Thank you very much. And thank you to all the members of your committee for inviting me to appear before you.
I feel in some ways that I'm appearing before you under false pretenses. A few years ago, when I was researching a book on the budget process, I gave evidence to a House of Commons committee in London. That committee was studying better ways of involving the United Kingdom Parliament in approving and considering the budget.
One of the things it had front of it was a report from the Hansard Society, which had examined how legislatures throughout the world dealt with and involved themselves in budget consideration. The Hansard Society had constructed a table ranking legislatures on the basis of their influence in terms of budget approval.
There were about 15 legislatures in that league table. At the top in terms of its influence, as one would expect, was the United States Congress. Firmly at the bottom was the New Zealand Parliament.
You can imagine that I was put at a certain disadvantage in trying to tell the House of Commons committee how it should organize its consideration of the budget to enhance its budget role, when my own Parliament—the Parliament I was associated with—was firmly at the bottom of the league table.
There were a number of other Parliaments similar to mine that were not very far above New Zealand: the United Kingdom itself, Australia, and Canada. One thing I do take comfort from in terms of a ranking of that nature is that there is no correspondence between a lack of parliamentary influence over the contents and approval of the budget and one's ranking as a liberal democracy. Most of the democracies that were ranked very low on the Hansard Society's table in terms of legislative influence over budgets were themselves epitomes of democracies and liberal democracies. There is no correspondence between a legislature's lack of involvement or control over budget outcomes and the country's standing in terms of its own particular democracy and liberal attitudes. I do think there is one thing that did come out of that table that impressed itself on me, and that is the degree to which we can expect legislatures to have an influence over budgets that are presented to them.
In presidential or semi-presidential systems, there is a high degree of difference between executive power and legislative power. In the United States, for instance, members of the executive, by law, cannot be members of the legislature. That's entirely different in systems like our own in New Zealand, and I surmise in Canada too, where there is a high degree of correspondence between executive power and legislative power.
In our systems, in order to be in government one must first be in Parliament. Where the government is not an alien element to a Parliament, it's an essential and senior element in the Parliament. In those systems expectations about the degree of influence that our legislature can exert over the budget must be quite different. It's not only expectations, but it seems to me that it's less appropriate for there to be legislative control over the budget in the way that can be exerted in presidential systems, in a system in which the government itself is a functioning participant—and sometimes a dominant functioning participant—in the legislative process.
I know that in Canada you have a first-past-the-post electoral system, and for the last few years it hasn't been throwing up the sorts of clear results, in party terms, that one often associates with first-past-the-post systems.
In New Zealand we've had a proportional representation system for the last 15 years. It's a system that almost guarantees that no individual party will get a majority on its own in the Parliament. We're almost in a post-coalition phase of government in New Zealand; we haven't had a coalition government since 1999. Governments make arrangements with other parties that they call “support parties” in order to obtain majorities for their policies in the Parliament.
At our last election the now governing National Party obtained 48% of the vote, which in a first-past-the-post system would have given it an overwhelming majority of members in Parliament. It still does not have a majority in its own right in the Parliament.
Even though we've moved to a proportional system with no overall party majority in Parliament, that has not significantly increased the influence our legislature has on the passing of the budget. I think it hasn't significantly increased it for the reasons I've just touched on: that there would be something fundamentally wrong in a parliamentary system if a Parliament were constantly rewriting the budget proposals that came forward from the government. The government wouldn't have the mandate to govern in the first place if it was put on the back foot in that way in terms of getting its budget through.
The first point I want to make to you is I think one needs to be realistic in one's expectations in a parliamentary system about the degree of influence a legislature can appropriately bring to bear in terms of a budget. It doesn't mean that legislative performance with regard to budgets can't be improved. It certainly can. I think New Zealand is still behind the game to some extent with regard to that. It can be improved, but the legislature cannot be a controlling element in negotiating a budget in the way that a legislature can in the United States, for instance.
