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countries, as in Norway, executives also may draft parliamentary regulations. For example, the “financial veto” in New Zealand – which prevents Parliament from amending the executive’s draft budget – was incorporated into Parliament’s Standing Orders following an initiative from the Treasury (the equivalent of a Ministry of Finance).

3.1.4. Budget offices in the legislature

Constitutions do not specify the resources available to the legislature to assist in budget analysis. In some continental European countries, civil service laws and/or annual budget laws (e.g. Germany) specify the number and salary structure of non-partisan staff to assist parliamentary committees.

In 1974, the United States created a Congressional Budget Office (CBO) by law. The CBO is responsible for producing an annual economic forecast (in addition to that prepared by the executive), reviewing the President’s annual budget submission, scoring all spending legislation passed by the Congress, and preparing reports in compliance with the Unfunded Mandates Reform Act 1995. The number of staff exceeds 230. This is well in excess of those in Korea and Mexico, the only other OECD countries which have established such offices, largely using the United States CBO as a model. In Korea, the National Assembly Budget Office Act was adopted in 2003.

3.2. Executives

The executive branch has two particularly important roles to play in budget processes. First, it must prepare the initial draft of the annual budget, which should be set in the context of a coherent medium-term fiscal strategy. Second, the executive is responsible for executing the annual budget and accounting to the legislature for budget implementation and results. The legal framework for the important individual steps in these processes is examined in subsection 4 below. This section is confined to examining the legal basis establishing the main actors in the executive branch. In this context, decision making and accountability in the executive may either be individual or collective. The legal basis for each is examined in turn.

3.2.1. Individual budget powers at political level: presidents and monarchs

There are five main individuals at political level who potentially could play a role in budget processes, namely presidents, monarchs, prime ministers, individual ministers, and political appointees. This section examines the legislative basis for the first four. In some countries, administrative law specifies the extent of political appointees – who are often involved in budget-making

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processes – within the executive (e.g. Spain’s Organic Act on the Organisation and Functioning of the Central State Administration).

In a presidential political system, all executive power is invested in the president. Budget-related responsibilities and powers may include the obligation to formulate the annual budget, submit it to the legislature, sign it into law, veto it (in part or in whole), promulgate it, and prepare reports on budget execution. Similar powers are extended to draft laws pertaining to the budget system and draft supplementary budgets. As head of the executive, the president also signs presidential decrees or orders, including important ones relating to the budget system.

Written constitutions usually only summarise the president’s role in the budget area. For example, the United States Constitution states that “executive power shall be vested in a President”. The Constitution only elaborates indirectly on presidential duties for the federal government’s budget, by requiring that “he shall from time to time give information to Congress on the State of the Union and recommend for their consideration such measures as he shall judge necessary and expedient”. The president is individually responsible for formulating and submitting the budget: by law (US Code, Title 3), the president formulates and submits a draft budget to Congress. Individual accountability is safeguarded by strong constitutional powers for presidential impeachment, although it is extremely difficult to break constitutional obligations in the budgeting area.

Not all presidential systems require the president to submit the budget to the legislature. In Korea, for example, the Constitution requires the executive as a collective body, not the President as an individual, to submit the draft budget bill to the National Assembly.7 This reflects an alternative constitutional provision that “executive power is vested in the executive branch headed by the President”. In semi-presidential systems, such as Finland and France, the president’s responsibilities in the budget area are exercised largely through the constitutional provision that he/she is the head of the Council of ministers. In Finland, “the President of the Republic makes decisions in Government on the basis of proposals for decisions put forward by the Government” (Constitution Art. 58). His/her powers are weaker than those of France, where the President could, provided the ministers are from the same political grouping, exercise an influential voice in Cabinet on budgetary matters (see country case study for France).

In summary, constitutional provisions for presidents’ responsibilities and powers in budget processes vary from country to country. However, even in countries where a president’s individual powers are strong, the important budget processes – formulating a detailed budget and reporting on its execution – are delegated to collective bodies within the executive.

