Notwithstanding the differences in the forms and varying content of democracies, it is generally accepted that the primary responsibility for decision-making relating to the determination of expenditures at an aggregate and at detailed levels, is that of an elected legislature. While there are some legislatures which have no deliberative power in this regard, in either type, the final power of the purse rests with the legislature. In both executive and legislature dominated systems, there are adequate checks and balances between the various pillars of democratic society. From the point of expenditure management, two major issues have cropped up during recent years that need to be addressed immediately.
In both systems, it is now recognized that there has been a massive shift in decision making from the legislature to the executive. In the management of finances, a major portion of the budgetary outlays is governed by the existing legislation and, increasingly, the share that is brought within the ambit of annual control is becoming smaller and smaller. Furthermore, governments appear to have, prior to the Maastricht treaty and the introduction of fiscal responsibility legislation, practically unlimited powers to borrow routinely from international financial institution without getting prior or later approval from the legislature. With the increasing and inevi- table movement toward greater globalization it is even suggested that governments need more power to act quickly and decisively to stop capital flight or to attract foreign direct investment. From these points of view, legislatures are viewed as obstacles to proper and judicious economic management and therefore the shift of decision making power to the executive is both necessary and justified. It is also suggested that when legislatures decide to act they assume adversarial and inquisitorial roles rather than engage in constructive dialogue with the executive. Moreover, the constraints they impose are rather too soft and not hard enough to have any major restraining influence on governments. The legislation enacted is incoherent, long and may occasionally be self-contradictory, with the inevit- able result that the judiciary is brought into the picture. Therefore, the argument goes that there is much that the legislatures have to do in
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reforming themselves and in improving their operating systems. The legislatures argue, on the other hand, that much of the blame is to be allotted to the people too, in that their preferences are far from clear, that they often underestimate the future financial implications of many of the policy initiatives they support, and that on many issues dominant interests manage to get decisions in their favor, leading to large scale patronage and cronyism. The capture and management of the voter’s preferences becomes even easier in a context of growing apathy and lack of participation in matters and on issues when their involvement counts. The voter remains largely uneducated or fully informed about the multiple dimensions of proposed expenditure policies, as the bureaucracy is generally reluctant to share information with the community. The veil of secrecy is too pervasive and firmly imbedded into the system that vigorous efforts are needed to reduce its spread.
These and related systems have received considerable efforts during recent years and many proposals have been advanced with a view to addressing the problems. Broadly, the proposals are of two types — those that aim at taking the legislator to the people and improving the voter–
representative relationship and those that aim at the improvement of legislative involvement in expenditure management matters. The first type includes proposals relating to fixed terms for the legislators, introduction of more ballot initiatives, greater transfer of tasks and responsibilities, with attached funding power, to the local levels, and formation of citizen panels.
Some progress has already been made in terms of transferring more tasks to the local levels. But this transfer has also become problematic, in that requisite financial powers were not transferred but continue to be exercised by central governments. Similarly, formation of citizen panels has selectively been done at the local level, providing opportunities to the users or potential beneficiaries to have a voice in the implementation of programs. Ballot initiatives are, on the other hand, viewed with some concern, in that they tend to be costly, indeterminate in results, and may have the impact of interrupting legislative business.
The second type of proposals deal specifically with expenditure manage- ment, in that they advocate specific legislation rather than resort to omnibus legislation, more avenues for ensuring accountability and the introduction of a two-year budget cycle. While the first proposal is to be welcomed, the progress in ensuring more channels of accountability has been confined to introduction of performance orientation to the allocation of resources and to greater post-budget oversight. In some cases, the establishment of websites is deemed to be a major step in ensuring accountability. In reality, these measures have little bite in them, and have had, as yet, little impact on the expenditure management culture and associated mindsets. The introduction of a two year budget has little inherent capacity to resolve the basic
problems that have weakened the role of the legislature. On the other hand, it could contribute to greater acceleration on what is admittedly a downhill journey.
The major issue that is waiting to be resolved relates to the involvement of the legislatures in the making of fiscal policy and restoring its legitimate role.
It has often been suggested that there should be a balance in the relative functioning of the legislature and the executive, but the exact nature of this balance or its location at a point of time has never been specified; rather, it has been a convenient abstraction that receives instantaneous approval from all. What are the functions and tasks to be performed if the role of legislature is to be restricted to the approval of budgets and oversight of macro policies? Notionally, they already have power (where it is so endowed) to approve the budget, to approve policies, to approve specific staff levels, to approve funding and limits on programs and projects, and to approve the borrowing levels, and even to approve, in unusual circumstances, the periodic funding of programs. It is true, however, that the allocation of respective powers in these areas differs very widely among countries. It is necessary to review each country’s experience in these areas and to endow greater powers in the legislatures where needed. From this point of view, the greatest need for improvement is felt in the British Commonwealth type of systems, where a government, once elected, can function, with a party whip, in a semi autocratic way for the next five years.
It would also be prudent to restrict the possibilities of excessive interference by congressional type systems, and to provide selected opportunities during a fiscal year for congressional intervention.
Another issue that needs to be addressed relates to the role of the community in fiscal decision making. Once the representatives are elected, the community has little role to play, except in critical periods when it galvanizes its efforts to either oppose or to approve legislation that is then under consideration. Entrusting it with a greater power of oversight may be equivalent to an expression of lack of faith in the effectiveness of the legislative institutions. Should powers be given to the community to replace the existing system or to supplement the existing system? In most cases the efforts are related to the latter objective and revolve around the provision of more information to the electorate to make up its mind and to express its preferences. It is pointed out that the community is generally informed after a decision has been taken, after a policy has been formulated, or at a stage when it is too late to make its presence felt and its voice heard. In this regard, notwithstanding all the recent emphasis on fiscal transparency, there is a good deal that remains to be done. The issues raised here suggest that expenditure management continues to be a work in progress and there are several gaps in its functioning in a democratic society that need to be addressed.
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