First of all, thank you very much for allowing me to present some thoughts to the committee. I also would like to thank your administrative team for being so helpful in helping me to organize this.
First I'm going to give you some comparative observations. I bring less of the Canadian experience but a bit more of a contrast with other legislatures in the OECD countries in particular.
The first point I would make is that there's no standard model. There's no one best model for parliaments to scrutinize the estimates. You have a really wide diversity of models among the industrialized democracies that range all the way from the traditional Westminster model, which essentially keeps Parliament in a very passive role, all the way to Congress, which takes eight months to look at the President's budget proposals, formulates its own proposals, and sometimes doesn't even manage to pass it in time for the beginning of the fiscal year. You have the entire range in the OECD countries, from essentially just approving the government proposal as it is to writing the budget, and anything in between.
Where you position the parliament is a normative choice. It reflects your view of how public spending should be scrutinized and how much Parliament should affect public spending. So one cannot advocate one single best model. I just wanted to make that clear. However, if your aim is to strengthen parliamentary scrutiny of public finances, then I think there are a few factors you can consider, given comparative experience.
Let me just highlight six of these, which are also discussed in the paper, which I believe your research staff has had access to. Maybe some of you have had time to look at it.
In this paper I compare a number of industrialized countries' national legislatures. I look at six aspects in particular. These are institutional features of the legislative budget process.
The first one is the power of the parliament to amend the executive budget proposal. The second is what happens if the budget is not approved by the time the financial year starts. The third is the degree to which the executive can adjust the budget, as approved by Parliament, during the course of the financial year. The fourth one is how much time Parliament has in advance of the fiscal year to scrutinize the budget. In other words, when is the budget tabled in Parliament relative to the beginning of the fiscal year. The fifth element is the committee capacity within Parliament to scrutinize the budget and to monitor its implementation. And the final point is Parliament's access to independent budget analysis capacity.
I'd be very happy to expand this discussion on individual points if you have any questions, but I'm going to leave it fairly general for the sake of keeping my input short.
What I do in the paper, and you have copies of the results in front of you, is produce a ranking of national legislatures based on these variables. I give high scores to countries where the institutional arrangements favour a high degree of parliamentary control of the budget, and I give low scores to institutional arrangements that make it more difficult for Parliament to scrutinize the budget and to shape budget choices.
If you look at this ranking, which I hope is in the submission you received, you will see that the Westminster parliaments tend to cluster at the very bottom of the distribution among OECD countries. So the inherited system from Westminster is not one, from an institutional perspective, that favours strong parliamentary scrutiny and strong parliamentary input into the budget process.
Despite this, it is at the same time true that a number of legislatures, in particular over the past 10 years, and also in countries that have inherited the western system of parliamentary government, have started to make changes to the budget process, in particular changes that strengthen the role of Parliament in the budget process. With this experience in mind, I would like to proceed to a very short list of some reflections about the situation in Canada that relate to the variables that I just summarized for you.
Drawing on international experience, I think there are a number of possible changes. I'm not saying these are changes you should be making, but changes that could be considered if your aim is to strengthen Parliament.
The first one, in my view, is to protect and enhance the role of the Parliamentary Budget Officer. A number of countries are creating similar institutions, and the Parliament in Canada has really been at the cusp of this development. Internationally, the Parliamentary Budget Officer of Canada is very highly regarded, and it's certainly a major change, in my view, at least, in the degree the parliament in Canada has access to an independent, highly professional research capacity.
I believe that some adjustments are possible to the legal framework for the Parliamentary Budget Officer. In particular, this role could be strengthened, or the status be strengthened, if he were a full officer of Parliament. Moreover, steps could be taken so that the Parliamentary Budget Officer has total access to all relevant information. In the past I believe there have been incidents where departments have not been quite as forthcoming with providing information to the Parliamentary Budget Officer as perhaps they should have been. But overall, I see this as a very positive development, and I see some scope for strengthening it also on the basis of international experience.
The second point—and Professor Franks also talked about this—that is worth considering is the structure of the appropriations. In Canada, if I understand correctly, the appropriations are actually fairly highly aggregated, so the main level of appropriating money is at the vote level, and there are some categories of expenditures within a vote. Parliament certainly does not approve the appropriations on a program basis.
So if you wanted more control over the budget process and over budgets, one move could be to move from approval of votes to approval of programs. You already have a set of main estimates that includes strategic objectives and, within these objectives, programs, and it would be a fairly easy step to structure appropriations in a similar way. A number of western countries have made this exact move in recent years. New Zealand has adopted output-based appropriations, which are more detailed than appropriations at the vote level. A country like South Africa, for example, a few years ago, about 10 years ago, switched from approving budgets on a vote basis to approving budgets on a program basis. This gives you a lot more control over the budget and limits a bit more the still very broad flexibility the executive has in implementing the budget.
Quickly, I'll make three other points. It is possible, in my view, to adjust the timing of the budget process. If you look at the comparative evidence, the Canadian Parliament is one of the very few parliaments in the OECD community where the budget is approved after the beginning of the fiscal year. This is done routinely. The OECD best practices for budget transparency state categorically that the budget should be tabled no less than three months prior to the beginning of the fiscal year. The standard is also in the IMF code of fiscal transparency, so this is a very widely accepted recommendation.
The delay of approval of spending proposals and of spending is really something that is very outdated, and there are possibilities to either adjust the fiscal year or to bring the tabling of the budget forward, which will do away with this outdated and—in my view—inefficient practice, which undermines Parliament.
Very briefly, I have two other points. It might be possible to strengthen committee review in Canada. In many countries that have very in-depth scrutiny by Parliament of the budgets, they have a two-step process, where the finance committee or an appropriations committee is first tasked with looking at the aggregates—the spending totals in the budget and the allocation of the aggregates across individual policy areas—and then sectoral committees are tasked with scrutinizing individual votes.
Several parliaments, such as that of Sweden and the United States, in the past few decades, reformed their process to kind of strengthen the scrutiny of the overall allocations and not just have the sectoral committees scrutinize individual budget votes or departmental budgets.
My final point would be—and this is possibly a bit more controversial, but it is worth noting—that the Canadian Parliament has fairly limited powers to amend the budget proposal of the executive. When I say “budget proposal”, I'm referring to the spending proposals. I'm sorry for this inaccuracy in terms of your terminology, but it's one that I'm very used to.
A number of Westminster parliaments, amongst others, have reshaped their amendment powers over the past few years to allow for a slightly bigger possible role in prioritizing the budget. I just want to mention three examples. The New Zealand Parliament in the 1990s changed its standing orders to allow the parliament to make changes within the votes—so to alter the composition of the votes. This is different from the amendment powers that Professor Franks describes in the Canadian Parliament, where you can only reduce items.
In South Africa, the parliament recently gave itself very broad amendment powers, which are essentially unfettered. An interesting reference point may also be the experience in France where the Loi organique relative aux lois de finances was reformed in 2001. Through this reform, the parliament actually received the power to change allocations between programs within so-called “missions”, which are broader clusters of programs.
So there are several examples of parliaments that have recently extended their powers to allow for, amongst others, the possibility of shifting money between different programs in the budgets.