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The same observation is true for monarchs. In some constitutional monarchies (e.g. Denmark, Norway, Spain), constitutions, at first sight appear to grant strong authority to the monarch. In Denmark, “executive authority is invested in the King”, “the King shall have supreme authority in the Realm” and the “King shall not be answerable for his actions”. However, these provisions are counterbalanced: the King “shall exercise supreme authority through the Ministers” and “the Ministers shall be responsible for the conduct of government; their conduct shall be defined in statute”. Norway’s Constitution does not contain such counterbalancing provisions. Nonetheless, principles of parliamentarianism have been accepted despite the absence of constitutional provisions. Today, in no OECD country does the monarch play an important role in the budget process – nominal powers are invariably delegated to ministers. In contrast to the example of Denmark above, the delegation is not always formally stated. In Westminster countries, the Queen (or Governors General in Australia, Canada, and New Zealand) traditionally follows the advice of her ministers.

3.2.2. Prime ministers

The prime minister is usually the head of government in countries with parliamentary political systems. Depending on whether the country accords a high importance to the law, his/her responsibilities in budget matters are specified in the legal framework. First, in some countries, written constitutions specify the key responsibilities and powers of the prime minister (or the equivalent, such as the Chancellor in Germany). In France, for example, the 1958 Constitution (Title III) states that the Prime Minister is the head of the government, assures the execution of laws (including the annual budget law), and is (individually) responsible for the government’s programme. The Constitution expressly states that the Prime Minister may delegate certain functions. Thus, the Minister of Finance, who is not mentioned in the Constitution, submits the annual draft budget law to the French National Assembly. In view of the Constitution, it is made clear that this is on behalf of the Prime Minister, who has final authority over the Minister of Finance on the draft budget submitted to Parliament.

Second, there are countries where the prime minister’s responsibilities have no legal basis. This is the case in the Westminster countries whose prime ministers have very strong powers. In Canada, for example, the Prime Minister appoints not only Cabinet ministers, but also senators. In all Westminster countries, the prime minister determines the government’s overall priorities – he/she has veto powers in Cabinet and in the caucuses of his/her political party. These are unwritten powers. Depending on the extent of delegation and trust in his/her Minister of Finance (or equivalent), the prime minister is also influential in deciding the government’s budgetary policies and annual budgets.

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3.2.3. Ministers of Finance

The Minister of Finance (or equivalent) plays a key role in budget management in countries with a Parliament. His/her role is seldom specified in the constitution. Austria and Germany are exceptions. For example, in Germany, “the Minister of Finance, on behalf of the government, has to submit annually to Parliament (both houses) an account of revenues, expenditures, property and debt in the preceding fiscal year” (Constitution Art. 114). In a further 13 OECD countries, the effective control of the Minister of Finance over budget management is made explicit in a law (OECD, 2003). Government decrees may elaborate on the Minister’s responsibilities. For example, in France, a presidential decree (which is also signed by the Prime Minister), specifies the responsibilities of the Minister of Finance.

The Minister of Finance of Westminster countries has unwritten powers to veto Cabinet colleagues on budget decisions. In the United Kingdom, the Chancellor of the Exchequer, although he/she is formally not the head of H.M. Treasury, nor seldom mentioned in legislation, may exercise a particularly powerful role in Cabinet for final decisions on the budget.8

3.2.4. Collective and individual responsibility of government ministers

In some countries with parliamentary systems, the responsibilities of the cabinet of ministers are explicit in the constitution. Japan’s Constitution specifies that “executive power is vested in the Cabinet” (Art. 65), which, “in exercising executive power, shall be collectively responsible to the Diet” (Art. 66). Cabinet must resign en masse should the House of Representatives pass a no-confidence resolution (Art. 69). Moreover, “Cabinet must prepare the budget and present it to the Diet” (Art. 73). In contrast to the constitutional status of Japan’s Cabinet, in Westminster countries, the Cabinet of ministers is an extra-legal organisation – its responsibilities are not specified in the law. Despite its absence of formal powers, Cabinet’s decisions are binding and this body exercises strong control over government departments, including the size of their budgets.

If a legislature perceives that Cabinet has too much power, it has two main options: either to remove Cabinet or to limit Cabinet’s powers, by adopting a law if necessary. Both options would result in a political crisis. Under the first option, once Parliament obtains the necessary majority, it could bring the government down through a vote of no-confidence. Under the second option, a parliamentary majority to pass an authority-limiting law would be required. When Cabinet ministers are all senior politicians, this would also result in a crisis of confidence in government leaders. This suggests that it does not appear essential that Cabinet’s responsibilities are fully specified in law, as the legislature could “control” abuses of Cabinet’s budgetary power by engineering a political crisis.

