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Parliamentary
Amendment Powers with Respect to the Budget MR. WEHNER: I realise that lunch time is approaching fast and furiously but I would like to ask you to bear with me for about 15, 20 minutes or so. My name is Joachim Wehner and I am a researcher with IDASA. I was asked to present an overview of the debate on Parliamentary amendment powers with regard to the budget. There is a paper by Warren Krafchik and myself on this topic. Copies are available via the International Budget Information web site. My presentation will have four broad sections. I want to say a bit about why we did this research, make some general comments, present a model that we developed and conclude with some basic policy recommendations. Although our recommendations apply to the South African case, they may as well, I think, apply to many other countries. Let me first turn to the South African situation and outline why we did this research. Section 77 of the South African constitution of 1996 allows Parliament to amend the budget, but it also says that there needs to be national enabling legislation, in other words, further legislation that regulates how exactly Parliament is supposed to go about amending the budget. This is perhaps quite unique, because in many other countries there are provisions in constitutions that will spell out directly how Parliament could go about this, or you will have no such stipulation and Parliament itself, in its Parliamentary rules, will determine this process. In South Africa it was felt that by writing Parliament’s principle right to amend the budget into the constitution this would protect this right, so I was told by a constitutional lawyer here. The necessary enabling legislation has been cause for debate since 1997. What happened last year during the budget process in March was that the Congress of South African Trade Unions, Cosatu, said: "we are not going to come and speak to you in Parliament on the budget, because what can you do about the budget anyway? If we are unhappy with it and we tell you why this is the case you don't have any powers to change that, so why should we make an effort anyway." Since there were few informed comments on the issue of Parliamentary amendment powers, we started looking at this topic. Here I come to my general comments. We started off from the assumption that the budget is one of the most comprehensive policy statements that a government has, spelling out the nation's priorities on an annual basis. We felt that Parliament as the representative of the people has the right to fully understand the policy implications behind the budget and check that it matches the nation's needs and priorities with available resources. Especially in South Africa you have a situation where there are limited resources, but almost endless needs, so that double check is very important. We found that almost generally across countries there is a compromise between technicality and democracy. In other words, the budget is very complex, so one cannot just "juggle things around", but on the other hand Parliament needs to approve the budget and must have the final word on it. Furthermore, civil society access is guaranteed through the Parliamentary budget process. That reminds me very much of the independent assurances of integrity which we heard a bit about yesterday. We found that Parliamentary amendment powers broadly fell into three categories. First, there are unrestricted powers where Parliament is allowed to do basically anything it wishes to the budget. As a second category you have restricted powers, with restrictions usually relating to an increase of expenditure. Then there is a third category where you have a balanced budget provision, where Parliament can do anything as long as the budget balance is maintained. The first category, unrestricted powers to amend the budget, is most common in presidential systems where such a broad legislative power over the budget can be counterbalanced in many cases by presidential veto. In other words, where you have a separately elected president there is a balance between the two. We, for the purpose of our research, then decided to focus more on systems that are comparable to South Africa Parliamentary systems where you have an executive that is elected from amongst the members of the legislature. We found that, although there are variations, there is a lowest common denominator which can be summed up as the power to reduce expenditure. Usually there is also some mechanism to engage with taxation, although that can be circumscribed. The question that we then had was why do some Parliaments use their powers to amend the budget and others do not. We looked at the extent of the use of these powers and realised that some Parliaments, the German one for instance, use their powers very extensively. Last year the German Parliament shifted more than 17 billion Deutsche Mark between votes and it cut total expenditure by more than 4 billion Deutsche Mark. In other Parliaments, like in Australia and the UK, Parliament tends to do nothing to the budget unless changes are supported or proposed by the executive. We designed a survey and decided to look at the UK, Australia, India, Germany and South Africa. We tried to look at some of the differences in the Parliamentary budget process that may help us to explain why these variations occur. Basically we came up with a set of six categories or variables that are important, that determine Parliament's overall ability to change the budget. In this third section, I want to present this basic model that we developed in conjunction with some country examples. I should add that we very much relied on getting information from people that work in Parliaments, because we found there was actually very little written work on this. It is not a widely researched area. The first variable obviously is the design of amendment powers itself. It is obvious that these directly impact on the possibilities that Parliament has to change the budget. Why are amendment powers important? As already said, presidential systems would represent a very strong case here, because there are usually very broad powers to change the budget. The weaker case would be the general category of Parliamentary systems and, perhaps most notably, South Africa where right now there is an absence of any powers that are legally defined. The second variable that impacts directly on Parliament's ability to change the budget is what we call the location of amendment powers. Basically we discovered that in some Parliaments committees have the right to propose amendments to the budget in