III.IS THERE AN OPTIMUM LEGAL FRAMEWORK FOR THE BUDGET SYSTEM?

have proposed constitutional amendments for budgetary rules to impose a balanced budget or restrict debt levels. Such prescriptive advice necessarily involves making value judgements. It is therefore important to establish criteria for establishing specific standards for a “budget system”.

In public choice economics, judgements of existing rules are usually based on the criterion of “efficiency” or possibly, “fairness”. In this literature, the principle of normative individualism – the value judgement that nobody’s goals and values should a priori be more important than those of anybody else’s – is upheld (Buchanan, 1987). Every individual is assumed to be pursuing his or her own ends within the framework of the “is”. However, in these studies, norms established by society as a whole do not exist and therefore a societal “is” cannot be compared with a societal “ought”. Instead, the unanimity principle is stressed, namely that rules that have consequences for every member of society can only be looked upon as “good” if every member has voluntarily agreed to them. Under such an approach, it is difficult to change rules on the basis that one proposed alternative set of rules is “better” relative to the initial set.

Public choice economists have entered debates on “appropriate” constitutional rules. The literature often remains at an abstract level and cannot be applied easily, if at all, to real-world constitutional law. “Constitutions” are defined broadly, being perceived as “a set of rules which constrain the activities of persons and agents in the pursuits of their own ends and objectives” (Buchanan, 1977, p. 292). Scholars have acknowledged that preconceptions about government behaviour are important when judgements are made on real-world constitutions (Boadway, 2003, p. 64). However, public choice theorists have not provided a clear conceptual framework for the following questions (Voigt, 1999, p. 530):

●What should be the content of rules constraining actual constitutions?

●Which issues should be dealt with in the written constitution and which should be left to sub-constitutional choices (i.e. ordinary laws or regulations)?

●What characteristics should constitutional rules have?

These are highly relevant questions for this study.

2. Who should set and monitor legally binding standards?

The standards for budget system laws are intricately linked with the standards for budget systems as a whole. Three questions arise: “What are the key ingredients of a ‘good’ budget system?”, “Which features of budget systems are so important that the rules governing them should be embodied in formal law?”, and “Who should establish the ‘good’ or ‘best practice’ standards, both for the budget system as a whole and for the specific features to be incorporated in law, and who should monitor such standards?”. This

III.IS THERE AN OPTIMUM LEGAL FRAMEWORK FOR THE BUDGET SYSTEM?

subsection is mainly confined to the “who” questions, examining the roles of politicians, bureaucrats and international organisations.

2.1. Role of politicians and bureaucrats

Legally binding budget standards are first and foremost set by politicians

– legislatures and executives. But who influences politicians? Bureaucrats advise the political authorities. In some countries, bureaucrats may be the initiators of changes in budget system laws. In particular, the professionals who work in Ministries of Finance (or the equivalent) as well as other central ministries or agencies propose ideas for budget reform. The drafting of new or revised budget laws is often initiated by bureaucrats for consideration by their political superiors.

2.2. International transmission of budget system laws

A second source of “standards” is countries’ budget system laws, which are often used as models or starting points for budget reforms. Importing the desirable features of other countries’ budget systems (laws) into their own laws is common within OECD countries. When embracing the budget-related aspects of “New Public Management”, the Anglo-Saxon and northern European countries adapted budget laws or introduced new ones (Lienert, 2005). In so doing, some countries looked to the leaders of the reform movements. France’s 2001 Organic Budget Law was partly influenced by performanceoriented budget reforms adopted in the previous decade in other OECD countries.1 New Zealand’s budget reform “model” was imitated in several countries – in particular, the 1994 New Zealand Fiscal Responsibility Act that supplemented the State Sector Act 1988 and the Public Finance Act 1989. For example, the legal frameworks in Australia and the United Kingdom in 1997-98, relating to budget transparency and medium-term macro-fiscal stability, incorporated many of the features of the New Zealand reforms. The Nordic countries, which compare budget problems and solutions in frequent regional discussions, have adapted their budget systems (including laws in two cases), being fully aware of similar reforms in neighbouring countries.

Using OECD countries’ budget laws as standards is prevalent in transition and developing countries. For example, a number of Latin American countries (Oliva, 2001) and India (India, 2003; Hausmann and Purfield, 2004) have adopted fiscal responsibility acts, modelled on those adopted in other countries, particularly the New Zealand Act of 1994 and the EU Maastricht criteria.2 In Francophone Africa, in 1997, the West African Economic and Monetary Union (UEMOA, 1997) directed its eight member countries to adopt an organic budget law, modelled largely on the Organic Budget Law 1959 used (until recently) by France for its State budget. In Anglophone Africa, some countries have revised