Budgetary powers, the Grand Cru of Parliament

The world’s finest wine is made from vine that grows on a hillside, where a rugged path separates it from other vine. This path marks a difference in value: the price difference between the wines is hundredfold. Although the different vines may seem quite similar to the eye of the occasional beholder, the quality of the soil, inclination of the hillside, and angle of the sunlight make a world of difference between them. Retaining the value of the thousand-year-old vineyard requires expertise, experience, respect for the fundamental principles, as well as creativity.

The most valuable cultivation of Finnish Parliament is its powers to decide how public resources are allocated. Legislative drafting plays a key role in terms of the use of these budgetary powers. The majority of decisions affecting the budget are made prior to the budgetary process. Therefore, legislation proposals should also be analysed from the perspective of their effect on Parliament’s budgetary powers.

Restricting the budgetary powers of Parliament could result in unfavourable conditions for sustainable policy-making

The oversight powers of Parliament have been increased in order to mitigate the effects of the restriction of the budgetary and fiscal powers of Parliament. However, this is not alone enough to safeguard the role of Parliament as the highest authority on central government finances.

Compared to most other countries, the budgetary and fiscal powers of the Finnish Parliament and the related legal framework are strong. However, previously Parliament’s budgetary powers have been knowingly limited in order to make decision-making processes more flexible. One example are decisions relating to privatisation. Significant decisions concerning state-owned property are also taken outside the budgetary decision-making process. Parliament is also committed to the spending limits procedure in order to ensure budgetary sustainability.

Some of the changes taking place can be difficult to pinpoint, as Parliament’s budgetary powers have also been restricted as a side effect of decision-making. For example, payments of full compensations to municipalities due to tax cuts decided by the central government, which are included in the system of central government transfers to municipalities, have grown substantially in recent years. Consequently, this originally technical solution has gradually started to impact the budgetary powers of Parliament. In terms of retention of these powers, it would be important that any funding solutions introduced in connection with the current regional reform were sufficiently clear and simple.

The soil of the vineyard is crucial for the quality of the wine. The soil structure has effects on the vine root system and the subtlest differences in the soil can have a significant impact on the end result. Therefore, it is not irrelevant on which side of the centuries old stone wall the grapes ripen. For quality reasons, each vineyard has clear boundaries and each harvest is collected by hand.

In central government, however, silo structures are not a warrant for quality. Functional and structural fragmentation of public administration undermines Parliament’s opportunities to exercise its powers. It is difficult to gain an overview of central government finances as a whole because the steering chains are complex and accountability is dispersed. The quality of legislation is compromised by a too narrow and limited approach to legislative drafting, which means that the required expertise, substance competence and perspectives are not reflected in the end result. The public administration as a whole should promote innovations and reforms. Siloed legislative drafting and time pressures together prevent forward-looking parallel drafting between the different administrative branches.

Fragmentation of public administration hinders parliamentary work

Functional fragmentation means that the steering of operations and finances is not coordinated or the different steering methods do not form a comprehensive, manageable entity.  When operations are dispersed it is difficult to achieve the targeted reform. Attention should be paid to the uniformity of the steering practices, sufficient coverage of measures supporting the reform, and comprehensiveness of the overall risk management. Politicians and high public officials should clearly express the targeted focus areas, as well as make the deprioritization areas clear.

Fragmentation can also be structural in nature and manifest itself as increasing segregation between the different actors. This can mean that steering is not effectively transmitted onward from the responsible ministry. A particular steering challenge is formed by entities that are external to the central government but still receive the majority of their funding from the state budget. Parliamentary and Government steering should promote the cost-efficient and effective use of public funds and ensure no partial optimisation happens.

An expert winemaker knows how to create a balanced product from different grape varieties. Numerous different factors can affect the end result, which means that each year the jigsaw puzzle must be put together again, taking account of the learnings from the past. No two vintages are alike. An experienced wine taster can nevertheless identify the soil type and location of the vineyard. Parliament should be able to monitor the impacts of the budgetary decisions to the same level of detail.

When reforming the operating models and processes of public administration, the aim should be to create such monitoring, evaluation and reporting structures that together can ensure accountability for the use of public funds. This would improve Parliament’s knowledge of the results and impacts of its decisions. The National Audit Office contributes to the knowledge-base of the Parliament by offering timely and relevant information and by ensuring accountability.