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PEM PAL Budget Community of Practice ( BCoP ) “The Role of Austria's Parliament in Budgeting” Fiscal Governance in Austria Vienna, 30 th January 2014. Helmut Berger Parliamentary Budget Office. Content. Key Elements of Fiscal Governance

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helmut berger parliamentary budget office

PEM PAL Budget Community of Practice (BCoP)“The Role of Austria's Parliament in Budgeting”Fiscal Governance in AustriaVienna, 30th January 2014

Helmut Berger

Parliamentary Budget Office

content
Content
  • Key Elements of Fiscal Governance
  • Overview of the Austrian political, economic and fiscal system
  • Actors and Competences in the Fiscal Process
  • The Budget Process at a Glance
  • The Budget at a Glance
  • Intragovernmental Fiscal Relations
  • The Austrian Stability Pact
  • Challenges for Parliament

REPUBLIK ÖSTERREICH Parlament

key elements of fiscal governance
Key Elements of Fiscal Governance

REPUBLIK ÖSTERREICH Parlament

challenges for governments and parliaments
Challenges for Governments and Parliaments
  • Foster fiscal sustainability
  • Enhance fiscal transparency
  • Safeguard value for money for citizens
  • Support medium and long-term orientation
  • Provide benchmarks for politicians, administration and public
  • Assure commitment and a key role for the parliament

It`s all about good governance and fiscal accountability!

REPUBLIK ÖSTERREICH Parlament

definition of fiscal governance i
Definition of Fiscal Governance (I)
  • Fiscal governance is the combination of institutions, rules, and norms that structure governance in this policy area
  • Fiscal governance is focusing on how governmental budgetary policy is planned, approved, carried out and monitored
  • Generally fiscal governance involves different public entities, but business and civil society are engaged as well
  • In countries with different layers of government (federal state, provinces, municipalities etc.) regulations on the intragovernmental fiscal relations are an essential part of fiscal governance
  • National fiscal governance may be influenced by international obligations or assessments from international organisations (e.g. OECD, rating agencies)

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definition of fiscal governance ii
Definition of Fiscal Governance (II)
  • Fiscal governance, or fiscal frameworks, can be defined as those rules, regulations and procedures that influence on how budgetary policy is planned, approved, carried out and monitored
  • This includes particularly:
    • Basic principles of budgeting and accounting
    • System of fiscal equalisation
    • Numerical fiscal rules
    • Independent fiscal institutions
    • Medium-term budgetary frameworks (MTBFs)

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objectives of fiscal governance i
Objectives of Fiscal Governance (I)
  • Traditional political objectives
    • Assuring parliamentary approval of the budget and close control over spending by the “sovereign”
    • Better coordination among the various government layers, particularly in highly decentralised countries
    • Meeting the obligations arising from international agreements or rules and policies of the European Union
    • Economic objectives
    • Sound and sustainable budgetary positions in particular by containing the deficit bias (i.e. the tendency to give rise to high deficits and increasing debt ratios)
    • Reducing the cyclicality of fiscal policy making
    • Promoting a more long-term oriented fiscal planning and avoiding the short term approach typically associated to political cycles

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objectives of fiscal governance ii
Objectives of Fiscal Governance (II)
  • Performance objectives
    • Improving the efficiency of public spending
    • Assuring financial transparency
    • Avoiding “creative accounting”
    • Linking the allocation of budgetary resources to performance
    • Support the efficient use of public resources by monitoring the efficiency of public spending programmes

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overview of the austrian political economic and fiscal system
Overview of the Austrian political, economic and fiscal system

REPUBLIK ÖSTERREICH Parlament

the austrian political and fiscal system
The Austrian politicaland fiscal system

Austria is a parliamentary democracy that has been dominated by majority governments and grand coalitions of two major parties since 1945

Austria is a federal state and is composed of nine federal provinces, the so called “Laender” (Burgenland, Carinthia, Lower Austria, Upper Austria, Salzburg, Styria, Tyrol, Vorarlberg and Vienna)

