wide-ranging competencies in money, credit, debt and public finance, including examination of the

IV. FOUR NORDIC COUNTRIES

estimates of State revenue, budget co-ordination, government accounting, audit and administrative efficiency (s. 4.6.2).16 In both Denmark and Finland, the constitution specifies that appropriation acts cannot be delayed between readings. In Norway, there is a lack of any constitutional provisions for parliamentary budget approval procedures.

In all countries, parliamentary regulations or law (Sweden only) supplement, or fill the void of, constitutional provisions regarding parliamentary committees. In Norway, parliamentary Rules of Procedure (Norway Parliament, 2004) provide the basis for specifying the budget responsibilities of parliamentary committees. In particular, the responsibilities of the Standing Committee on Finance and Economic Affairs and procedures for adopting the budget are extensively laid out. Its competencies include examination of matters relating to economic, monetary and fiscal policies, inclusive of taxes and duties, national insurance revenues, State guarantees, the fiscal budget and the national budget (s. 12.2). The fiscal budget is received by Parliament in early October. Reflecting the top-down budgeting process introduced in 1997, “no later than November 20, the Standing Committee on Finance and Economic Affairs shall recommend budget limits for each ministry’s spending programmes, as well as propose recommendations on taxes, duties and block grants to municipalities” (s. 19). Parliament shall, within one week (i.e. by 27 November), make a resolution on binding budget limits for the various aggregates. Thereafter, the other standing committees examine spending programmes and may propose amendments. The Standing Orders are clear: recommendations for changes of chapters or items in each separate spending programme are allowed, provided they do not deviate from the limits decided by Parliament (limits are established for 21 spending areas). This second stage – beginning in late November – must be completed by 15 December (s. 19). Budget resolutions made by Parliament at this stage are final. Comparable rules are laid down in Sweden’s Parliament Act. In contrast, in Denmark the role of the Finance Committee is not specified in the Standing Orders of Parliament (Denmark Parliament, 2001). These Orders formally delegate this task to the Standing Orders Committee.

Each Nordic country has a tradition of close collaboration and working relationships between parliamentary committees and the offices of the executive branch. Ministries of finance generally provide the necessary advice to parliamentary committees in a professional manner. In Norway, Parliament has revitalised its own control functions, including by introducing public hearings to parliamentary committees, extending question time in plenary sessions, and expanding the audit function (Christensen et al., 2002). In Sweden, Parliament’s general investigating staff, which amounts to 35, supports the parties and Members of Parliament in budgetary matters.

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4.7. Parliamentary amendment powers, coalition agreements, two-stage budgeting and fiscal rules

Finland’s Constitution is the only one of the four constitutions that states explicitly that Parliament has authority to propose amendments to the draft budget. In contrast to, say, the constitutions of France and Spain, in none of the four Nordic countries does the law limit the extent of parliamentary amendments to the draft budget. In practice, Parliaments take advantage of these powers and regularly modify the budget proposed by the executive. However, in Denmark and Finland, agreements between the political parties establish non-legally binding guidelines on the direction of change of major fiscal aggregates (for Denmark, see Blöndal et al., 2004; for Finland, see Blöndal et al., 2002). In Finland, not only may the Finance Committee propose amendments to the draft budget, but also, during the plenary session, members may propose amendments. When this happens, the budget bill is returned to the Finance Committee, which may concur or propose further amendments (Rules of Parliament, s. 59).

In Sweden, although in principle Parliament has unlimited powers to amend the government’s proposal, in practice there are strong restrictions. Decision making in Parliament follows a typical top-down procedure. When Parliament prepares the budget in the autumn (September-November period) there is already an overall restriction – the State expenditure ceiling decided earlier in the spring. After preparation and discussion in the Committee on Finance, Parliament first decides on the expenditure ceiling for the year t+3. Next, it fixes the amount of money to be allocated to each of the 27 expenditure areas for the upcoming fiscal year. Parliament also makes an estimate of the State revenues. These issues are settled in one vote in the chamber. After this decision, which is usually made about 20 November, the specialised committees discuss the detailed allocation of funds between the appropriations within each expenditure area. At this stage they are not allowed to exceed the limits decided by Parliament, but they may reallocate funds between appropriations within the respective expenditure area. When each committee has reached an agreement a proposal is submitted to the chamber where the detailed allocation of funds to all the appropriations within one expenditure area is settled in one vote. The final decisions are usually taken in mid-December. This top-down procedure and the voting procedure may increase the possibilities of a strong minority government getting the draft budget approved with few changes. Furthermore, since 1994 the minority government has co-operated with one or two political parties and negotiated the content of the draft budget before it has been submitted to Parliament in order to ensure a reliable majority. Consequently in recent years Parliament has approved few changes to the submitted draft budget.

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Norway also usually has coalition governments. However, fiscal management objectives are quite different from the other three countries, given the important place of oil revenues in the economy. The government’s main challenge is to ensure that fiscal policy is sustainable in the long run, given a starting position of very large overall government surpluses (15% of GDP in 2000) and the long-term need to finance future obligations in relation to old age and disability pensions (Norway Government, 2001). The main issue is the speed and time profile of spending oil revenues. In this context, the government has established a fiscal policy rule of allowing the non-oil budget deficit to equal, over time, the projected long-run real return on the Government Petroleum Fund. During 2002-04, the use of oil money exceeded the expected real return to the Fund (OECD, 2004). However, the guidelines allow year to year deviations to smooth market-based swings.

In summary, the government’s supporting parties in Parliament have an incentive to vote in favour of the government’s proposed budget – it would be politically too costly to leave the coalition or the co-operation between parties. In the case of Finland, the president could veto the adopted budget. However, should Parliament re-adopt the budget law without material alteration, it enters into force without presidential confirmation (Constitution, s. 77).

4.8. Supplementary budgets

The constitutions of three of the four countries authorise the government to propose a supplementary budget. In Finland, a supplementary budget requires justification. The Constitution also allows any Member of Parliament “to submit budgetary motions for budget amendment immediately linked to the supplementary budget” (Art. 86). In Sweden, “the Riksdag may revise its revenue estimates for the current budget year, alter appropriations already approved and determine new appropriations in a supplementary budget” (Instrument of Government Act, Art. 9.6). The Swedish government regularly submits supplementary budgets for the current fiscal year in the spring fiscal policy bill in April and in the budget bill in September. Neither the budget bill nor the spring bill are adopted as laws – they are simply decisions.

In Denmark, a practice has developed whereby the Finance Committee of Parliament approves government requests to modify budgetary appropriations during the course of the year. At the end of the year, all approved requests are cumulated into a supplementary appropriation bill. On a strictly legal basis, it is questionable whether this practice is constitutional, since the Constitution specifies that “no expenditure shall be defrayed unless provided for by a finance act passed by the Folketing or by a supplementary appropriation act” [s. 46(2)]. In Norway, Parliament’s power to adopt supplementary budgets is implicit, not explicit – the Constitution simply specifies that “it devolves