Budget preparation in North Europa
The Budget Preparation process in North Europa generally follows the same pattern every year.
1. The Budget cycle
The Budget Preparation process in North Europa generally follows the same pattern every year. The timetable is desribed in the constitution, where the law prescribes that the general government draft Budget bill should be introduced before the end of August, and the Parliament should pass the approved Budget bill or pass a provisional appropriation before the financial year begins.
From the first preparations of the Budget proposal it takes about 1 year before the Parliament decides on the Budget and about 2½ years before the fiscal accounts can be presented to Parliament.
The overall schedule are illustrated in the following table:
- The Budget cycle
- Institutions in the Budget process
- Establishing Budget preconditions
- Setting up overall Budget targets
- Follow-up
1. The Budget cycle
The Budget Preparation process in North Europa generally follows the same pattern every year. The timetable is desribed in the constitution, where the law prescribes that the general government draft Budget bill should be introduced before the end of August, and the Parliament should pass the approved Budget bill or pass a provisional appropriation before the financial year begins.
From the first preparations of the Budget proposal it takes about 1 year before the Parliament decides on the Budget and about 2½ years before the fiscal accounts can be presented to Parliament.
The overall schedule are illustrated in the following table:
Time
January
Early February
May
May - June
August
End of August
Early September
Early November
Mid November
End of November
Mid December
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Process
Ministry of Finance examines budget preconditions and proposes overall Budget targets
Break down of overall budget targets to ceilings for consumption, income transfers, and investments for each ministry
Line ministries give their draft Budget proposals to The Ministry of Finance
Ministry of Finance performs technical scrutiny of the Budget proposal and holds discussions with line ministries on the financing of new initiatives etc.
Last minute estimates of the economic situation and the influence on the Budget proposal
Presentation of the Budget proposal
First Parliamentary discussion on the Budget proposal
End to political negotiations on the Budget proposal
Minister of Finance proposes the Governments amendments and changes to the Budget proposal (including the result of the political negotiations)
Minister of Finance presents amendments due to a final estimate of the economic situation and the influence on the Budget Proposal
Third and final Parliamentary discussion on the Budget Proposal
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2. Institutions in the Budget process
The Preparation of the central Government Budget in North Europa is done in co-operation between several levels of Government. The different authorities play their own special role - not only in the preparation of the Budget Proposal, but also in implementing the Budget, and controlling the outcome.
The authorities and the functions they perform can be found in every country. A closer study will however show differences with regard to:
This presentation will give an introduction to the authorities and their role in the North European Budget and appropriation system.
Parliament
The Parliament is the central appropriation authority. According to the North European constitution no expenditure may be paid without a prior appropriation from the Parliament, and no tax may be collected if it is not decided in a law.
As for the Budget procedures the North European constitution states that the Budget Proposal must be presented to Parliament at the latest four month prior to the beginning of the fiscal year.
The Parliament can not make its own Budget Proposal, but it is entitled to decide changes to the Governments Budget Proposal before finally adopting the Budget.
The Parliament's Finance Committee functions as the appropriation authority during the fiscal year. It is also in the Finance Committee discussions on the detailed contents of the Governments Budget Proposal are taken. Usually the Parliamentary debate on the Budget Proposal follows a broader perspective on the economic policy.
When the Budget Proposal has been adopted by Parliament and the fiscal year has begun, changes to the appropriations in the Budget can be implemented through applications to the Parliament's Finance Committee. Such applications must contain a full explanation to why a change is necessary, how it will be financed e.g. through cuts in other appropriations or reserves. Furthermore an application must be approved by the Ministry of Finance before it can be sent to the Finance Committee.
This procedure makes the North European appropriation system very flexible because most applications to the Finance Committee are passed within 1-2 weeks. As a special North European practice all applications passed by the Finance Committee during the fiscal year are combined in one supplementary appropriation-act by the end of the fiscal year.
Government
At Cabinet-level only a few general economic discussions are taken during the year. Generally most economic discussions in the Government including Finance Policy and Economic Programmes are taken in the Cabinets Economic Committee (a group of four ministers where the Minister for Finance presides). In specific matters this Committee can call on other ministers.
In January the Cabinets Economic Committee decides on ceilings for the coming year (i.e. spending limits for each ministry). This discussion also includes a broader economic discussion on the global economic targets.
In June the Cabinet discusses the result of the Budget Preparation process and decides on the Budget Proposal for presentation to Parliament.
Ministry of Finance
The Ministry of Finance coordinate the Budget process. It is the Minister of Finance who presents the Budget Proposal to Parliament on behalf of all cabinet ministers.
Under the North European system no cabinet minister can contact the Parliament or its Budget committee in appropriation issues without a prior acceptance from the Minister of Finance.
The functions of the Ministry of Finance in the Budget process can be divided into four major tasks:
To make Guidelines and Directions to be used by the spending ministries when drafting the Budget.
The first three functions are necessary to ensure that the Minister of Finance has the background to present a coherent economic policy based on actual projections of the Fiscal Balance for the Central Government.
Due to practical considerations the functions of accounting are placed with the Agency for Economic Management. This is to ensure the best possible use of computer technology, but also due to financing considerations. In North Europa the Ministry of Finance does not make money transfers to spending agencies. The agencies have access to draw directly on the Central Bank. The accounting and payment systems gives the agencies regularly updated reports on how much have been spent of the appropriation. These reports are also sent to the relevant ministry.
Spending ministries
All Government administration in North Europa is based on the law of responsibility of each cabinet minister. The law determines that the minister are politically responsible for all decisions taken within his area, but does not prohibit a delegation of decision-power to lower levels within the ministry.
