Parliamentary Budget Office (PBO): Need; Proposed Functions; Issues

Public finance and Government Budgeting is one of the key functions involving both executive and legislature. The suggestion that India should have a Parliamentary Budget Office (PBO) is based on the premise that current budgeting process in the country is heavily tilted towards executive; and legislature’s role is limited due to some of the inherent reasons.

Understanding Executive-Legislature Imbalance in Budgeting

To properly understand this, let’s segregate the role of executive and legislature in the process.

Role of Executive

We all know that preparation of Budget is done in budget division of the department of economic affairs in finance ministry. Finance Ministry would send some forms to ministries/departments to fill up with their demands for coming financial year. Ministries and Departments pass on these forms to disbursement officers, who in turn would fill up and send them back to Heads of respective departments also known as Controlling officers. They scrutinize the demands and once all things set, will send it to Budget department. The department further scrutinize it and sees if the demands are justified. Once done, these expenditures are tallied with expected revenues of the government and thus create a consolidated statement which is then sent to cabinet for approval. Once cabinet approves, finance ministry creates further documents and now budget is ready for presentation, discussion and voting in parliament. This last stage is kept highly secret.

Role of Legislature

Once budget documents are complete, they are presented by Finance Minister in parliament with permission from president; estimates of ministries and their demands for grants are scrutinized by 24 standing committees; then discussions take place, cut motions if any are moved; the demands are passed or guillotined (passed without discussion); appropriation bill is presented and voted and once passed authorizes the government to spend money from the consolidated fund. After this, finance bill is moved and passed.

Where is imbalance?

In the above entire process, the most crucial part on legislature is to discuss and debate the demands and pass them with utmost care. But, ironically, most of the demands are just guillotined i.e. passed without discussion. Thus, the most crucial part gets least attention. Further, even in case of discussion on Bills their fiscal implications are never studied and deliberated upon. A simple example is the Right to Education Bill, 2008 wherein the government had to reimburse unaided schools for expenditure on every child no estimated expenditure from the Government exchequer was determined. Then many Bills are passed without preparing a budget with respect to the cost involved in their proper implementation, which ultimately has always resulted in failure.

Reasons behind Non-deliberation

There are several reasons:

• There is a general lack of expertise among the MPs with regard to ascertaining financial matters.
• There is a lack of access to high quality research exclusively by the legislators. The legislature does not have on board staff of high quality researchers to assist them in budgetary matters. This makes them dependent on the executive for all research work.
• The institutions that can facilitate high quality research are like libraries and reference services are not available due to constraints in resources. The research products are also not readily available in public domain.
• The Finance Commission is not properly strengthened to deal with the technical challenges posed by the budget.
• The dependence on government data and inputs is very high in the absence of other research without any credibility of this information.

Rationale and Need for Parliamentary Budget Office

The proponents of the PBO say that the above problems can be best solved through establishment of an independent Parliamentary Budget Office. This institution exists in several countries such as US, UK, Canada, Australia, Kenya, Hungary, Uganda, Thailand and Bangladesh (the name varies from country to country). It may be described as an independent, non-partisan budget research and analysis body.

The Functions of PBO

Some of the general functions of the PBO are:

• It would professionally scrutinize the demands and implementation of the budget and also holds the government accountable for the objectives achieved through the budget.
• It would help the Parliamentary committees and MPs to analyze the Budget in terms of its complex and technical aspects. This is needed especially to ensure the Parliamentary control over the public finance.
• It would make independent and objective economic forecasts, baseline estimate surveys, analysis of the budget proposal made by the executive and medium and long term analyses are provided.

We note here that the PBO works and functions vary from country to country. For example, while in Uganda and Kenya the PBO deals with only the requests made by various committees, in Canada service requests from individuals Members of Parliament are also entertained but they are prioritized after the requests from the committees.

Benefits of PBOs

PBOs also have several benefits. Some of them are:

• The expertise offered by this body helps the parliamentarians a lot in dealing with the technical details of the budget.
• Fiscal discipline can be brought about in their functioning as they can bring in transparency and accountability in the functioning of the government.
• The deficit bias that affects fiscal policies can be addressed through their expertise.
• Information asymmetries can be reduced through the PBO.
• Informed public debate can be raised for the scrutiny of the fiscal and economic policy and the credibility of the budget process can be enhanced.
• True representative democracy can be brought about by making the budget process open more for citizens’ participation through increased accessibility.

The benefits can be best understood from the example of the Canadian PBO. The PBO exposed the Canadian government’s real expenditure with respect to the F-35 fighter jet procurement for the war in Afghanistan.  The US PBO has been successful in preventing the Congress from putting forward unaffordable proposals. In Australia, the PBO’s function has been extended to even costing parties’ electoral manifestos.

Problems with the Idea of PBO

A PBO can function well only if the independence and viability of the office is maintained. If it becomes too closely associated with the policy makers, its independence becomes a question and it will not act against policies of the government and so it’s demonstrative impact and independent analysis will be greatly affected.

If India works sincerely towards setting up this institution it will greatly help the Parliamentarians in easy and efficient discharge of their functions. India has a lot to learn from the models in other countries. India can set up a PBO that accepts requests from both the MPs and the committees and assist them. In the end, it requires the collective effort of both the legislature and the executive to set up such an important institution like the PBO. There is a need for strong public and political will to take this step.