Establishment of the Parliamentary Budget Office

Contents• Act• Preparations for PBO establishment• Work-plan development• Research• Current Legislative Fiscal oversight• Defining Legislative oversight• Proposal for PBO: Functions, Organisational

design, Stakeholder engagement, Implementation plan, Budget

• International seminar

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Act

• The Money Bills Amendment Procedure and Related Matters Act came into effect in April 2009

• Section 15 of the Act established a Parliamentary Budget Office

• Objective of the PBO is to provide independent, objective and professional analysis and advice to Parliament on matters related to the budget and Money Bills

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Section 15(2) outlines the core functions of the Budget Office as follows:

• reviews and analysis• advice and analysis on proposed amendments• reports tabled and adopted in a House with

budgetary implications• abreast of policy debates• unfunded mandates

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Preparations for PBO Establishment

• DBSA Research • Study tours- Kenya, Germany, Sweden, Japan

and the Republic of Korea • secondment of MI Jahed

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Work Plan Development

Critical Factors: • Interaction with Exec Authority, Political Task Team

for guidance and advicePolitical Task Team:o House Chairpersons-Committees: NA & NCOPo Chairpersons of finance committees: NA & NCOPo Chairpersons of appropriations committees: NA &

NCOPo Co-Chairpersons: Review of Rules Committee

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Work Plan Development

• Interaction Senior Management and Specialists

• Engage external stakeholders• Research, international best practices, lessons

of experience, understanding SA needs, implementing Act

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Research

What do PBOs do? • evidence-based budget analysis• economic forecasts• fiscal projections • examine proposals• impact of alternative spending policies

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PBOs: International trends

• PBOs relatively recent phenomenon • Growth in PBOs in line with more democracies• In many countries there is growing trend of rising

Executive capacity over Parliament• Legislatives generally lack technical, analytical capacity

and information • Decline in Legislative oversight abilities • Limited oversights often leads to poor fiscal outcomes • PBOs have improved legislators ability to interpret,

review and make better decisions on Budget process

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Study Visits

• Germany, Sweden, Japan, South Korea, Kenya• Budget offices across the globe are influenced by the

roles played by their legislatures in the budget process:– Budget approving legislatures: cant amend and approves

Executive budget(Sweden, UK)– Budget influencing legislatures: can amend, but can’t

formulate budget(Italy, Netherlands)– Budget making legislatures: has legal & technical

capacity to amend or reject Executive budget proposals and substitute its own( Japan, USA)

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Study Visits• The varying influence of legislatures in budgeting reflects differing

authority to modify executive budget proposals.• Countries reported that their legislatures have unrestricted powers

to amend the budget. • Legislatures however, can make amendments only if they do not

change the overall fiscal position, while they may only decrease, not increase, proposed spending.

• Legislative influence is also affected by the time available to consider requests: a legislature that has limited time to examine budget proposals is at a disadvantage.

• Legislatures established a more regularised process with more time to consider budget requests e.g. Mexico had changes requiring presidents to present their budgets earlier than before.

• Committee structure is the heart of legislative influence, legislatures have found it essential to divide the task of reviewing the budget into committees.

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Study Visits

• Staff establishment , Reporting line, Functions• PBO: International Experience and Lessons• No “one size fits all model”• Roles influenced by: type of political system,

Legislature’s formal powers i.e. to amend, political environment, technical capacity of Parliament

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Lessons for SA PBO

• Budget transparency (Parliament & Civics)• Enhance credibility of budget process• Increase accountability• Discipline in public spending• Capacitate Parliament to exercise oversight

functions

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Legislative Fiscal Oversight

• In SA, oversight takes place in Committees with significant part occurring in the Parliament

• Legislative oversight takes the form of:– Questions to the President, Deputy President– Questions to the Ministers, Deputy Ministers– Debates – Motions– Committee reports flowing from interaction with

departments and oversight visits

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Fiscal Oversight

However fiscal oversight is about:• Government expenditure• Government Borrowing• Tax• Regulation

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Fiscal Infrastructure

Oversight over Institutions:• Parliamentary Committees• National Treasury• SARB• SARS• Now: PBO

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Fiscal Reform

• Fiscal Reform: Reform of the budgeting system and Public service reform

• 2 imperatives for reform of budgeting system: budgeting system is key for attaining objectives and ability of Govt to employ limited resources with maximum effect

• Budget systems have 3 basic functions: fiscal discipline: “allocative efficiency” i.e. resource allocation in line with govt priorities: “delivery efficiency” i.e. which means the least-cost provision of public services

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Fiscal Oversight• Budgeting System most important component of

public service delivery• Key instrument for translating govt priorities,

strategic plans into public goods and services• Any policy or plan which does not consider

budget constraints is unlikely to be successfully implemented

• Good Governance: budget captures & implements principles of accountability, transparency, democracy, participatory governance

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FunctionsEconomic Stream Public Finance Stream Public Policy Stream

Macroeconomic evaluation Economic projections Tax review and analysis Fiscal Framework review and

analysis Provide advice of proposed

amendments to the Fiscal Framework

Fiscal projections Revenue studies

Microeconomic evaluations Spending trends review and

analysis Spending projections Baseline studies Provide advice and analysis on

proposed amendments to the DOR Bill and the Appropriation Bill

DOR Bill review and analysis Appropriation Bill review and

analysis Monitor legislative proposals with

financial implications - Bill costing Monitor reports adopted by the

Houses with financial implications Monitor committee reports

adopted by a House with financial implications

Policy analysis Policy implementation analysis Outcomes analysis vs spending

trends Monitor policy proposals with

financial implications Monitor policy debates and

development in key expenditure and revenue areas

Policy Evaluation

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Organogram

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PBO reporting line

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Internal Stakeholders

• Organisational Design • Human Resource: JD, market- related

performance contracts• IT: Web design• Process mapping between LOD and PBO• Legal• SCM

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External Stakeholders

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Auditor General

Amendments to the Act

• The Money Act envisages that the Director will appoint the Deputy Directors/Senior Analysts and other support staff. This process is currently with the Standing Committee on Finance.

• Amendments to the Act will focus on the following: Time frames and sequencing Section 15 on the Parliamentary Budget Office Textual amendments

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Implementation Plan The following must be considered during the Budget Period

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Budget

2012/13 2013/14 2014/15 2015/16 2016/17

R'0000 R'0000 R'0000 R'0000 R'0000

Total Employee Remuneration 4 542 584 17 478 729 18 877 027 20 387 189 22 018 164

Total Operational Budget 2 249 000 2 129 000 2 299 320 2 483 266 2 681 927

Total Capital Expenditure 850 000 850 000 918 000 991 440 1 070 755

Total 7 641 584 20 457 729 22 094 347 23 861 895 25 770 846

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Way Forward

• Implementation be prioritised• Office space• Support and advise on Act amendments• Presentations: Exec Auth, Pol Task Team, POA• Continue stakeholder engagement• International Seminar

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Thank you

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