This implies that all appropriations decided by Parliament are given to a minister. From this also follows that every spending decision in the agencies are taken on the Ministers responsibility.
The spending ministries therefore have two major functions in the Budget process:
If a spending ministry during the Budget follow-up finds it necessary to apply for a change to an appropriation, the application and the financing must be approved by the Ministry of Finance before it can be submitted to Parliament.
Spending agencies
The spending agencies are where the actual spending of the appropriations decided by Parliament are done. In the Danish Budget system they are involved in several parts of the Budget process.
As mentioned above they operate on behalf of the relevant minister and on his responsibility. The amount of decision-power delegated from the minister to the agencies can differ from ministry to ministry. This also applies to spending decisions.
In most cases the Budget process within a ministry starts with the minister asking the different agencies for draft Proposals to the Budget for their operations. Later in the Budget process agencies usually are asked to help in the process of giving priority to marginal spending reductions or expansions.
The authorities and the functions they perform can be found in every country. A closer study will however show differences with regard to:
- Procedures used in the Budget preparation and appropriation process, and during Budget implementation, follow-up and control.
- Actual influence, that the different authorities have at different occasions during the process.
This presentation will give an introduction to the authorities and their role in the North European Budget and appropriation system.
Parliament
The Parliament is the central appropriation authority. According to the North European constitution no expenditure may be paid without a prior appropriation from the Parliament, and no tax may be collected if it is not decided in a law.
As for the Budget procedures the North European constitution states that the Budget Proposal must be presented to Parliament at the latest four month prior to the beginning of the fiscal year.
The Parliament can not make its own Budget Proposal, but it is entitled to decide changes to the Governments Budget Proposal before finally adopting the Budget.
The Parliament's Finance Committee functions as the appropriation authority during the fiscal year. It is also in the Finance Committee discussions on the detailed contents of the Governments Budget Proposal are taken. Usually the Parliamentary debate on the Budget Proposal follows a broader perspective on the economic policy.
When the Budget Proposal has been adopted by Parliament and the fiscal year has begun, changes to the appropriations in the Budget can be implemented through applications to the Parliament's Finance Committee. Such applications must contain a full explanation to why a change is necessary, how it will be financed e.g. through cuts in other appropriations or reserves. Furthermore an application must be approved by the Ministry of Finance before it can be sent to the Finance Committee.
This procedure makes the North European appropriation system very flexible because most applications to the Finance Committee are passed within 1-2 weeks. As a special North European practice all applications passed by the Finance Committee during the fiscal year are combined in one supplementary appropriation-act by the end of the fiscal year.
Government
At Cabinet-level only a few general economic discussions are taken during the year. Generally most economic discussions in the Government including Finance Policy and Economic Programmes are taken in the Cabinets Economic Committee (a group of four ministers where the Minister for Finance presides). In specific matters this Committee can call on other ministers.
In January the Cabinets Economic Committee decides on ceilings for the coming year (i.e. spending limits for each ministry). This discussion also includes a broader economic discussion on the global economic targets.
In June the Cabinet discusses the result of the Budget Preparation process and decides on the Budget Proposal for presentation to Parliament.
Ministry of Finance
The Ministry of Finance coordinate the Budget process. It is the Minister of Finance who presents the Budget Proposal to Parliament on behalf of all cabinet ministers.
Under the North European system no cabinet minister can contact the Parliament or its Budget committee in appropriation issues without a prior acceptance from the Minister of Finance.
The functions of the Ministry of Finance in the Budget process can be divided into four major tasks:
To make Guidelines and Directions to be used by the spending ministries when drafting the Budget.
- To collect draft Budget Proposals from the ministries and combine these to the final Government Budget Proposal.
- To follow-up on Government revenue and spending and make economic forecasts and calculations as preparation for Government decisions on economic policy.
- Through the Agency for Economic Management to ensure the accounting in the agencies and to present the fiscal accounts after the end of the fiscal year.
The first three functions are necessary to ensure that the Minister of Finance has the background to present a coherent economic policy based on actual projections of the Fiscal Balance for the Central Government.
Due to practical considerations the functions of accounting are placed with the Agency for Economic Management. This is to ensure the best possible use of computer technology, but also due to financing considerations. In North Europa the Ministry of Finance does not make money transfers to spending agencies. The agencies have access to draw directly on the Central Bank. The accounting and payment systems gives the agencies regularly updated reports on how much have been spent of the appropriation. These reports are also sent to the relevant ministry.
Spending ministries
All Government administration in North Europa is based on the law of responsibility of each cabinet minister. The law determines that the minister are politically responsible for all decisions taken within his area, but does not prohibit a delegation of decision-power to lower levels within the ministry.
This implies that all appropriations decided by Parliament are given to a minister. From this also follows that every spending decision in the agencies are taken on the Ministers responsibility.
The spending ministries therefore have two major functions in the Budget process:
- They have to present a draft Budget Proposal for the ministry and all its agencies to the Ministry of Finance.
- They have to follow-up on the actual Budget and take action if an agency have difficulties to keep the given appropriations.
If a spending ministry during the Budget follow-up finds it necessary to apply for a change to an appropriation, the application and the financing must be approved by the Ministry of Finance before it can be submitted to Parliament.
Spending agencies
The spending agencies are where the actual spending of the appropriations decided by Parliament are done. In the Danish Budget system they are involved in several parts of the Budget process.
As mentioned above they operate on behalf of the relevant minister and on his responsibility. The amount of decision-power delegated from the minister to the agencies can differ from ministry to ministry. This also applies to spending decisions.
In most cases the Budget process within a ministry starts with the minister asking the different agencies for draft Proposals to the Budget for their operations. Later in the Budget process agencies usually are asked to help in the process of giving priority to marginal spending reductions or expansions.