Legislative and executive powers are shared by the federal and provincial parliaments and governments

On the local level the 2.354 municipalities (71 with more then 10.000 inhabitants) have the right to self government

REPUBLIK ÖSTERREICH Parlament

the austrian political and fiscal system1
The Austrian political and fiscal system
  • Laender and municipalities have their own systems of financial management (i.e. own budgets) and may levy taxes
  • However, legislative and fiscal powers are highly centralised
  • Important taxes as the income tax, value-added tax etc. are practically raised only on the federal level and revenue offices are managed solely by the federal level and to a small extend by municipalities
  • Laender and municipalities receive funds by fiscal transfers from the federal government’s tax revenue under the system of revenue sharing and fiscal equalisation
  • The revenue-sharing plan covers only a few years and is re-negotiated at regular intervals
  • Municipalities and their local budgets are supervised by the Laender

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selected economic indicators
Selected EconomicIndicators

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expenditure shares of levels of government 2012
Expenditure Shares oflevelsofGovernment 2012

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general government development
General Government Development

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actors and competences in the fiscal process
Actors and Competences in the Fiscal Process

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actors in the fiscal process
Actors in the Fiscal Process

European Union

Parliament

Court of Audit

Budget

Office

Institute of Economic Research

Federal Government

Fiscal Council

Ministry of Finance

Line Ministries

Austrian National Bank

Austrian

Treasury

Statistics

Austria

parliament national and federal council
Parliament - National and Federal Council

The Austrian Parliament has two chambers, the National Council (183 members) and the Federal Council (61 members), who jointly represent the legislative power. The Federal Councils major responsibility is the representation of the Federal Provinces’ interests in the legislative process at federal level.

The National Council has exclusive competence in budget matters. The Federal Council has no decision rights in this area.

The Federal Council’s approval is necessary in case of intended change of the distribution of competences as laid down in the federal constitution restricting the competences of the Provinces.

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budget committee
Budget Committee

The Budget Committee prepares the approval of the Federal Medium-Term Expenditure Framework Act, the Budget Finance Act and of all kinds of bills regarding budgetary matters.

For this purpose the Budget Committee debates the bills. During these debates the Minister of Finance and the responsible Line Ministers have to be present and must answer any questions arising in respect of the budget allocations.

As for the implementation of the Budget Finance Act, the Budget Committee discusses and resolves so called Budget Accompanying Acts (Budgetbegleitgesetze). These Budget Accompanying Acts change legislation in various matters with financial impact as for instance laws on family grants, social security or hospital funding.

REPUBLIK ÖSTERREICH Parlament

budget office
Budget Office
  • Established 2012
  • Main Tasks:
    • To support the budget committee in form of written expertise, analysis and short studies on budgetary matters presented by the government according to budget law
    • To support other parliamentary committees regarding impact assessment of new legislation
    • To consult the Parliament on performance and gender budgeting
  • Currently 7 headcounts, 5 academic experts
  • Government independent expertise, direct support for budget committee, part of Parliamentary Administration
austrian court of audit
Austrian Court of Audit
  • Set up by the federal constitution as an independent auditing institution on a federal, laender and municipal level
  • Main functions and objectives
    • To verify that state funds are being correctly administered, including state spend by public institutions and state funds used by private institutions.
    • To scrutinise whether resources available are being used economically, efficiently and effectively
    • To Compile the federal financial statements
    • To Audit processes and financial statements of government bodies and off-budget entities
    • To cooperate in preparing the financial debt statement by ensuring the legality of debts and their correct entry in the ledger of financial debt

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ministry of finance
Ministry of Finance
  • Macro-fiscal policy competence according to the Constitution and Organic Budget Law
    • Overall-responsibility for the federal budget and overall-coordination (of federal government but also with lower levels of government)
    • Preparation of draft budget bills (medium-term and annual)
    • Establishment of Budget rules
  • Agreement on overruns of budget allocations
  • Only Ministry of Finance may assume liability on behalf of the Federal Government (statutory or contractual guarantees)
  • Only Ministry of Finance may incur financial debts (in compliance with authorisations contained in the Federal Finance Act)
  • Reporting requirements to National Council

