I.COMPARATIVE LAW, CONSTITUTIONS, POLITICS AND BUDGET SYSTEMS

Parliamentary control is based on reports provided by the executive. It is Parliament’s prerogative to specify the content and timing of such reports, which may contain both financial data (annual accounts) and non-financial data (e.g. attainment of performance targets).

The final stage is when an independent external audit office audits the financial accounts. It may also have a mandate to assess the results of the annual budget in terms of efficiency, economy and effectiveness.

2.2. How are the different legal frameworks for budget systems organised?

This section describes seven different organisational frameworks for the laws and regulations governing budget systems that can be distinguished in OECD countries. A starting point is to distinguish countries that have written constitutions from those where constitutions are not explicit – two very broad categories (first row of Figure I.2). Within the first category, there are six further categories.

In a few countries, the constitution establishes a hierarchy of law. First, constitutions in some countries require important laws to be “organic” laws, which have a higher status than ordinary statutes. Organic laws are required only rarely, notably in France and Spain. In France, there is an Organic Budget Law that relates only to the State budget. Because of its importance, it is known as the “Financial Constitution”. However, transactions of the State in France cover less than 40% of general government transactions (using a national accounts definition). The organic law relating to the annual budget laws of the state is supplemented by another organic law relating to the financing of social security.

In contrast to France, Spain does not have an overarching “organic” budget law that governs budget processes of the state. Instead, these are laid out in a General Budgetary Act and a General Act on Budgetary Stability. However, for constitutional reasons related to the autonomy of self-governing communities, Spain also has an Organic Act Supplementary to the General Act on Budgetary Stability, which requires the self-governing communities to prepare their budgets in accordance with the stability targets required by the two aforementioned ordinary laws. As in France, extensive regulations have been issued to fill out the detail of budget processes and procedures.

A second form of higher law is “framework legislation” in federal countries, where federal law takes precedence over provincial law. In Germany, a Budget Framework Law elaborates on budget principles to be applied at all levels of government and specifies mechanisms for co-ordination of budget policies between the different levels of government. A major purpose of the law is to ensure that budgets at different levels of government are adopted in the context

I.COMPARATIVE LAW, CONSTITUTIONS, POLITICS AND BUDGET SYSTEMS

of a coherent national budget framework. On the basis of the Budget Framework Law, the federal government and each Land (province) have adopted their own budget laws (called “codes”).

Many countries do not have such a hierarchy – all laws are “ordinary” laws. The United States is a federal country whose constitution contains only a few provisions related to the federal budget. A distinguishing feature of the United States – which puts it into a category of its own – is the very large number of laws covering different aspects of the federal budget system (see Box 1 of the United States case study). Budget-related laws have been consolidated in specific chapters of the US Code (especially Titles 2 and 31), which is a consolidation of all federal laws. The many budget-related laws are supplemented by a number of regulations of the legislature, as well as extensive regulations issued by the Office of Management and Budget (OMB). In addition to this dense body of law and regulation at federal level, there are separate constitutions, laws, and regulations in each of the 50 states. Unlike Germany, there is no federal law that requires uniformity in budget and accounting procedures for the nation as a whole.

Most countries’ legal systems have no hierarchy in budget-related laws (fourth column of Figure I.2). A few key laws (e.g. Australia, Canada, Japan, and Korea) or a single law (e.g. Finland) govern budget processes. In several countries (e.g. Japan, Korea, Sweden) the major law specifying budget processes is supplemented by a Parliament Act, which contains provisions mainly for parliamentary approval of the budget. Finland’s State Budget Act elaborates only on a few issues not covered by the extensive budget-related provisions contained in its written constitution, which has an entire chapter devoted to State finances.3 In Japan and Korea, the Constitutions have separate sections on fundamental budget principles, which are complemented by key laws governing budget processes including provisions for budget preparation steps within the executive (many countries assign these steps to government decree).

In Denmark and Norway, both of which have written constitutions, no statute law has been adopted to specify principles or details of the budget system (a similar situation prevailed in Sweden until it adopted a budget system law in 1996). In the case of Denmark, budget “guidelines” are issued by the Ministry of Finance. Any changes in the guidelines are always reviewed by the parliamentary Finance Committee – this is a practice, not a legal requirement. The Finance Committee also has other delegated powers conceded by Parliament. These include ones related to adoption of the annual budget and the approval of supplementary spending during the course of the year (see Blöndal and Ruffner, 2004). In Norway, budget regulations are adopted by Parliament. In practice, most amendments to these regulations are initiated by the Ministry of Finance. Thus, in both cases, the Ministry of Finance plays the key role in drafting the budget “regulations” (as in most other countries). The main