The shameful and wasted legislative Budget process

The Appropriation Bill for the financial year 2011was presented in Parliament on 19th October 2010 and was followed by the presentation of the Executive Budget on 22nd November 2010.

The second reading debate took place for a period of six days from November 23rd to November 29th and the Second Reading was approved by vote on November 29th 2010.

The much respected Economist, who regularly contributes to Sunday Times, wrote in his column on 28th November as “Budget debates in recent years have not been very enlightening of the financial and economic issues raised by the budget. This is indeed unfortunate as the budget is the centre piece of the government’s economic policy. Members of Parliament, especially the ministers of the government owe a responsibility to the people of the country to justify and explain the expenditures of their respective ministries and lay out the policies they expect to follow…. The opposition has no lesser a role in ensuring parliamentary control of public expenditure. It is the role of the Opposition to point out where the allocation of finances could be improved in the interest of good financial management and the best use of finances for the economic and social welfare of the country…It is the essence of parliamentary democracy that the accountability of public expenditure must be under parliamentary control. Parliament and especially the opposition are the watch dogs of the public finances. The government’s majority in Parliament should not be allowed to dilute the quality of the budget debate or render the accountability of parliament for the management of the public finances a futile exercise”.

The citizens who witnessed parts of the budget debate shown on TV and read the extracts in the newspapers must agree that yet again what happened in Parliament, subject to a few exceptions, was a shameful and wasted exercise of the legislative process, especially noting the number of empty seats seen on both sides of the house. This shameful and wasteful process was highlighted by a Minister well past his prime, but yet holding a decorated high office in the legislature, signing Baila and the other members joining in and others asking for more of the same! Whenever the integrity of the statistics and information were challenged or when a serious lacunae or amber risk signals of the policy and action strategies were placed before the house by young, enthusiastic and professional members who appeared to have done their home work, their voices were drowned and challenged thus negatively impacting on the effectiveness of the debate and the budget process. What a Shame!

Next phase of the budgeting process begins with the Committee stage review. One does not need a crystal ball to correctly predict the outcomes of this phase too. Unfortunately the Committee stage review will also continue in the same vein not adding value to the budget system as a whole, whereas what is expected in this phase is a non partisan collective approach by the legislators, in to reviewing and improving the quality of the proposed spends and ensuring enhanced productive outcomes from the national resource allocations, prioritized to the needs of and meeting the expectations of the citizens, with better targeted spend strategies, enhanced accountability and improved oversight by all stakeholders.

At the recently concluded launch of the International Open Budget Survey Workshop, where the open budget indices of 94 countries were presented, the writer argued that the South Asian Region countries should benchmark the budget systems in force in New Zealand .

The New Zealand Budget process allows the Government to:

• set its fiscal objectives in respect of revenue, expenditure, debt repayment and investment;
• maintain effective fiscal control and plan for the coming year and beyond;
• allocate the available resources, consistent with the Government's strategic objectives and priorities;
• fulfil the legislative requirements for the Budget; and
• seek authority from Parliament for spending.

All Ministers have a key role in the Budget process. Together, they agree on the Budget strategy and priorities for spending. On an individual level, Ministers identify priorities for departmental chief executives to guide preparation of Budget submissions. Vote Ministers drive the development, fine-tuning and negotiation of Budget and baseline submissions and packages in their Vote areas as part of the Government's overall Budget package

The following diagram outlines the key phases of the New Zealand budget system highlighting the relationship between Executive and Parliamentary roles in the Budget.

The New Zeeland Budget process can be divided into distinct phases:

Executive Phase

Strategic Phase

Covers Ministers' development of an overall strategy for the Budget, including strategic priorities and targets for spending, revenue, the projected fiscal surplus, and public debt intentions. Decisions taken during the strategic phase are reflected in the Government's Budget Policy Statement (BPS) which is required to be tabled in Parliament by no later than 31 March.

Baseline Alignment Phase

Covers Cabinet determining any shares of new spending in each Vote, aligning spending in each Vote to ensure that it is consistent with Government priorities and Cabinet making final decisions about the overall shape of the Budget package. For Budget 2010 this consisted of two different phases:

• Budget Baseline submissions, which update departmental budgets for the next three years for any technical adjustments required under existing policy
• Baseline Alignment Proposals (BAPs), which set out proposed changes in each Vote to ensure that spending is aligned with the Government’s priorities.