Turning to the specifics of the budget process, I'll touch on them as far as New Zealand is concerned, not because I think you have a lot to learn from New Zealand, but because I think it will give me an opportunity to throw in a few remarks about issues that you might like to consider. I think it's important from a budget approval point of view to take a holistic approach. Approving a budget isn't just a budget night announcement by the minister and then estimates going off to parliamentary committees for legislative endorsement. I think a proper budget process starts with how a budget is prepared. It obviously runs into how a budget is approved. Then it runs further into how one looks back post-budget to see how that budget turned out in the event, and whether approvals that were given were appropriately used from a legal point of view and from the effectiveness and efficiency points of view.
As far as the pre-budget process is concerned, it's still fairly rudimentary in New Zealand. A government is required by law to present a budget policy statement to Parliament prior to the budget setting out its assessment of the economic and fiscal outlook, and setting out the conditions under which it is drawing up a budget, from its point of view. What are the fiscal constraints? What is the economic outlook that will govern budget decisions by the government?
That budget policy statement is considered by a committee like yours, the finance committee, and reported back to Parliament, and a debate takes place, but it's all at a very high level. It's very difficult to trace any connection between the budget policy statement and particular budget outcomes. In one very minor area, and it is a very minor area only, our Parliament I think is probably ahead of most other Parliaments in terms of preparation of a budget, and that is with respect to the budget for offices like mine: officers of Parliament. We have three of them: the controller and auditor general, the ombudsman, and the parliamentary commissioner for the environment. Our expenditure, I suppose, will represent about 0.5% of overall government expenditure.
With respect to officers of Parliament, the Parliament itself, a parliamentary committee, draws up the budget. By constitutional convention, the government includes in its own estimates what that parliamentary committee has decided upon. It's a parliamentary committee chaired by the Speaker. So from that point of view, that's a very high degree of legislative involvement, because the legislature itself is writing the budget, but of course it's with respect to a very small proportion of the government's overall budget.
Apart from those two involvements, the New Zealand Parliament doesn't really involve itself with budget preparation. I understand that in Canada, since at least 1994, your committee—I think it's your committee—has been receiving submissions from members of the public about what they would like to see in budgets. I think this is a very valuable role that Parliaments can legitimately take on. After all, in the run-up to the budget there is a great deal of community consideration and discussion about what people would like to see in the budget. It seems to me that it's a good idea for Parliament to channel that type of discussion into its own proceedings with its own sectoral committees, inviting sectors of the community to come in and tell those committees what they would like to see from the budget.
The process could turn into a little bit of a wish list, but after all, why shouldn't Parliament become the forum for that kind of debate, rather than leaving it to the media?
I think there's a great deal more, certainly in New Zealand, that our committees could do. They're putting themselves in the forefront of public debate about what the public has in terms of expectations about a coming budget. What effect in terms of pay-off, in terms of inclusion in the budget, results from that, I'm not sure that it would be a great one. Nevertheless, it would put Parliament at the centre of a debate on a very important issue: what governments should include in the budget. And to some extent, Parliament is reactive in regard to that sort of issue. Statements are made in the media about what people expect from the budget, and parliamentarians might respond to them. But why not bring that kind of debate out of the media and straight into the Parliament, rather than dealing with it in a derivative way, in the way in which it's generally dealt with up to now.
As I say, from a New Zealand point of view, participation in the preparation phase of the budget is fairly rudimentary. It could be a lot better. It could be better, from one point of view, by bringing the public into the Parliament and stimulating debate about what the public wants to see in a forthcoming budget.
Budget approval itself, of course, is a highly political process. If a government doesn't get budget approval, it ceases to be a government, and that's a fundamental constitutional principle. In New Zealand we have the traditional budget statement from the Minister of Finance, and then we have consideration of the individual estimates by the various select committees to which those estimates are referred.
Not every estimate can have a full consideration by the committee involving public hearings, but most of them do. And in most cases the committees to which the estimates are referred will hold public hearings at which the minister, who is being given the spending authority by the estimates, will be expected to appear before the committee to explain why the minister wants that spending authority. The minister will defend criticism from members of the committee as to why it's too much or why it's not enough or why there isn't something for a particular subject that they think ought to be considered by the government and acted upon.
Because the minister is in front of those subject committees considering estimates, it's a highly politically charged atmosphere, of course. Politicians engaging with politicians will engage at a political level, and one shouldn't expect anything different. But it does seem to me that sometimes opportunities are missed for legislative involvement and influence. One area where it does seem to me that there is a fruitful opportunity for greater legislative influence is in respect of the performance standards the departments are signing up to as a condition for getting the finance that is being given to them.
