Archive for the ‘MT Budgeting’ Category

Budgeting in Chile

Tuesday, September 10th, 2013

Chile may be a new OECD member country, but in the realm of public financial management and fiscal policy it has a few things to teach many existing OECD members. The OECD Journal on Budgeting has just published a review of Chilean budgeting practice prepared by an OECD mission comprised of myself and two OECD staff members (more…)

Top-Down Budgeting & the Setting of Ministry Expenditure Ceilings

Tuesday, August 20th, 2013

Top-down budgeting is today widely regarded as a key element of good budgeting practice, and with good reason. In its core sense, agreed by all, top-down budgeting calls for the budget preparation process to be framed by a hard aggregate expenditure ceiling – approximately speaking, a limit which applies to the totality of government expenditure. The aggregate ceiling should be set in a top-down manner, which means that it is set at the start of the budget preparation process prior to any consideration of “bottom-up” spending requests from spending ministries. It should also be hard in the sense that, once set, it is essentially not varied during the budget preparation process. Establishing and enforcing such an aggregate expenditure ceiling is today generally viewed as crucial to ensuring that aggregate expenditure does not grow faster than is consistent with government’s aggregate fiscal policy objectives, and in particular with deficits and debt discipline.

This pertains to aggregate expenditure ceilings. But what does it mean for the setting of ministry expenditure ceilings. This is where the consensus disappears. (more…)

New Performance Budgeting Manual

Saturday, September 17th, 2011

The global CLEAR initiative – led by the World Bank – has just published an important new manual on performance budgeting. (more…)

Baseline Expenditure Projections and Employment Inflexibility

Thursday, October 7th, 2010

The importance of good baseline expenditure projections – discussed in recent blog entries by myself and Jordi Baños Rovira – has just been underlined further by the European Commission’s recently-published proposal to make it compulsory for member countries to produce detailed medium-term expenditure (as well as revenue) projections “based on unchanged policies”. This underlines further the pressing need to improve methodologies for estimating baseline expenditure. (more…)

Budget Baselines: comment by Jordi Baños-Rovira

Thursday, September 23rd, 2010

Responding to my recent blog on budget baselines, Jordi Baños-Rovira of the Catalonia Budget Directorate (Spain) writes:  I totally agree concerning the importance of producing sound expenditure baselines projections (also called “continuation budgets” or “current services baselines”), not only for traditional annual budgeting, but specially for elaborating medium-term expenditure frameworks (which should be totally integrated with annual budget elaboration). (more…)

Budget Baselines: Essential and Overlooked

Wednesday, September 15th, 2010

Accurate projections of the “budget baseline” are one of the most important budget preparation tools in support of fiscal discipline. The budget baseline is a projection of where aggregate expenditure is heading if government policy remains unchanged – expressed differently, of inertial trends. (more…)

Sweden to Introduce Budget Surplus Rule

Monday, May 10th, 2010

Following a major fiscal policy review, Sweden has recently announced that it will legislate a fiscal rule in respect to the budget balance. This represents a significant development in a much-admired fiscal policy framework which was introduced more than a decade ago, during a period of major fiscal consolidation. (more…)

Fixed vs. Indicative Medium-Term Ceilings: The Fiscal Policy Dimension

Thursday, April 22nd, 2010

I have previously criticized the assumption made by some that medium-term (MT) budgeting necessarily requires that ministries be given fixed MT ceilings – that is, ceilings which represent commitments from government on the level of funding each ministry will receive in the next, say, three years. A system of indicative ceilings is, I have argued, preferable in many countries. There is an important point to add to this debate: namely, that there can sometimes be serious tension between fixed medium-term ministry expenditure ceilings and the aggregate fiscal policy or fiscal rules which guide budget policy. (more…)

What future for the UK’s medium-term budgeting system?

Wednesday, March 24th, 2010

In bringing down its 2010-11 budget, the British government has been subject to strong criticism for failing to back its targets for medium-term fiscal consolidation with specifics on which areas of public spending will be cuts in order to achieve these targets. Critics say that the government should have conducted its triennial Spending Review – due this year – in order to flesh out these details. This raises a key question: what is the future of the UK’s system of fixed MT ministry budget ceilings? (more…)

MT Ministry Ceilings: Fixed or Indicative

Wednesday, March 24th, 2010

We often hear it said that medium-term expenditure ceilings for ministries or sectors are an essential part of good medium-term budgeting. Spending ministries, it is said, know what budget funding they will receive not only this year, but next year and the year after. The funding certainty this will give them will improve their planning and management, thereby boosting service delivery. Such increased funding certainty, the line runs, is the #1 objective of medium-term budgeting. This is, with respect, wrong. (more…)