II.COMPARISONS OF OECD COUNTRY LEGAL FRAMEWORKS FOR BUDGET SYSTEMS

and pre-election reports –, Australia’s 1998 Charter of Budget Honesty commits the government to processes for costing election campaign promises made by the major political parties (Australia Government, 2003).

Notes

1.Laws are permanent until amended. The ease with which laws may be changed differs across countries.

2.Wehner (2005) constructs an index of legislative budget capacity, in which Westminster countries have low scores.

3.In France, a special court for budget discipline exists for ordonnateurs – those that order spending. However, this court has been largely ineffective because the 1948 law setting it up excluded government ministers – the main ordonnateurs (Bouvier et al., 2002, p. 390).

4.See White Paper, Better Accounting for the Taxpayer’s Money, H.M. Treasury, 1995.

5.A debate is under way on how to integrate elements of the Organic Budget Law – applying to the State – to the social security organisations and local governments.

6.Denmark, by the Constitution, 1953; Sweden, by constitutional reform, 1969. In New Zealand, “constitutional reform” means adopting a statute of constitutional significance; the act abolishing the Legislative Council was adopted in 1951.

7.In practice, the Ministry of Planning and Budget prepares the budget on behalf of the executive.

8.The Prime Minister is formally the nominal head of H.M. Treasury, reflected in the title “First Lord of the Treasury”. In practice, the Chancellor of the Exchequer is the head and exercises day-to-day authority. The office of the Chancellor is very rarely referred to in the law (for example, the Government Resources and Accounts Act 2000 does not mention the post, whereas the Treasury is mentioned nearly 90 times). The phrase “the Treasury” in fact refers to the Lords Commissioner of the Treasury, who consist of the Prime Minister, the Chancellor and six government Whips. It is these individuals, i.e. politicians (not civil servants working for H.M. Treasury), who constitute “the Treasury” when it is mentioned in the law. See the Interpretation Act 1978 for details.

9.More generally, continental European countries’ legal systems distinguish the body of law that governs the State (public law) from that which governs non-State activities (private law).

10.When the deficit criterion was breached by France and Germany, the EU’s Council of Finance Ministers did not follow the EU Commission’s November 2003 recommendation to speed up the excessive deficit procedure, the last step of which is the imposition of fines (IMF, 2004, Box 1). The Commission challenged the legal basis under which the Council acted and took the case to the EU Court of Justice for a ruling.

11.In the United Kingdom, a strong comptrollership function was specified in the 1866 Exchequer and Audit Departments Act: to this day, the head of the supreme audit institution is known as the Comptroller and Auditor General. Whereas some countries of the Westminster tradition have retained (e.g. India, Ireland) or reinstated (e.g. New Zealand) the controller function, in Canada, the Auditor General has not had a comptroller function since it was abolished in 1931.

II.COMPARISONS OF OECD COUNTRY LEGAL FRAMEWORKS FOR BUDGET SYSTEMS

12.The Board of Audit in Japan, under the law establishing it, is independent of the Cabinet of Ministers, and is neither under the control of the legislature nor the judiciary. This is illustrated in the Organisation Chart of the Government of Japan

–see Japan (2004). The Korean Board of Audit and Inspection is a constitutionally independent agency under the President of the Republic – see www.bai.go.kr/ english/p_e_about01.html.

13.See Table 2 of www.imf.org/external/NP/LOI/2001/tza/01/INDEX.HTM.

14.Extrabudgetary funds at federal level are of diminishing quantitative importance. In 1999, the debt servicing of some large funds (e.g. the Inherited Liabilities Fund, the Federal Railways Fund) were integrated into the budget.

15.The 2003 version of the budget circular contained 738 pages. This is much longer than that of other OECD countries.

16.By law in Australia (1998) and New Zealand (1994); by near-laws in the United Kingdom (Resolution of the House of Commons on the code for fiscal stability).

17.New Zealand’s Standing Orders also limit parliamentary debate on the main estimates to three days. The Standing Orders also limit the financial review debate (prior to the beginning of the fiscal year) to six days, and the debate on select committees’ reports on departmental annual reports and financial statements to four days. In Canada, 20 “opposition days” for debate on the government’s expenditure proposals are specified in the Standing Orders of the House of Commons; however, because of the extremely limited budget amendment powers, many of these days are devoted to non-budget discussions.

18.The 1921 Budget and Accounting Act required OMB to prepare four-year projections; the Congressional Budget Act 1974 requires the CBO to prepare fiveyear projections.

19.Offsetting collections are collections that, by law, are credited directly to expenditure accounts and deducted from gross budget authority and outlays of the expenditure account, rather than added to receipts. They result from business-type activities, for which spending for specific purposes is authorised by Congress.

20.Most OECD countries only have one annual budget law, consolidating both revenues and expenditures. However, the Westminster countries typically adopt a consolidated revenue fund act (or finance act) and an appropriation act. The United States Congress passes 13 appropriation acts each year. The Parliaments of the Netherlands and Sweden pass more than 20 individual appropriation acts.

21.The notion of “capital contribution” was repealed in 2004 and replaced by “capital expenditure”, meaning the costs of assets acquired or developed, inclusive of tangible, intangible and financial assets.

22.This can be done either by regular legislative procedures or, more likely, as part of the congressional budget processes. See Heniff (1998).

23.“Programme” is used for simplicity; “programmes” are known as “requests for resources”.

24.English-speaking countries rely on outside bodies for advice on accounting standards (exclusively in the cases of Australia and New Zealand), and follow the accounting norms used in the private sector. In other countries, Ministries of Finance (in collaboration with external audit offices) are responsible for establishing government accounting norms. However, in France, the 2001 Organic Budget Law requires review by a committee composed of public and private sector

II.COMPARISONS OF OECD COUNTRY LEGAL FRAMEWORKS FOR BUDGET SYSTEMS

representatives. For different models of government accounting, see OECD (2002b) for a full discussion.

25.The act also refers to GFS Australia, which is a statistical publication of the Bureau of Statistics containing concepts, sources and methods for preparing government finance statistics (GFS) in Australia.

26.For example, New Zealand requires it by law, whereas Australia and Canada – other Westminster countries – do not require it by law. Austria and Finland – which incorporate many budget-related provisions in law – do not require an ex post comparison between projections and actual expenditure. See Q.5.2.n of OECD (2003).

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ISSN 1608-7143

OECD Journal on Budgeting – Volume 4 – No. 3 © OECD 2004

PART III

Is There an Optimum Legal Framework for the Budget System?

Public finance specialists and constitutional theorists are very reluctant to establish legal norms for budget systems. International organisations have published guidelines for desirable features of budgetary transparency. Except for external audit standards, international bodies have not specified which features should be incorporated in domestic law. As a result, there are no international standards that specify legal requirements for desirable features of national budgeting systems. Classical and new budget principles, as well as the distinct functional responsibilities of the legislature and the executive in budgetary processes, should guide policy makers who wish to establish a “good” law for their national budget system. For budget preparation, adoption, execution, reporting and auditing, this section identifies desirable features that should be included in the law. Suggestions are also made as to which budget principles should be included in constitutions, primary law and secondary law.