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line ministries
Line ministries
  • Participation in the preparation of medium-term and annual budget bill
  • Execution of budget
    • Management and oversight of budget funds, and exercise oversight of compliance with budget figures and the performance mandates
    • Prepare monthly budget forecasts
    • Participate in controlling
    • Management of re-allocations (depending on budget level)
  • Accounting of all business cases
  • Participation in the drawing up the federal financial statements
  • Developing and administration of policy areas

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austrian treasury
Austrian Treasury

Debt management office and acts in the name and for the account of the sovereign

Wholly owned by the Republic of Austria, represented by the Federal Ministry of Finance

The primary objective is to secure the government’s funding at the lowest possible cost over the medium to long term while avoiding excessive risk

Responsibilities include issuing Austrian government debt and managing the central government debt portfolio

Acts as central liquidity manager of the Republic of Austria

May perform financial and consulting activities for Austrian provinces, quasi-governmental and other legal entities of the Republic of Austria with the aim of exploiting synergies

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statistics austria
Statistics Austria

Separated from Government Services in the year 2000

Independent and non-profit-making federal institution under public law

Responsible for performing scientific services in the area of federal statistics

Federal Statistics is defined as a (non-personal) information system of the government providing data on the economic, demographic, social, ecological and cultural situation in Austria

This information helps administrative bodies in planning and political decision-making procedures and in controlling the measures taken

Moreover, data are made available to the scientific and economic community and to the general public

The Statistics are decreed by international legal acts of the European Community, by federal laws and by regulations

REPUBLIK ÖSTERREICH Parlament

austrian institute for economic research wifo
Austrian Institute for Economic Research (WIFO)

The Austrian Institute for Economic Research (WIFO) is an independent scientific institution that prepares all macroeconomic assumptions used in the budget process.

WIFO is funded by the federal government, the state governments and the social partners, as well as by specifically funded research. It has a professional staff of about 100 persons.

WIFO produces multiple forecasts for the Ministry of Finance, including the five-year perspective used in the coalition negotiations, the economic assumptions for the annual budget, the mid-term expenditure framework and the annual stability programme submitted to the European Commission.

The objective is to forecast as accurately as possible.

WIFO is also engaged in a variety of economic research, both in Austria and internationally.

REPUBLIK ÖSTERREICH Parlament

fiscal advisory council
Fiscal Advisory Council

Evaluation and forecast of the financial-political situation

Analyses of the effects of financial operations on the national economy in connection with the indebtedness of all the public authorities

Analysis of the sustainability and quality of the budgetary policy of public budgets

Presentation of written recommendations concerning the financial policy of the public budgets in Austria taking economic conditions into consideration

Annual presentation of a report on the recommendations made to the Federal Minister of Finance, which the Federal Minister of Finance is to present to the National Council and Federal Government

REPUBLIK ÖSTERREICH Parlament

sterreichische nationalbank oenb
Österreichische Nationalbank (OeNB)

Central bank of the Republic of Austria and as such an integral part of the European System of Central Banks (ESCB)

Astock corporation and capital is held by the federal government a the sole shareholder (rights are exercised by Federal Minister of Finance)

Fully independent and not bound by any instructions from institutions from the European Union, the government or any other institution

Safeguards price stability and contributes to the stability of money and credit markets

Conducts monetary policy operations with banks and manages foreign reserve assets

Analyses banks and contributes to the maintenance of financial stability

Provides Austrian businesses and consumers with high-quality, secure cash

Provides comprehensive, high-quality and timely financial statistics

REPUBLIK ÖSTERREICH Parlament

the budget process at a glance
The Budget Process at a Glance

REPUBLIK ÖSTERREICH Parlament

major changes and new elements in the austrian fiscal framework
Major Changes and New Elements in the Austrian Fiscal Framework