These days parliaments don't vote cash resources for the purchase of so many PCs or cars or whatever; parliaments allocate spending authorities that will deliver services that government wants to have delivered from its departments. The only way of measuring whether those departments are adequately delivering the services is to draw up performance standards in advance that they must meet in delivering the services and the goods that government is purchasing from them. So departments promise to answer so many pieces of correspondence within 90 days or to approve so many grants within 30 days.
It does seem to me that it would be worthwhile for parliamentary committees to look closely at those promises to see whether they're rigorous enough, to see whether they need to be specified with greater specificity if they're too nebulous. It's to see, in other words, whether the conditions that departments are signing up to, as a condition of receiving authority for public expenditure, are sufficiently well drafted. I think ministers themselves would have an interest in a greater parliamentary consideration of these sorts of issues, because it is in ministers' interests to get the best deal for the money that they are spending on their departments for the delivery of goods and services.
Unfortunately, it seems to me these performance measures seem to be tucked away in very detailed documents. In New Zealand we call them statements of intent. They're like corporate plans for individual departments. There's a lot of information to try to wade through that is not necessarily presented in a congenial way. But it is quite important to focus on the standards of performance that departments are signing up to as a condition of their annual funding authority and to see whether those standards are appropriate or whether they couldn't be improved.
Although I don't advocate that it's possible in a Westminster parliamentary democracy for Parliament to have a strong influence in terms of rewriting the budget, I do think it is possible for parliamentarians to bring some influence to bear in terms of those kinds of standards. I think greater attention from parliamentarians to that kind of detail that is tucked behind the budget would repay study.
Post-budget the traditional way of examining how governments have performed has been through public accounts committees, which eschew politics, which look at the economic and efficient use of resources largely on a bipartisan basis.
In New Zealand we do not have and never have had a public accounts committee. We no longer even have a pretense that any committee will carry out that public accounts examination post-budget of performance by departments. What we have instead is a fairly comprehensive review process called financial review.
As government departments finish the financial year, they're obliged to report to Parliament, setting out in an annual report quite detailed financial statements in terms of the way in which they've used the appropriations that were given to them in the previous financial year. The level of reporting is quite high, and it seems to be quite satisfactory.
Those reports are then referred to individual parliamentary committees, depending on the subject. The health committee, for instance, would look at the annual report of the Ministry of Health. The defence committee would look at the annual report of the defence force. Another round of hearings would commence, with the chief executive, in our terms, and the deputy minister in your terms, fronting before the committee to answer for the way in which the department has used the resources that were given to it, whether it has delivered on the performance standards that it's promised to deliver on, or whether it's acted in other ways that members want to follow up in terms of being inappropriate or inefficient.
Again not every department will have a public hearing on financial reviews because there isn't the time for every committee to do that, but those financial reviews are an essential post-mortem, as it were, on the previous year's budget in terms of the way in which the considerable resources that one is voting these days to government departments actually were used.
The reports from the committees back to the House will lead to a debate on the floor of the House about the performance of the departments. In fact the debate was held earlier this week, and it involved reference to the way in which this office had used its resources--I must add, not in a critical way. Nevertheless, it was gratifying to see there was some parliamentary attention given to quite a small office in the general scheme of things.
I think there is a comprehensive post-budget process in New Zealand involving all committees. I think one of the difficulties with it is that it is politicized. And there's nothing wrong with that. Politics are the Parliament. The fact that it is highly politicized means that the regular public accounts committee work, which is antithetical to a strong political involvement, tends not to get done. Members' interests, naturally enough, tend to be on the politics of the situation, and without a dedicated public accounts committee, some of the more dreary but nevertheless worthwhile work doesn't tend to get done by parliamentarians. That, I think, is a failure in our process.
Those are words of a general nature about what I see as legitimate expectations in Westminster parliamentary democracies from legislative influence over the budget process and a quick run-through on the New Zealand one--as I say, starting from the bottom of the table in the relegation league in terms of influence, but saying that with a degree of realism in terms of the way in which our system works.
It's back to you, Mr. Chair. I would be very happy to respond to any comments or questions from members of your committee.