their committee report to the legislature whereas in other countries they do not have this right. What flowed from that was that the debate on the floor of the house on the budget was usually much more focused when it was based on specific recommendations rather than just a general report. Germany is an example of where this is the case. The committee presents a very detailed report and recommends amendments, specific amendments to the budget in its report to the house. South Africa, to the contrary, is a very weak case. The committee report here is very flimsy. Last year it was about seven pages long with no recommendations whatsoever. The result you have is illustrated by what happened when the Water Affairs vote was discussed in Parliament last year. An opposition member brought a water sample, held it up and claimed it was rotten water which he claimed was straight from some tap. Then a cabinet member jumped up and yelled: "That's urine, are you allowed to bring a urine sample into the House?". All of this was very entertaining in a way, there was a lot of action, but it actually meant nothing. It meant nothing in terms of budget analysis and it was clear that MP's did not have a grasp on what was going on. Thirdly we found that time for consideration is a very essential variable. This is pretty plausible, but there are huge variations. Parliaments need time to enable careful and informed use of amendment powers. If there is little time, as in Australia for instance where the Parliamentary budget process lasts about a little more than one month, Parliaments tend not to have that ability. In Germany, on the other hand, Parliament has four months before the start of the financial year and that gives ample time for Parliament to really do in-depth analysis. So sufficient time was the third variable that we came up with. Our fourth variable, we named it committee involvement, is a very complex one. We found out that the way committees are involved in the Parliamentary budget process substantially impacts on the nature of amendments. I should elaborate a bit. First of all we found it is important that a co-ordinating committee, like for instance the finance committee, is able to draw on expertise in different sectors - like health, education or welfare - when it considers the budget. Secondly we found that there is an important link between the public accounts committee and the committee that considers the budget when it is being passed in Parliament, because in order to make informed amendments you need to know how the last budget was implemented and from that you are able to deduct very important observations that will help you in considering the new budget. In Germany, for instance, the budget committee considers sectoral input from so called reporting members that are members from within its committee that are assigned departmental votes and become experts on departmental expenditure. Furthermore the public accounts committee in Germany is a subcommittee of the budget committee. So all these functions are very neatly integrated and drawn together, which makes this committee's work very strong. On the other hand there are examples where such committee involvement is generally lacking. Australia, for instance, has no committee stage in the House of Representatives, and that obviously does not enhance members' ability to suggest informed amendments. I should say another thing, when I spoke about sectoral input and the importance of drawing it together, I meant that one would only have the ability to shift money between votes if one knows that if expenditure is cut somewhere the savings can be shifted somewhere else. Otherwise the overall chance that such reprioritisation will take place is quite limited. Our fifth variable was the independent research capacity that Parliament has at its disposal. This is important because it helped to rule out uninformed amendments and additional costs on the executive which would arise if extra questions would have to be answered by the departments in question. We found that in many countries Parliaments have quite substantial resources. There are usually scientific services, the library of the House of Commons has a research section with a staff of about 75, and many Parliaments have a dedicated budget division as well. I think the Congressional Budget Office in the US is the envy of any Parliament. On the other hand, in South Africa for instance, there are cases where such research capacity does not exist. I think a research capacity for budgetary matters is crucial to enable members to understand the budget. The gentleman I spoke to in Germany had been working for the budget division of the scientific service of Parliament for 30 years. So he probably knew more in some areas than members of the committee themselves and he was very informed. Such experienced people are a great asset. Finally we found a sixth variable, the access to departmental information and this is important because one needs to ensure that Parliament is able to keep an eye on the implementation of the actual budget. Oversight is needed for good and informed amendments. If you know how the budget was implemented that is a substantial part of your comment on the budget. You can say: "No we can't do it this way, because it didn't work when we did it that way last year, we need to do it differently now." There are many strong cases in this regard. In Australia you have current expenditure information on line. In Australia, Germany and the UK there are regular briefings of the auditor general with up to 50 reports a year, which makes for a substantial flow of information. The problem that you often find is that that this valuable information is not being fed back into the Parliamentary budget process. The situation we have in South Africa is that there is no up to date expenditure reports during the financial year, which is crucial information. So those are six variables that have been taken together, if you draw a balance, one of them may not make a difference, but drawn together they impact on the overall ability of Parliament to change the budget. I should add that perhaps there is a seventh variable that we have discovered subsequently and that is the way that committees organise themselves internally when they consider the budget. A very interesting example I found in New Zealand where the select finance and expenditure committee draws up a standard questionnaire that it then passed on to each department to be filled in and to be given to the sectoral committees that consider departmental votes. These then have a basis on which they can consider the departmental budgets when they