In India, establishing a Parliamentary Budget Office (PBO) is a due concern. A PBO is an independent and impartial body linked directly to Parliament that provides technical and objective analysis of Budgets and public finance to the House and its committees. As ‘the guardian of the public purse’, Parliament must play a greater role in budgetary governance. Its core functions include Budget approval, scrutiny of its implementation, and holding the government to account. However, Parliament lacks the capability to perform such functions effectively. The result is often an arbitrary taxation policy, burgeoning fiscal deficit, and an inequitable allocation of public resources.
Greater budgetary oversight
Multiple indicators suggest that executive-led budgetary governance has not been successful in India. The unequal distribution of public resources is a prevalent issue. Despite high economic growth, India suffers from inexcusable income inequality, poverty, unemployment, malnourished children, preventable diseases, systemic corruption, and underinvestment in key social services such as health and education.
Budgets can be seen as ‘contracts between citizens and the state’ or as ‘treaties among citizens negotiated through politics’. Indian political economy literature fails to adequately address the role of Parliament and State legislatures in public finance management. The role of Parliament and State legislatures in budgetary decision-making and oversight is far from satisfactory; it is meaningful to have a well thought-out legislative-executive balance of power in budgetary governance.
The Indian Parliament is a Budget-approving body contributing to budgetary matters in the following notable ways: presentation of the Budget; scrutiny of the demands for grants of various ministries; debate; consideration and approval of the Budget. To carry out these functions effectively, Parliament requires institutional, analytical and technical competence. Some have argued that a ‘Budget-approving’ Parliament does not require a functioning PBO. This argument, although common, is unsound. When Parliament is a Budget-approving body, its members must be well-informed for a legitimate approving process. Establishing a PBO within Parliament is undoubtedly necessary. It is an instrument for addressing bias towards spending and deficits and, more significantly, for enhancing fiscal discipline and promoting accountability. Further, it can generate quality public debate on Budget policy and public finance, enabling parliamentarians to engage meaningfully in the Budget process.
There is a growing trend among legislatures, particularly within the OECD countries to establish specialised Budget research units. Traditionally, independent budgetary units are more common in developed countries, but many developing countries are now establishing such entities; for example: Benin, Ghana, Kenya, South Africa, Morocco, the Philippines, Uganda, Nigeria, Liberia, Thailand, Afghanistan, and Vietnam. The other functioning PBOs are in countries such as the U.S., Canada, Australia, Austria, South Korea, Italy, and Mexico. There are PBOs established in subnational legislatures, such as California, Ontario, Scotland, and New South Wales. Additionally, New York City has a well-functioning Independent Budget Office (IBO).
Role of a PBO
The majority of PBOs have four core functions: independent and objective economic forecasts; baseline estimate survey; analysing the executive’s Budget proposal; and providing medium- to long-term analysis. Costing is standard practice for many PBOs. Budgets generally start with an economic forecast. A PBO can present either its own independent forecast or it can validate the government’s, providing an objective analysis on the official forecast.
A PBO can perform other tasks depending on its mandate, resources and requirements of parliamentarians or committees. These may include general economic analysis, tax analysis, long-term analysis, options for spending cuts, outlining a budgetary framework that reflects priorities of the nation, bespoke policy briefs.
A PBO is different from general parliamentary research services and information wings. It also differs from finance committees and the Public Accounts Committee. A PBO is comprised of independent and specialised staff, such as Budget analysts, economists, public finance experts. The PBO must be non-partisan, independent and mandated to serve all parliamentarians. Furthermore, the core functions of the PBO should be codified in law. Its output, and the methods by which those outputs are prepared, must be transparent, accessible and understandable.
Onus on parliamentarians
Parliamentary scrutiny of public finance is an important aspect of governmental accountability. There is a legitimate democratic need in this country to strengthen the capacity of Parliament and its members. An unprecedented change has taken place in the way citizens view the government’s stewardship of taxpayer resources. This demands a consideration of global standards and best practices to promote financial and budgetary transparency.
Parliamentarians have a role in establishing the PBO. As representatives of the people, they can help improve Budget policies by providing inputs on public needs and priorities. Similarly, a PBO can ensure that parliamentarians are well-informed to perform their budgetary and oversight functions effectively. A PBO in Parliament will have a positive impact on the House’s ability to carry out budgetary oversight and fiscal decision-making. However, this will not be an easy task. It is likely to attract opposition from the bureaucracy as any aspect of strengthening Parliament (or State legislatures) has always been unwelcome and met with less consideration from the executive. Parliament, with its long-standing traditions of non-partisan legislative services to MPs in India, will find more favourable consensus among all parties for the proposal to establish a PBO. However, establishing the PBO in India will require unremitting political will and public support.
Vinod Bhanu is Director, Centre for Legislative Research and Advocacy, New Delhi