Following a period of decline in influence, many legislatures are starting to reclaim a more active role in the budget process. What is the effect of legislative action on budget outcomes? How can differences across countries be explained? This paper published by the World Bank Institute surveys the changing landscape of legislative budgeting. It argues there is a need to establish supportive institutional mechanisms to reconcile legislative activism with fiscal prudence, and tailor these mechanisms to different national circumstances.
A formalised process of scrutiny does not translate into a meaningful budgetary role for legislatures. Parliamentarians are therefore asking how they can engage more effectively with the budget process. Democratisation and constitutional change have opened up possibilities for legislative participation in many previously closed systems. This increased engagement can ultimately make a positive contribution to budget outcomes, but should not detract from sound budget outcomes and fiscal prudence.
There are risks involved in legislative participation. The central question is whether legislatures can be both more disciplined as well as more independent in budgetary matters. But the case for effective participation is often not fully appreciated. Arguments for legislative engagement include:
- Constitutional requirements and the power of the purse. The legislature is obligated to ensure that the revenue it authorises is fiscally sound. Without this, the incontestable democratic fundamental of the ‘power of the purse’ cannot be fulfilled.
- Checks and balances as ingredients of good governance. The executive should be answerable to, and restrained by, the legislature.
- Openness and transparency. Tabling the budget in the legislature enables public debate and scrutiny.
- Participation and consensus-building. Legislatures help ensure a balance of views and a platform for establishing consensus on difficult trade-offs. They are an entry point for think tanks, academics and civil society groups.
While some legislatures exert significant influence and affect budget outcomes at various levels, others remain passive rubberstamps. A number of variables interact to define the ability of parliament to engage with budget issues. These relate to its constitutionally intended role and its legal, party political and technical capacity.
- Presidential versus parliamentary systems. The nature of the state has fundamental implications, with parliamentary systems more conducive to legislative-executive relations.
- Design of parliamentary powers to amend the budget. If amendment powers are circumscribed, the executive has more control over the budget.
- Party political dynamics. Budgeting takes place in the broader political context of party-political majorities, party cohesion and party discipline.
- Legislative budget research capacity. Technical capacity, for example access to budget analysis, is necessary to support legislatures in making decisions about budget integrity.
- Access to relevant information. Comprehensive, accurate, appropriate and timely information is required in support of the budget figures.
- Legislative committees as the engine room for financial scrutiny. Committees should have sufficient time for deliberation, have support staff and the power to summons individuals and information.
- Time for scrutiny and the timing of the budget process. A minimum of three to four months is required for legislative approval and it should be tabled well in advance of the fiscal year.