come to the committees. They are also allowed to supplement these questions with detailed ones of their own. So that is perhaps another area which we forgot this time and which one should add on. Let me conclude by looking at South Africa. We found that what we need is the introduction of minimum standard amendment powers, congruent with international standards, with the right to reduce expenditure, effect shifts between votes, and a mechanism to engage with taxation. We should empower the finance committee to suggest amendments to the House and extend the time that is available to Parliament when it considers the budget. The latter would require bringing the presentation of the budget forward by about two months. We also need to assess the options that are available for establishing an independent research service for Parliament and, lastly, formalise regular departmental briefings on budget implementation. The latter is already taking place in some provinces. Okay, thanks. QUESTION: I've read the Cape Times. It says: "The budget presented to Parliament yesterday which Finance Minister Trevor Manuel described as a good news budget has been acclaimed across a wide spectrum from merchant banks to the South African communist party." Could you comment on this? MR. WEHNER: I think this calls for an economist's comment on South Africa's budget. However, I should give you a brief example of why we felt parliamentary amendment powers are really important in South Africa. This relates to last year's budget process. We had a situation in this province, the Western Cape, where the ruling party presented a budget which would have resulted in the closure of two hospitals in the province and they cited a tight budget as the reason. The opposition then came up with a proposal of how to affect additional savings that would have resulted in actually keeping these hospitals running. That has direct benefits for the people living in the province, how many hospitals they have accessible. The Budget Information Service at IDASA did an independent evaluation of those proposals and found that they were very feasible indeed. But there was no formal mechanism due to the absence of amendment powers for incorporating such good suggestions. MR. KRAFCHIK: The point that Joachim is making here is important. Amendment powers can make quite a serious difference in a reprioritisation debate. But if you wanted me to comment on this particular budget that was presented last week? Is it a feel good budget or is it a do good budget as opposed to feel good budget? I think it's a feel good budget, a lot of people felt good about it, but I don't think it's going to do much good. Two quick points about it and we've got a longer submission about it which we can make available to people and this is more or less what we've been engaging in over the last week. The government claims that this is a poverty budget. Our point has been that this is not a poverty budget, it's an investment budget. We understand that there are very few additional resources available given our debt and various other factors, personnel salaries etc etc, but of those minuscule resources that are available the vast majority of that has been skewed towards the private sector. Most went into a tax cut for example. Very little went into a comprehensive poverty programme. There was a soft measure of a billion Rand which was provided for poverty which we'll see during the year. So that was the first point we make. In a little bit more detail what we're concerned about is that government has budgeted for a very small increase in personnel salaries. Now personnel salaries make up 60 to 80 percent of your social expenditure budgets in the provinces. At the moment government budgeted for a decrease in real terms, about a minus two percent in personnel salaries. Now there's only two ways that that's going to happen. One way is that personnel, civil servants, all of them are going to accept a below inflation increase. We think that's unlikely and certainly, in last year's budget figures, personnel salaries were underestimated by about 25 percent across the social expenditure votes. The second way is that you can meet that amount if you affect immediately a radical reduction in the amount of civil servants. Now given a set of complicated circumstances there is no agreed tool at the moment on how to reduce the civil service and even if they were to find that tool and implement it the day after elections it's not going to impact on this year's budget. It will impact perhaps in the best scenario on next year's budget. Now if we're right and if the budget is underestimating personnel services then the second trend we found is that where that happens provinces tend to reprioritise out social expenditure and capital expenditure and preserve the money for personnel costs. So this is why we're saying in general that the budget will not do much good even though you might feel good about it on budget day, it's most likely to squeeze out social expenditure and capital expenditure. QUESTION: I would like to share my experience in Poland where the Parliament has amendment powers, but an extra expenditure has to be financed from a cut in another expenditure, so the balance has to be kept. The problem that we face was that usually the government proposes the budget with macro economic assumptions, and sometimes these were unrealistic, but they cannot be touched. For instance they assumed that the inflation would be low. Our institute predicted it to be a few points higher. But during the discussion in Parliament this cannot be discussed, although I think that it should. If they don't take into consideration this background, there will be problems even if you have amendment powers. QUESTION: This is a question relating to something Warren said. With regard to this interaction between the government and the independent research institute, in this case IDASA, how does the government react? Are they happy, are they thrilled with having a public debate on this issue? Relating to this, your seven points, which all are very pertinent, how would the government (in this case the ANC which has a very strong presence in Parliament, so they're really both the executive and the legislature with a fairly weak and divided opposition) react to these findings? MR. WEHNER: I should say that what happened was that there was a lot of controversy between Parliament and the Ministry of Finance on this very issue of amendment powers. The ANC is the majority party in the government, and obviously the ANC has a majority in the Parliamentary finance committee. But in this instance members of the finance committee, ANC