Medium-Term Expenditure Framework (MTEF): Legally binding for four years (since 2009)

New rules for reserves and introduction of the possibility to carry forward any unused funds at the end of the fiscal year as an unearmarked reserve (since 2009)

Accrual accounting and budgeting on the federal level (since 2013)

Performance budgeting and result-oriented management of administrative units (since 2013)

Long-term projections covering a period of 30 years (since 2013)

Fiscal rules: Federal and sub-national debt brake rule (since May 2012)

REPUBLIK ÖSTERREICH Parlament

the budget cycle
The Budget Cycle

Annual report

as a

prerequisite

for

Annual budget

4. Court of Audit

creates a federal statement of accounts (annual report)

Budget Control

Federal Statement of Accounts

1. Ministry of Finance

creates and the

Federal Government

passes a

federal (medium term and annual) budget draft

3. Ministry of Finance

and the

Line Ministries

execute the

federal budget law

Federal Budget Law

Federal Budget Draft Statement

2. Parliament

-adopts the Draft Law Resolution

-adopts the Federal Statement of Accounts

REPUBLIK ÖSTERREICH Parlament

budget authority of national council
Budget Authority of National Council

Minister of Finance prepares the budget bills and presents the drafts to the National Council

National Council can amend the budget at will or indeed prepare its own budget without reference to the executive (e.g. if government does not present a budget draft in due time)

National Council approves the mid-term expenditure framework (Federal Medium-Term Expenditure Framework Act), the yearly budget (Federal Finance Act) and the Austrian Stability Pact

The National Council may also empower the Minister of Finance in the Federal Finance Act to overrun the approved budget allocations under certain circumstances and up to certain amounts

The National Council and especially the Budget Committee receives a number of reports, supporting the budgetary steering and control function of the National Council

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the budget at a glance
The Budget at a Glance

REPUBLIK ÖSTERREICH Parlament

c urrent state of affairs
Current State of Affairs

The Federal Government must present the Budget Bill (Federal Finance Bill) to the National Council at latest 10 weeks before the end of the fiscal year

Due to general elections the National Council has not passed a Federal Finance Law for 2014 yet.

The household is managed according to the most recently passed Federal Finance Law (2013)

National Council has just passed temporary provisions by way of a Federal Law (due to changes in responsibilities of line ministries)

REPUBLIK ÖSTERREICH Parlament

mtef expenditure ceilings 2013 2017
MTEF: ExpenditureCeilings 2013-2017

REPUBLIK ÖSTERREICH Parlament

economic budgetary policy strategy
Economic & budgetarypolicystrategy

Government strategy for the years 2013-2017: Stable budget through reforms. Growth through active measures‛ and has three main goals:

A balanced budget until 2016, achieving of long-term sustainability and reduction of the debt ratio to 60 % of GDP

Stimulate investment in education, universities, R&D and infrastructure for growth and employment

Continuation of the structural reforms in the following sectors: pension system, health system, public administration, subsidies and labour market

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general government development1
General Government Development

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budgetary targets
Budgetary Targets

Priority on sustainable budget consolidation: planned revenue growth by 12,9 billion EUR and planned growth of expenditure by 5,7 billion EUR between 2012 and 2017

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budgetary targets1
Budgetary Targets
  • Targets:
    • Until 2016: a balanced budget in Maastricht terms
    • Until 2017: a 0 % deficit target for the central government and a small surplus for state and local governments
    • Until 2017: a structural budget balance of 0,45 % of GDP for general government (central government: 0,35 %)(“debt brake”)
  • Public sector debt-to-GDP will rise from 74 % in 2012 to 74,6 % in 2013 and shall decrease to 67 % of GDP by 2017

REPUBLIK ÖSTERREICH Parlament

key indicators budget 2011 2013
Key indicators Budget 2011 - 2013

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budget execution 2013
Budget Execution 2013

Austrian general government is expected to meet the budget deficit target set for 2013 (-2,3 % Maastricht deficit).

