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Duration of budget system law. The budget system laws are permanent laws, unless they are repealed or amended. Whereas the HGrG needs the consent of the both the Bundestag and the Bundesrat to enact amendments, the federal Constitution and the Federal Budget Code require the consent only of the Bundestag, although the Bundesrat may lodge objections.

Notes

1.The 1969 laws originally applied to West Germany. Following the Unification Treaty of 1990, the HGrG was amended to apply to East Germany, after which each eastern Land adopted an individual budget code.

2.Another of the aims of the StWG was to take the burden of policy adjustment off monetary policy and to make fiscal policy more fast-acting. To this end, new short-term fiscal policy instruments (counter-cyclical funds, limitations on borrowing, and rapid tax increases or decreases) could be implemented by ordinance, thereby avoiding the need for parliamentary approval of new laws. See Hunter (1978) for a fuller discussion.

3.It is not good use of government money to borrow on the capital markets and, at the same time, build up unremunerated government deposits at the central bank. Such a policy provides a hidden subsidy to the central bank.

4.Coverage of entities performing general government functions is incomplete to the extent that private law institutions using commercial accounting are excluded from reporting requirements (see IMF, 2003, paragraph 4).

5.For example, the 1994 coalition agreement stated that the new government aimed to reduce public expenditure to below the pre-unification level of 46% of GDP. However, after 1994, public expenditure continued to grow (see Wurzel, 2003, Figure 21).

6.Agreements reached in the Financial Planning Council, including specific targets for total expenditures of the Federation, each Land, and each social security organisation, could be made legally binding. Nonetheless, expenditure targets do not guarantee the achievement of the aggregate deficit target (IMF, 2003, paragraph 80).

7.Although medium-term financial planning was institutionalised in the late 1960s, annual budget plans were not derived from medium-term plans. According to Derlien (1995, p. 82), it has been the contrary: medium-term plans were updated on the basis of the annual budget.

8.Cameralistic cash accounting for public sector use was invented in Austria some 250 years ago and is primarily used in Austria, Belgium, Finland, Germany, and the Netherlands (Lüder, 2002, footnote 3).

9.See Derlien, 1995, for results of a survey of willingness to serve whatever government is in power.

10.See Table 1 of Wurzel, 2003, for the distribution of functional spending by level of government.

11.The intergovernmental fiscal system is described in several publications, including the Finance Report (Finanzbericht) and a brochure available on the

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Internet site of the Federal Ministry of Finance, www.bundesfinanzministerium.de/ Anlage20651/Finanzbeziehungen-Bund-und-Laender.pdf.

12.A description of the definition is contained in the administrative regulations on the budget classification of the Federation (Verwaltungsvorschriften zur Haushaltssystematik des Bundes, Allgemeine Hinweise zum Gruppierungsplan und zum Funktionenplan, paragraph 3.8.1).

13.Services are reported as a government activity if they are carried out by a government agency, but are not reported if they are carried out by a publicly owned company established under private law. Since the latter are included in the definitions in the national accounts, further coverage adjustments are necessary to convert the official statistical definition of “consolidated government” to that of “general government” as defined in the government finance statistics of the IMF or the system of national accounts (SNA). Wurzel (2003, paragraph 31) discusses some of the differences between official German and European classification norms.

14.Those at federal level are listed in the 2003 Finance Report (Finanzbericht) and in footnote 29 of IMF, 2003.

15.See p. 14 of Creel, 2003, for additional references on this debate.

16.The Council of Experts (“three wise men”) and their reporting responsibilities are specified in the 1963 Law concerning the Appointment of a Council of Experts.

17.This section is largely based on “Mandates of Supreme Audit Institutions – Germany”, www.bundesrechnungshof.de/en/veroeffentlichung/brh_frame_veroeffentlichung.html.

18.Exceptions are made in agreement with the Federal Ministry of Finance and the Federal Court of Audit, on condition that: 1) the public law body does not have a substantial impact on federal government finances; and 2) where the institution is responsible for health, long-term care, accident or pension insurance, if it does not receive any federal grants or if a guarantee obligation by the federal government is not in principle justified (BHO, ss. 111-112).

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ISSN 1608-7143

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

Japan*

*This study has benefited from helpful comments from Yutaka Sunayama of the Budget Bureau of the Ministry of Finance, Hideaki Tanaka of the Australian National University, and OECD colleagues.