II. COMPARISONS OF OECD COUNTRY LEGAL FRAMEWORKS FOR BUDGET SYSTEMS

medium-term budget framework. Sanctions are included should entities fail to comply with their budgetary commitments.

4.1.4. Timetable and approval process leading up to budget submission to the legislature

The key date for determining the budget timetable within the executive is the date on which the budget should be submitted to the legislature. On average, OECD countries require budgets to be submitted three months in advance of the beginning of the new fiscal year. There is a wide range around this average – from eight months before the fiscal year begins (United States) to one month after (New Zealand). Although the timing of the submission of the budget is a constitutional requirement in several countries, it is included in the Parliament Acts in Sweden, in the Public Finance Act in Japan, and parliamentary regulations in Norway (Table II.4).

Table II.4. Legal requirements for the date of submission of the budget to the legislature

*Finland’s Constitution requires submission of the budget “well in advance”. In line with this requirement, the budget normally is submitted about four months before the new fiscal year begins.

In Canada and the United Kingdom, there is no legally binding submission date – the executive decides. In the United Kingdom, during the period 1993-96, the government presented the budget about five months earlier than previous practice; however, the new government of 1997 reverted to the original practice of presenting the budget to Parliament at around the beginning of the fiscal year.

In only a few countries does the law prescribe how the executive should organise itself for preparing the annual budget in order to meet the prescribed

II.COMPARISONS OF OECD COUNTRY LEGAL FRAMEWORKS FOR BUDGET SYSTEMS

deadlines for its submission. In many countries, the legislature entrusts the executive with meeting the deadline, and the executive works backwards from the submission date. In some countries, the executive determines all aspects of budget preparation, including the date of the submission of the budget to Parliament. Examples of the three “models” are:

●Instructions on budget preparation are provided in a law. In Japan, the Public Finance Act, 1947, provides several instructions for the Minister of Finance (who co-ordinates the initial budget estimates of ministries), Cabinet (which is required by law to issue the budget guidelines, including initial expenditure ceilings) and spending ministries (who are to submit detailed estimates not exceeding the ceilings). Korea has similar budget preparation procedures prescribed by the Budget and Accounting Act 1961.

●Parliament explicitly entrusts the executive with taking all necessary steps to meet the deadline. In Finland, the State Budget Act (s. 10a) states that “provisions concerning the stages of and procedures to be followed in the preparation of the budget proposal may be issued by government decree”. In many countries, executive decrees, especially those issued by the Ministry of Finance, specify the detailed steps needed to meet legal requirements concerning the types and format of appropriations and, especially, the documents needed by the legislature to accompany the draft budget law. In the United States, the law requires that the head of each agency (the equivalent of a ministry in other countries) prepare and submit to the President each appropriation request, in a form and by a date prescribed by the President.

In view of this delegation, much detail is elaborated in OMB’s budget circular A-11.15

●Practices have developed over a long period and it would be inconceivable that Parliament would adopt a law specifying the steps for budget preparation. This is the case in the Westminster countries, where the executive is free from any legal constraint on the annual budget preparation processes.

4.1.5. Presentation of the “budget”: a law or a report on the budget?

A major difference between countries exists on the emphasis given to the legal aspects of the budget versus the strategic and policy aspects.

●The budget is primarily a draft law for revenues and expenditures. The budget system laws of many continental European countries require the executive to submit a draft budget law. The emphasis is on submission of a legal document containing annual revenue estimates and proposed detailed expenditures. In such countries, the annual budget law often incorporates changes in tax legislation necessary to attain the revenue estimates. On the expenditure side, the budget law establishes legally binding ceilings for most

II. COMPARISONS OF OECD COUNTRY LEGAL FRAMEWORKS FOR BUDGET SYSTEMS

expenditure chapters and items (some expenditure categories may be excluded from the binding ceiling requirements). In the case of Germany, footnotes to some expenditure items are also legally binding.

●The budget is primarily a statement of the government’s budgetary strategy and policies. In the Westminster countries, the emphasis in the government’s budget is to provide a statement of budgetary policies for the year ahead and to show the annual budget estimates in relation to its medium-term fiscal strategy (which may not be formally approved by Parliament). Legal formalities associated with any new tax measures are initiated on “budget night” – when the budget is announced. The possibility for Parliament to amend proposed tax changes is generally very limited. The detailed expenditure estimates are later debated in Parliament. Once approved by Parliament, an annual appropriations act is adopted, generally without parliamentary debate, i.e. the legal aspects of the budget are viewed as end-of-process formalities. Since the 1990s, some Westminster countries have formalised in the law the need for the government to present a report on the budget and/or a pre-budget report, in part to remove the importance and degree of surprise that were traditionally associated with the budget speech of the Minister (e.g. New Zealand’s Fiscal Responsibility Act, 1994).

The Nordic countries are probably closer to the Westminster “model”. The law merely requires a “fiscal budget” (Norway) or “proposals” for State revenue and expenditure (Sweden). Unlike continental European countries, the budget’s legal aspects are not emphasised. The emphasis is on fiscal strategy and policies, and macro-fiscal control. In Japan and Korea, laws requires a “draft budget” not a draft budget law.

At its early stages, the United States budget process is akin to Westminster countries, in that the president’s budget proposes a strategy and Congress adopts a “budget resolution” laying out the budget strategy. However, at the second stage

– that of congressional approval – the budget process becomes akin to continental European countries. Congressional committees become preoccupied with ensuring congressional budget control and each action has a strong legal foundation, which eventually leads to the adoption of 13 separate appropriation acts each year. As in Germany, the legislature may add detailed “footnotes” that place legally binding constraints on the executive in executing the detailed budget. In general, strong legislatures are strongly associated with a considerable emphasis on the law in budget matters.

4.1.6. Documents required for submission with the annual budget (law)

The legal requirements for documents to accompany the draft budget vary enormously between OECD countries, reflecting to a considerable extent