II.COMPARISONS OF OECD COUNTRY LEGAL FRAMEWORKS FOR BUDGET SYSTEMS

already been implemented. In the “laws are required” countries, modifications to law are made early in the reform process. In contrast, in the “laws may not be necessary” countries, laws may be changed late in the change process, or not at all. Two examples illustrate this contrast. In contemplating budget reform in France towards the end of the 1990s, it was quickly realised that changes in the 1959 Budget Law were needed (France National Assembly, 1999). It took about three years from the time major reform was studied intensively until the adoption of the new Organic Budget Law in August 2001. To ensure the success of the new performance-oriented budgeting system, the law is being implemented progressively over a five-year period (2001-06). In contrast, the United Kingdom government issued a discussion paper on changing the budget and accounting system in 1995.4 Prior to the adoption of the new law – the Government Resources and Accounts Act in 2000 – government ministries had already begun piloting the new budget and accounting system. Full implementation of the system took place on 1st April 2001 (H.M. Treasury, 2001), only a few months after the adoption of the act.

2.3. Elaborating on the budget powers of the legislature vis-à-vis the executive

A principal purpose of budget system laws is to clarify the powers of the legislature to approve and follow up on the annual budget. This latter power includes the extent to which the legislature can intervene in budget execution, including expenditure control and accounting. In this context, the United States and the United Kingdom contrast strongly. In the United States there is a keen awareness that any budget reforms have to be fully consistent with the Constitution. Any constitutional questions are likely to be framed in terms of the separation of the legislative and executive branches. Legislators in that country know that the Supreme Court is likely to support them if it can be construed that the executive – the presidency – is acting as a law maker. Such considerations are less relevant in the United Kingdom where the equivalent of the United States Supreme Court is lodged in the House of Lords. Although the House of Lords has, in principle, the power to judge budget-related cases like any other administrative cases, in practice the House of Lords does not constrain the strong powers of the executive in proposed budget-related laws. Unlike in most OECD countries, the highest court of the United Kingdom cannot refer to a written constitution.

In the 1960s and early 1970s, when the president of the United States was frequently cancelling or postponing approved expenditures, it was perceived that the executive was encroaching on the legislator’s right to specify expenditure policies in annual appropriation acts. This led to the adoption of the Congressional Budget and Impoundment Control Act 1974, which, inter alia, created a non-partisan Congressional Budget Office with some

II. COMPARISONS OF OECD COUNTRY LEGAL FRAMEWORKS FOR BUDGET SYSTEMS

250 staff. The act reduced the executive’s capacity to cut expenditures to levels below those approved by Congress, thereby reducing the “excessive” budgetary powers perceived to be held by the executive. Budget reform legislation was used in the United States to enhance the already strong powers of the legislature (the United States could be placed primarily in the third quadrant of Figure II.2). Unlike the United Kingdom, which does not have a single Budget Committee in its Parliament to propose far-reaching amendments to the government’s proposed budget, the United States House of Representatives and Senate have some 40 committees involved in the budget process (see United States country case study).

Examples of the differing dominant factors that provoke countries to introduce budget reform by adopting a law are shown in Table II.2, which shows that:

●Piecemeal budget reforms have been implemented in the laws of Germany (medium-term budget framework), and are beginning in Spain (mediumterm framework and a performance-based system). Comprehensive budget

reforms – based on law – are under way in France, at least for the State sector (which covers only around 40% of general activity).5

●Comprehensive budget reforms in New Zealand and the United Kingdom were in part supported by new laws (more so in New Zealand than the United Kingdom), adopted late in the reform cycle. In some budget-related laws, considerable authority has been delegated to the executive (e.g. the United Kingdom Treasury decides on the content of a code for fiscal stability which it presents to the House of Commons).

●Some budget reforms in Finland and Sweden do not necessarily need a law, reflecting delegation of authority and/or strong co-operation between the legislature and the government.

●A special Government Performance and Results Act was adopted in the United States to introduce a performance orientation to the federal budget. The budget appropriations structure is firmly controlled by the legislature – congressional committees are free to add projects in the annual appropriations laws (this would be inconceivable in Westminster countries).

In “constitutional” countries, laws have been used to enhance the authority of the legislature. Three examples are provided. In Finland, the new Constitution adopted in 1999 slightly limited the executive’s powers concerning delegated legislation (Art. 80). In France, when the new “Financial Constitution” was adopted in 2001, some of the legislature’s powers that were removed in 1958, when the Constitution was adopted, were restored. In 2003, Korea amended the National Assembly Act to establish a special standing Budget and Settlement Committee and a National Budget Office to strengthen the National Assembly’s capacity to review and approve the draft budget submitted by the government.