I.COMPARATIVE LAW, CONSTITUTIONS, POLITICS AND BUDGET SYSTEMS

4.8. Are laws “green lights” or “red lights”?

Laws differ in how they regulate budgetary action. Some countries may be more prone to adopting permissive budget-related laws, which simply lay out desirable budgetary principles. Voluntary compliance with “green light” provisions of laws is expected. There are few or no penalties for not respecting the “good” budget principles. For example, many countries’ legal frameworks permit, but do not require, a supplementary budget to be presented to the legislature during the fiscal year, should the need arise. There are no penalties should a government not present a supplementary budget in a given year. Nor are there penalties for adopting four supplementary budgets in the same year.

In contrast, some countries may require a formal mid-term budget review to be conducted every year. When embodied in law, there is a compelling requirement on executives to submit such a review by a given date. No exceptions are allowed (except perhaps if the government falls at the time of the mid-term review). Some laws may also prohibit certain actions – dictate what the government or legislature cannot do. For example, a quantitative fiscal rule may prohibit the deficit exceeding x% of GDP. These two forms of “red light” laws may be more prevalent in some countries than others. In Section 5.4 below, it is proposed that countries with strong legislatures may use law more often than in countries with weak separation between the executive and the legislature. Strong legislatures adopt both “green light” and “red light” laws to regulate budget processes. In contrast to permissive law, restrictive law requires the detailed specification of sanctions in law. In countries where many laws with “red light” provisions are adopted for budget processes, density of budget-related law is likely to be greater.

5. Forms of government and budget system laws

This section highlights the extent to which past and present forms of government affect the source of laws in general and budget system laws in particular. It highlights the use of the law for strengthening budget powers. In regimes where the separation of powers is strong, legislatures use the law to strengthen their powers in the budget processes. Conversely, in countries where there is a weak separation of powers, the executive also uses the law – but to strengthen its own budgetary powers.

In major OECD countries, three main groupings of governments may be distinguished: 1) constitutional or parliamentary monarchies; 2) presidential and semi-presidential governments; and 3) parliamentary republics.

5.1. Constitutional or parliamentary monarchies

A key characteristic of absolute monarchies was the lack of separation of powers: the monarch was the holder of all State functions. Before democracy,

I.COMPARATIVE LAW, CONSTITUTIONS, POLITICS AND BUDGET SYSTEMS

the monarch convoked assemblies of nobility, clergy and other representatives. In some cases, such assemblies adopted the “budget” of the monarch. The specification of standards in law, which had previously been reserved to the monarch or a non-autonomous judicial body, was increasingly assigned to Parliaments. However, the degree of independence of Parliaments varied. Within Europe, two models evolved.

In France and in German-speaking countries, judicial organs developed under the auspices of the absolute ruler, executive power grew, as did the public administration of the State. Over time, the power of the monarch diminished. Some budget-related organisations, notably courts of accounts, date from an early emphasis on a semi-autonomous judiciary. Additionally, the notion of the State, a written constitution and a system of public and administrative law developed. These influences continue to impact on the primacy given to the law in these countries.

In contrast, in Britain, parliamentary assemblies became increasingly important and the monarch’s role gradually diminished until it became, as today, a purely ceremonial one. The form of government evolved into a “limited monarchy”, where the Crown fulfilled state functions on the basis of national policies decided according to Parliaments’ legislative powers. However, there remained some fields in which the Crown retained the royal prerogative. In 1714, a special bond between the parliamentary assembly and the executive organs developed, notably that of ministerial responsibility before Parliament. These features, especially the prerogative powers of the Crown, which today are exercised by Cabinet and H.M. Treasury, continue to play important roles in the budget framework in countries that have inherited the “Westminster” governance model. In the United Kingdom in particular, the necessity for statute law to govern budget processes is played down. When statute laws on budget-related issues are adopted, the impact of such laws is to maintain the strong inherited prerogative powers enjoyed by the government. This, combined with the first-past-the-post electoral system, allows the executive to dominate the legislature. The Prime Minister and his/her Cabinet not only controls the legislative agenda, but also exercises prerogative powers.16

Some European countries (e.g. Denmark, Netherlands, Norway, Spain, and Sweden) as well as Japan have also retained a parliamentary monarchy form of government. In all cases except Spain, the role of the monarch has been reduced to one of representation. However, in most of these countries, electoral laws are different, resulting in multi-party political systems and the formation of coalition governments. Also, Cabinet ministers may be chosen from outside political parties, e.g. high-level bureaucrats. Thus, parliamentary and executive powers in these countries are generally more balanced than in countries of the Westminster tradition.