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In some countries, a law specifies ministers’ individual responsibilities to the legislature for their actions regarding the annual budget. In the Nordic countries, constitutions include strong accountability requirements on ministers. In Denmark, “Ministers shall be responsible for the conduct of government and individual ministers may be impeached for maladministration of office” (Constitution, Arts. 13 and 16). In Finland, the Constitution requires ministers to disclose their assets and outside duties to Parliament. In Sweden, both individual and collective responsibility is stressed. Sweden’s parliamentary Committee on the Constitution “shall examine ministers’ performance of their official duties. The committee has access to the records of decisions taken in government matters and all documents”. The Constitution adds that all members of Parliament, and by extension, any Swedish citizen, may obtain records of ministers’ performance. Such constitutional provisions are supplemented by freedom of information acts, which allow citizens to be provided with the release of nearly all official documents.

In France, Parliament adopted a law establishing a special Court of Budgetary and Financial Discipline to follow up on the diversion or misappropriation of funds (Arts. L311-316, Code des juridictions financières). However, the law has had a limited impact, mainly because members of Parliament, presidents of regional councils, and mayors are exonerated from having to appear before the court.

3.2.5. Establishment of ministries and subordinate agencies

One of the innovations of “new public management” is to provide increased budgetary and management authority and autonomy to units within ministries. To what extent has law been used to introduce enhanced delegation of authority

– from ministers to non-elected officials who are responsible for running branches of executive authority along commercial lines?

The establishment and roles of ministries are set out either in law or by government decree. The United States has exceptionally strong legal provisions for the establishment of executive “agencies” (“ministries” in other countries). The US Code provides that no department or agency can be established without explicit approval of Congress. Thus, the roles of the United States Treasury and the Office of Management and Budget (OMB) were first specified in a 1921 law. Similarly, in Canada, the Financial Administration Act defines the responsibilities of the Treasury Board and the Ministry of Finance. In Japan, the National Organization Act 1948 requires ministries to be established by law. Accordingly, the Ministry of Finance Act 2000 was adopted to rearrange responsibilities and establish a budget bureau and a tax bureau under the Ministry.

In some continental European and Nordic countries, the creation or merger of ministries is an internal matter for the government (see country

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case studies). Councils of ministers generally make such decisions. In the United Kingdom, the full extent of the roles and responsibilities of H.M. Treasury has never been specified in law. Its authority is derived from the royal prerogative (i.e. the pre-existing powers that the courts recognise as legitimate for the purpose of carrying out government functions). However, some United Kingdom spending ministries have been established by law.

Regarding agencies for executing the budget, Sweden is one of the few examples where autonomous “administrative authorities” are provided with constitutional authority: the Constitution prevents Parliament and the government from determining how an administrative authority decides to exercise public authority in individual cases. In other countries, a law may be used to establish public agencies. In continental Europe, a distinction is made between agencies created under public law and those created under private law,9 with the latter more entrepreneurial and under less ministerial supervision (OECD, 2002a). Not all agencies are created by individual acts – many are considered administrative units under ministries. This is the case for many of the United Kingdom’s executive agencies (which now employ over 75% of United Kingdom civil servants). However, some agencies in the United Kingdom – nondepartmental public bodies – are created by individual laws. Few countries have adopted framework legislation to categorise various agencies by function, degree of independence, or governance structure. However, in 2004, New Zealand planned to adopt the Crown Entities Act for this purpose.

3.2.6. Accountability of the non-political executive

Accountability relationships between ministers (who are members of a council of ministers) and the operational heads of ministries (“secretary generals”, “chief executives”, etc.) traditionally are usually not governed by law. In many countries written constitutions require that administrative arrangements for the civil service be elaborated in a law. Accordingly, civil service laws have been adopted in a number of countries. These typically define the job duties and responsibilities of all civil servants (World Bank, 2001). Such laws specify the overarching role of civil servants (e.g. “to serve the State”) and set out arrangements for tenure, job security, remuneration and disciplinary arrangements. However, these laws merely provide a framework for specifying particular responsibilities. Most countries’ governments (not legislatures) adopt decrees to define more precisely the responsibilities of senior civil servants to ministers.

The accountabilities within the executive for responsible financial management have been specified in law in a few countries (e.g. the United States). This reflects the legislature’s desire to control budget implementation. In most countries the legislature trusts the executive to issue decrees for designing and monitoring financial control procedures (see section on internal