This holds even after accounting for weaker than expected economic conditions and additional budgetary provisions for Hype-Alpe-Adria banking-group.

The Maastricht deficit at federal government level is projected to turn out slightly higher than planned at -2,1 % of GDP (revised up from -1,9 %). State and local governments, however, will slightly overachieve their deficit targets reaching -0,3 % of GDP (instead of -0,4 %). Social security funds are expected to again display a small surplus (+0,1 % of GDP), surpassing earlier estimates of a balanced budget.

In July 2013, nominal GDP was revised downwards, causing general government debt per GDP to range at a moderately higher level of 74,6 % (instead of 73,6 %) at the end of 2013.

REPUBLIK ÖSTERREICH Parlament

outlook
Outlook
  • New Government is committed to achieving the fiscal goals set.
  • Minister of Finance plans to table a new Federal Finance Frame Law and a new Federal Finance Law by end of April 2014.
  • According to the temporary provisions, the general government deficit shall be reduced to -1,5 % of GDP and the structural deficit to -1,3 % of GDP. This shall lead to a decline of public debt to 74 % of GDP.
  • However, economic landscape in Europe remains challenging.
  • Further significant fiscal costs from banks under restructuring might be necessary.
  • Budget reform introduced full carry-forward possibilities for unused funds without earmarking, line ministries already built up considerable reserves, use of reserves will require additional funds.

REPUBLIK ÖSTERREICH Parlament

i ntragovernmental f iscal r elations
Intragovernmental Fiscal Relations

REPUBLIK ÖSTERREICH Parlament

principles of intragovernmental fiscal r elations
Principles of intragovernmental Fiscal Relations

Art. 13. Federal Constitutional Law

(1) The competences of the Federation and the Laender in the field of taxation will be prescribed in a special Federal constitutional law ("Constitutional Finance Law").

(2) The Federation, the Laender, and the municipalities must aim at the securement of an overall balance and sustainable balanced budgets in the conduct of their economic affairs. They have to coordinate their budgeting with regard to these goals.

(3) Federation, Laender and municipalities have to aim at the equal status of women and men in the budgeting.

REPUBLIK ÖSTERREICH Parlament

basic legislation
Basic Legislation

Fiscal Constitutional Law (Finanz-Verfassungsgesetz 1948)

  • Sets the basic principles for financialrelationsbetweentheFederation, Laender und municipalities
  • Basic principlesoftaxation, tax sharing, intergovernmental transfers and cost bearing

Fiscal Equalisation Law (Finanzausgleichsgesetz)

  • Details the rules of tax sharing, intergovernmental transfers and cost bearing between the Federation, the Laender and the municipalities
  • Usually in force for only a few years (present duration 4 years) after which it is replaced by new regulations
  • Result of negotiations between the federal minister of finance and representatives of the Laenderand the local governments in which consensus has to be found
  • Horizontal equalisation is not regulated by the Federation, nevertheless the system contains some elements with horizontal effects

REPUBLIK ÖSTERREICH Parlament

fiscal equalisation
Fiscal Equalisation

Distribution of Revenue

  • Guided by two main criteria:
    • Tax revenue criteria: allocation is based on regional or local revenue of a tax
    • Demographic criteria: allocation is based on the number of inhabitants of a Land or municipality
    • Laender now allocate the local share of revenues to the individual municipalities as decided on by the distributing Land

Intergovernmental Transfers

  • Intergovernmental transfers mark the second step of fiscal equalisation:
    • Quota allocation funds or grants to cover special needs or purposes
    • Transfers to equalize the average revenue of Laender and municipalities (paid by the federal government, horizontal effect)
    • Transfers for housing development, environmental purposes and infrastructure
    • Transfers from the federal natural disasters fund