Parliamentary Phase

The process for obtaining Parliamentary support for the Government's Budget package. This includes examination of the Estimates for each Vote by the appropriate Select Committee.

Implementation Phase

Covers any subsequent amendments to the Budget. Where additional appropriations are needed during the course of the year, spending is authorized by Parliament before the end of the financial year, via the Appropriation (Supplementary Estimates) Bill. In the interim, authority for additional spending is provided by an Imprest Supply Act

Parliament Brief: Government Accountability to the House

An essential function of the House of Representatives is holding the Government to account for its actions. The term ‘responsible government’ means that the Government has the confidence of the elected House from which its members are drawn. As a consequence, the Government is required to be accountable to the House.

The House has developed several mechanisms to ensure the Government is regularly held accountable. While virtually any parliamentary proceeding lends itself to holding the Government to account, these mechanisms provide structure to the accountability process. They ensure that Parliament approves expenditure for specified purposes and reviews how the money was spent.

The general principle that Government expenditure is not authorized for more than one year ahead offers regular opportunities for scrutiny by the House and committees as set out below.

Budget policy statement and Budget-related reports

Each year the Government is required to publish a Budget policy statement before 31 March. This contains information about short-term fiscal intentions and long-term fiscal objectives. One of the select committees of the House, the Finance and Expenditure Committee, is then required to report to the House on the statement, followed by a two-hour debate. After delivery of the Budget, the committee must also report on further Budget-related reports.

Financial review

An Appropriation (Financial Review) Bill is the final part of the Government’s regular financial cycle for the previous financial year. It provides for confirmation or validation of over expenditure or previously unappropriated expenditure for that year.

The financial review process in Parliament includes extensive review of public sector performance, including Crown entities and State enterprises, by select committees and debate in the House (see below and Parliament Brief, ‘Select Committees’).

Select committee scrutiny

While debates in the House are very visible examples of Government accountability, the detailed scrutiny occurs at select committees. This is where Ministers and officials attend public hearings and answer questions about their performance and policy intentions. In addition to the annual examination of the Estimates, committees also routinely examine the performance and current operations of public organizations by conducting financial reviews. This provides an opportunity for detailed study and is a regular reminder to those organizations that they are publicly accountable.

Specific issues might also come to committees’ attention. Committees are empowered to initiate their own inquiries and to receive briefings on such issues. Committee findings can have a significant impact on Government operations. If a committee makes a report to the House with recommendations to the Government, the Government must respond to the House within 90 days. It is rare for an inquiry report to be debated in the House.

Through these committees, Parliament can get the opinions and advice of the general public, experts and organizations when making law.

Liz Gordon, Chair, Education and Science Committee, New Zealand Parliament in an article titled

“A radical democratic approach: committees as the gateway to the people” states “I have quite strong views about democracy. It is not merely constituted by the people's vote, delivered on a set day at a polling booth, and followed by a period in which the politicians take action, only to be judged again in three or four years time. This is a minimalist view of democracy, and is neither functional nor dynamic. However, it is difficult to foster continued interaction between the needs and aspirations of the people and the work of elected representatives in an organized way. In my view, that is the central role of committees: to provide a gateway through which dialogue can be opened up on a range of issues of concern to the people. Committees thus act as a conduit. Not only do they invite people in (or committees, keep them out), but they also set the context wherein voices are heard. Thus, committees, at best, act as an instrument of radical democracy, fostering and enhancing the democratic process and inviting and providing opportunities for political struggle and change. Because of my views about democracy, it became important to me, when I took on the Chair of the Education and Science Committee, to try to forge a cooperative and effective team of members, Government and Opposition, who would work together to further the business of the committee

It is now time that the citizens collectively launch a change management initiative that says “enough is enough, of this wasteful and shameful budget review process by the legislature year after year” and “let us for the sake of assuring Sri Lanka’s sustainable long term future growth, prosperity and democratic good governance bench marked to international best practices change the legislative budget systems to be more in line with the New Zealand model”.

Who will that “Knight in Shining White Armour” be, who will lead the way bringing together the Executive, The Legislators, Politicians, Academics, Business, International Financial Agencies and competent Civil Society Organizations together in a bi partisan way, to lead the above change management initiative?