The Austrian Sociologist Rudolph Goldscheid once wrote that “The budget is the skeleton of the state stripped of all misleading ideology”. What he was suggesting is that for all the press releases, expressions of empathy or cleverly-named initiatives that emanate from politicians, it is their actions in taxing and spending on behalf of citizens that provides the best measure of their values and priorities.
With this in mind, we might question whether existing approaches to the government’s budget actually do a good job of informing the public about spending decisions that have been made by elected officials.
There is an important distinction here between making information available, and making it understandable. According to the international Open Budget Survey, New Zealand rates very highly in terms of making budget information freely available – but the ability of the public to engage in fiscal and budget policy is only adequate and Parliamentary oversight of the of the public finances is relatively weak. Much of the information that is published is not in a form that is easily understandable to the general public.
At best this is an indirect form of transparency – information is disclosed that can be understood by experts, or those with the inclination to wade through complex spreadsheets. For much of the population, most of the information that make up the budget is available, yet practically inscrutable.
There are other factors that make it difficult for the public to understand the true implications of the budget. There are long-standing weaknesses in the information in budget documents on the results of government spending, especially on the intended and unintended impacts of fiscal policy on the environment. The size of the numbers bandied around are impressive by the standards of all but the wealthiest individuals. People are often subject to the ‘money illusion’ – a failure to account for inflation –, and various other framing effects that can make it harder to parse new budget information.
Headlines announcing hundreds of millions of new spending in health or education (sometimes given as a total over four years) can often sound impressive. But these numbers are typically presented without reference to changing costs or a rising population. This changing landscape in which public funds are being spent makes it very difficult for individual citizens to judge what has been happening in real, per capita spending in any particular area, and therefore, whether these decisions align with their own priorities.
The obvious answer to this issue would be that it is the role of the media to hold governments to account, and that in doing so, they should draw upon the knowledge of academics and policy experts.
However, it would be fair to say that this this model does not work well in New Zealand. The pressures faced by traditional news media have been well-documented, and publically engaged academics and public policy-oriented think-tanks are relatively thin on the ground in this country (notwithstanding some honourable exceptions to this generalisation).
This year, the School of Government at Victoria University of Wellington and the New Zealand Institute for Economic Research (NZIER) are working together to produce analysis of Budget 2017, with spending decisions adjusted for population changes and inflation. Though this is a simplified approach, we believe that this is an important step toward providing New Zealanders with greater transparency around the ‘bare bones’ of democratic government.
The most straightforward argument for doing so is also the most powerful – citizens ought to have access to meaningful information about what decisions are made in their names. Public finances are public information, in the sense of being owned by the public, not simply available to them. Effective democracy requires that the public have effective access to information on government activities.
Greater transparency can also contribute to better government decisions. More information on government spending can weaken incentives for ‘electoral cycles’, or the fluctuation of government spending around elections. It can enhance accountability, and strengthen the mechanisms by which the actions of elected officials are kept in line with voter’s wishes.
Transparency also puts citizens in a better position to become more engaged in the political system, thereby leading to a government more in touch with the changing priorities and concerns of the public. In the early 1990s New Zealand was the first country in the world to publish a full balance sheet of the government, and more recent reforms, such as regular publication of Long Term Fiscal Reports, an Investment Statement, and a Tax Expenditure Statement (albeit a skimpy one) mean that we continue to rank high on international budget transparency standards.
Yet those standards are evolving and now stress the importance of going beyond disclosure of accessible information to providing effective opportunities for the public to participate directly in fiscal policy debate and deliberation – greatly facilitated by developments in ICT that have dramatically cut the cost of direct government-citizen interaction.
Direct public participation in fiscal policy design and implementation, in addition to being recognised now as a right of citizens (by, for instance, the Global Initiative for Fiscal Transparency), is also a means by which governments can tap into the information, insights, perspectives and energy distributed throughout society, lowering the cost and improving the effectiveness of policy development and public service delivery.
Areas for improvement in NZ include publishing a simple ‘Citizens Guide to the Budget’ to promote wider understanding and debate of key fiscal policy choices, publishing more fiscal data in open data formats to promote external analysis, and providing more opportunities for direct public inputs during fiscal policy and budget preparation. An example of direct public and external expert engagement worth extending into other areas was the substantial out-reach exercise conducted by the Treasury during preparation of the 2013 Long Term Fiscal Statement.
A further area of relative weakness in fiscal management in NZ is in Parliamentary oversight. There is no parliamentary budget office, or other source of ‘in-house’ independent expert advice to Parliament on fiscal policy. The Finance and Expenditure Committee (FEC) of Parliament that oversees fiscal management is chaired by a member of the governing party. The FEC has not sought independent advice on fiscal policy in recent years, despite funding being available for it to do so. There are few public submissions to the FEC on fiscal policy and there is no written response to the public submissions on the annual Budget Policy Statement.
There is a need to invigorate the way in which Parliament holds the government to account for managing the public finances so that it moves beyond cheap political point-scoring and raises substantive questions of government over the big issues in fiscal policy. One way to do this would be to promote greater external expert engagement as well as direct public submissions, and require a substantive response from government.
This commentary first appeared on Newsroom.co.nz.