07 July 2005
Comparative Law, Constitutions, Politics and Budget Systems.
This part aims to identify reasons for the wide differences in budget system laws in advanced countries. Comparative research on budget system laws is virtually non-existent. The economics and public finance literature provides little explanation as to why budget system laws differ so widely across countries. Comparative law studies are more promising, particularly those relating to the hierarchy of law. The differences in the relative importance of the constitution, statutes and regulations provide some explanation as to why countries’ budget-related laws are so different. However, there is no theory to explain why the relative weight of each of these sources of law differs across countries. Political variables are also important, particularly the past and present forms of government. The degree of separation of powers between the executive and the legislature partly explains the extent to which law is used for specifying budget processes and actors.
07 July 2005
Comparisons of OECD Country Legal Frameworks for Budget Systems
This chapter compares the extent to which law is used to specify budget players and processes, with a particular focus on 13 OECD countries. Although budget system laws serve differing purposes, new budget-related laws are often adopted to introduce budget reforms. Differences in the laws underpinning the main budget players – especially legislatures, the political and non-political executive, and external audit offices – are found to be wide. Important differences are observed in the extent to which law is used for specifying each stage of the budget processes: preparation, presentation, adoption (by the legislature), execution, government accounting and fiscal reporting arrangements. Comparative "models" or tables are provided for various budget-related issues and processes, including: budget timetables (legal requirements); fiscal rules; medium-term budget frameworks; the nature, structure and duration of appropriations; annual and in-year accounts, as well as for specific budget players such as parliamentary budget committees or external audit offices.
07 July 2005
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.
07 July 2005
Case Studies of Selected OECD Countries
Canada has a Westminster model of government and therefore does not highlight the legal basis for annual budget processes. A combination of laws, regulations and conventions govern budget preparation, adoption and budget reporting to Parliament. Although the principle of the supremacy of Parliament is enshrined in the Constitution, in practice, the executive – in particular the Cabinet of Ministers – has strong powers regarding the policies and amounts provided in annual budgets. The government has exclusive power to introduce the budget, and the legislature’s power to amend the budget proposed by the executive is extremely limited. Legislation does not provide a deadline for the executive to submit the budget to Parliament. In practice the budget is submitted to Parliament about one month before the fiscal year and adopted about three months after the fiscal year begins. The Constitution Act 1867, the Financial Administration Act 1985 (FAA) and the Auditor General Act 1977 (AGA) are the fundamental statutes governing budgetary processes (Box 1).1 The FAA has played a particularly important role in establishing the budget and financial management system. The Parliament of Canada Act 1875 does not contain any provisions on the parliamentary budget review process.