REPUBLIK ÖSTERREICH Parlament

the austrian stability pact
The Austrian StabilityPact

REPUBLIK ÖSTERREICH Parlament

austrian stability pact
Austrian StabilityPact

Basic concept of the ASP

Austria’s preparation for entering the EURO area required significant fiscal consolidation

The Austrian Stability Pact (ASP) involves all levels of government in the consolidation of public finances and prescribes deficit/surplus targets to the federal, regional and local governments

ASP provides for legally enshrined budgetary commitments across various government levels

However, due to financial crisis previous targets were revised and not achieved, sanctions were never used

REPUBLIK ÖSTERREICH Parlament

austrian stability pact 2012
Austrian StabilityPact 2012

Revision of ASP

  • Reform of EU budgetary surveillance and implementation of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG) require a reform of the ASP
  • A debt-brake was introduced as part of intragovernmental fiscal governance
  • The ASP sets more ambitious targets and strengthens the enforcement mechanism
    • Attaining budgetary goals in individual years
    • Enhancing the role of the Court of Audit
    • Making the launch of the sanctions procedures automatic

In the last two years fiscal rules in the ASP contributed to a general government deficit lower than anticipated

REPUBLIK ÖSTERREICH Parlament

austrian stability pact 20121
Austrian StabilityPact 2012
  • ASP 2012 defines a number of fiscal rules on the federal and sub-national level:
    • Debt brake rule: upper limits for deficits of Federal Government, Laender and municipalities
    • Expenditure rule: limiting annual expenditure growth of all levels of government
    • Rule on reducing the government debt ratio
    • Upper limits on contingent liabilities
    • Rules on improvements of budgetary coordination
    • Rules on enforcement of regulations

REPUBLIK ÖSTERREICH Parlament

fiscal rules in the asp
Fiscal Rules in the ASP
  • Debt brake rule: the Austrian budget has to be structurally balanced by 2017, the structural deficit of
    • Federal level < 0,35 % and
    • States and municipalities < 0,1 % of nominal GDP
  • Expenditure rule: annual expenditure growth of all governments must not exceed a rate below a reference medium-term rate of potential GDP growth, and an appropriate adjustment towards the medium-term objective must be ensured unless the excess is matched by discretionary revenue measures
  • Reduction of the government debt level: federal and sub-national governments will reduce gap between Austria's debt level and the 60 % reference by 1/20th annually (on average over three years)

REPUBLIK ÖSTERREICH Parlament

fiscal rules in the asp1
Fiscal Rules in the ASP
  • The treaty transposes all measures contained in the regulations of the European Union (“Sixpack”) and aims for a balanced budget until 2016
  • Mechanism of sanctions that can be triggered by a report of the Court of Audit
  • The pact will expire if no future solution can be reached regarding
    • the main spending post in the intra-state-context: health-care,
    • the main income of Laender and municipalities: intra-state fiscal equalisation

REPUBLIK ÖSTERREICH Parlament

challenges for parliament
Challenges for Parliament

REPUBLIK ÖSTERREICH Parlament

challenges for parliament1
Challenges for Parliament
  • Parliament has a central role within the fiscal governance frameworkHowever,
    • Budget process is a highly complex mechanism
    • Fragmentation of information makes it difficult to get a sufficient overview
    • Large information asymmetries between government and parliament
  • Main Challenges for the Parliament within fiscal governance are to
    • enhance public support for responsible fiscal policy
    • overcome the temptation to call for additional resources
    • foster accountability
    • press for a smarter use of resources and insist on performance
    • use provided information for discussion, decisions and control and insist on missing information
    • translate good fiscal governance in common langugage

REPUBLIK ÖSTERREICH Parlament

thank you for your attention
Thank you for your attention

Contacts:

Helmut Berger

Head of Parliamentary Budget Office

Parliament, A-1017 Wien, Dr. Karl Renner-Ring 3

Tel. +0043 1 40 110-2889; +0043 676 8900-2889

E-mail: helmut.berger@parlament.gv.at

REPUBLIK ÖSTERREICH Parlament