Should Aggregate Expenditure Ceilings be Comprehensive?

May 9th, 2016

Aggregate expenditure ceilings are today a feature of budgeting in many OECD countries. An article of mine just published in the OECD Journal on Budgeting addresses a key design issue of the coverage of aggregate expenditure ceilings – should they cover the totality of government expenditure, or is it legitimate to exclude certain categories of expenditure? Read the rest of this entry »

Does Central Banking Lending to Government Count as Debt?

May 2nd, 2016

In the two previous blog pieces, we looked at the argument put forward by “monetary populists” that the central bank (CB) should finance fiscal stimulus by making direct grants to government. In this piece, we look at an alternative proposition put forward by other monetary populists, who argue that even when the CB lends money to government (rather than granting it), it is in effect providing debt-free funding. Their argument is that government borrowings from the CB you do not count as debt, and it is only when government borrows from the private sector that it incurs true debt. Read the rest of this entry »

Debt-Free Fiscal Stimulus (continued)?

April 27th, 2016

The proposition that the central bank (CB) should grant the government the funds with which to finance fiscal stimulus is, as discussed in the last blog piece, one which has been frequently advanced in recent times. The proponents of such “debt free fiscal stimulus” view it as a more effective and equitable version of the failed quantitative easing (QE) policies pursued to date.

Proponents of debt free fiscal stimulus believe that the fiscal constraints upon government can be eased if CB grants replace borrowing is the means of funding fiscal stimulus. The problem is that this is not true. Read the rest of this entry »

Debt-Free Fiscal Stimulus?

April 18th, 2016

What if it were feasible to use the central bank (CB) to fund stimulus spending without recourse to debt? What if the CB were to simply give government the money to pay for the fiscal stimulus – that is, a grant rather than a loan?  If this were the case, shouldn’t the CB be fully exploited to finance the fiscal stimulus which the world so desperately needs today? Shouldn’t the CB be systematically tapped to fund infrastructure and other socially useful expenditure?

The belief that the CB should serve as a source of debt-free funding for government is one of the oldest themes of the ‘monetary populism’, which sees it as a legitimate use of the sovereign right to create money. Not surprisingly, this notion of debt-free funding has resurfaced strongly in the post-GFC years, as an easy response to the fiscal difficulties faced by governments. Read the rest of this entry »

Reconciling Fiscal Stimulus with Fiscal Responsibility?

April 11th, 2016

There is today in many countries a crying need for fiscal stimulus. At the same time, the need for fiscal consolidation is equally compelling in the medium and longer term. How can these two imperatives be reconciled? How can fiscal stimulus be managed so that it does not become an excuse for a renewed bout of the type of fiscal irresponsibility which has led so many OECD countries into difficulties? This is a key issue facing both fiscal policy formulation and public financial management today. It is a multi-faceted issue which does not have simple answers. But let’s start at the start by considering the macroeconomic policy context. Read the rest of this entry »

Performance Budgeting Manual now available in Spanish

April 29th, 2014

The performance budgeting manual which I developed in 2011 for the global CLEAR initiative – led by the World Bank – has now been published in Spanish translation under the title Manual sobre la elaboración de presupuestos basados en resultados. The manual is a comprehensive coverage of performance budgeting and its links to related areas of public sector reform.

Read the rest of this entry »

Evaluation and Budgeting – a UK Perspective

April 24th, 2014

from Michael Kell, Chief Economist at the UK National Audit Office

The PFM Results blog recently drew attention to the need to make better use of evaluation in budgeting, as discussed in Marc Robinson’s recent paper Connecting Evaluation and Budgeting. A UK National Audit Office report on Evaluation in Government – published December 2013 – addresses precisely this issue. The report examines the coverage of evaluation evidence in the UK government, how good it is, how it is used, how it is produced and at what cost. It aims to quantify as much as possible the state of evaluation in UK government. Read the rest of this entry »

Harnessing Evaluation as a Budgeting Tool

April 15th, 2014

In the wake of the global financial crisis, many OECD countries are looking to increase the role of evaluation as a tool to support good budgeting. In particular, evaluation is increasingly seen as an important part of the information base necessary to underpin an effective spending review process. Spending review aims to identify savings options which might be implemented on budget, and evaluation as an important role in helping to identify savings options. This raises the crucial question of the relationship between budgeting and evaluation, which is the subject of a paper of mine which has just been published by the World Bank, entitled Connecting Evaluation and Budgeting. Read the rest of this entry »

Spending Review: Comprehensive or Selective?

January 12th, 2014

The idea that spending review should become a regular part of the budget preparation process is now widely accepted. Most budget professionals now accept that the systematic and ongoing scrutiny of “baseline” expenditure to identify savings options is an essential part of good expenditure prioritization. Without systematic spending review, finding adequate fiscal space for high priority new spending – while keeping proper control over aggregate expenditure – becomes extraordinarily difficult, if not impossible.

So far, so good. The problems start when decisions are made about how to design the spending review process. It seems to have become a widespread article of faith that spending review should be always “comprehensive” or, as some put it, “zero-based”. Read the rest of this entry »

New Guide on Program Classification Published

December 12th, 2013

Correct program classification – that is, defining programs appropriately – is one of the most fundamental elements of a good government-wide performance budgeting system. Yet it is also an area where governments often make serious mistakes. The World Bank has just published a guide entitled Program Classification for Performance-Based Budgeting designed to help governments to define programs appropriately and in a manner consistent with the key objectives of a sound performance budgeting system. Written by myself, this guide sets out a number of rules which should be followed in defining programs. Read the rest of this entry »