or not, saw themselves as members of Parliament. What happened was the Minister of Finance presented a draft of how he would like this bill that regulates Parliament's powers to amend the budget to look like, that was towards the end of 1997, and the finance committee basically threw it out. The committee then established a study group which developed its own ideas which were not too well received in the department. So our role as IDASA in this instance is to support the legislature. We see a situation where the debate is not taking place on party terms, because it's not about ideology. MR. KRAFCHIK: It's not a bill that the executive is pushing, we're trying to make the space for that to happen, but having said that we can't read all the executives the same either. There is certainly a big distinction between people in the deputy president's office, for example, and people in the finance committee and people within the finance department. People within the finance department as well are split, so it's really a case of trying to identify where your allies are in each of the different parts of the executive branch and bring as many civil society people as possible to this debate, because this is going to empower the legislatures ability to engage in budget reform which they're still establishing their own legitimacy to do. QUESTION: I didn't get the opportunity to speak just now after your input. I think something that we can share and learn from which is really quite interesting is that in South Africa we are beginning to build a coalition of members of civil society, huge organisations in civil society, to play a more meaningful role in the budget process. This is at its beginning stages and we've had for the past three years big organisations like SANGOCO and the SACC and the economic justice wing of the SACC, which is the South African Council of Churches, and a range of structures coming together to grapple with the question of the budget. We do some basic economic literacy, we go to Parliament, we hear the speech, we come back, we talk about our impressions of the speech. Was it a feel good speech? I think that when we all came away from the speech to Parliament we felt that, yes, it was a feel good speech. The minister spoke about social expenditure, about less taxation for the poorer sectors under R70,000 a year, about tax relief. We welcomed that, but when you go into the details another picture emerges. We found that what was described as a social expenditure budget in fact in most cases amounted to a cut if you take inflation into account and we have got some of the details of our recent budget which we could share if there are people who are interested. When you go through the detail, another picture emerges. QUESTION: That was a good presentation. When you mentioned modeling I became excited, but then I found myself a bit frustrated at the end because you are thinking of only five countries and you have only about seven variables. There may be one other variable to consider: that is the composition of the legislature, in other words, the ratio of government to opposition membership in the legislature. QUESTION: I want to know about the composition of the parliamentary budgetary committees versus the locus of accountability, especially to civil society. What are the efforts in place throughout all these consultations to make them more accountable to civil society, and more inclined towards looking at issues that are poverty related? QUESTION: In your research, did you see how society can go to the parliament? In which way can civil society approach deputies, informally or formally through meetings, that helps parliament to analyse the budget and listen to society? This is an important aspect. MR. WEHNER: I should say that there actually is a paradoxical role for Idasa at the moment. Because we have a relatively weak and underresourced legislature, it is much more likely that it will draw on outside suggestions than if it was a lot stronger. Let me comment on the variables. Why did we choose these and not others? I think we were aware that there are many variables which we couldn't, by any means, incorporate into our research. One such variable was political culture. We know that in some countries amendments to the budget are regarded as a vote of no confidence. That's just the way it is thought of. In other countries like Germany there is a tradition that a working parliament is not one that simply gives the stamp of approval. This is a very different idea of how parliament works, and these differences are very important. So is the size of the ruling party, or whether a legislature is a full time legislature or not. You have some countries like Papua New Guinea, for instance, where parliament sits perhaps once or twice a year for a week or so. So we were aware that there are many other variables that would have been very interesting to look at. We were looking at a set of variables that we could objectively try to capture or measure in some way or another. But we acknowledge that there are many things that fall outside that model. The composition of committees - I think that was what your question related to - certainly impacts on how receptive committees are to the public. In South Africa, especially in the majority party, there is quite a commitment to representing a broad spectrum of society, so you find probably broader representation than in many other countries. This in all likelihood impacts on the willingness of members to listen to outside suggestions from various groups. It is another variable in a way. Society's access to parliament is also a hugely important point. I actually spoke about the strength of parliament, which, however, does not necessarily guarantee access of civil society to parliament. I have praised the German model because it's an example of a very strong parliamentary budget process. On the minus side, committee sessions in Germany are in principle closed. So there are contradictions. In South Africa we are very lucky that the Constitution of 1996 goes much further than any other Constitution, that I am aware of, in protecting the rights of committees and guaranteeing citizens' access to parliament especially through committees. The rights of committees to request members of the executive or any members of society to speak to them on any issue are protected. So we are very lucky here. As I said, we found that the German model works very well and there are many aspects that may be worth looking at. However, there is this total contradiction because the committee process is closed to the public. It is a strong parliament, but it is not open. |
