An Oifig Buiséid Pharlaiminteach Parliamentary Budget Office

The role and functions of Ireland’s Parliamentary Budget Office (PBO)

Briefing Paper 1 of 2017

Séanadh

Is í an Oifig Buiséid Pharlaiminteach (OBP) a d’ullmhaigh an doiciméad seo mar áis do Chomhaltaí Thithe an Oireachtais ina gcuid dualgas parlaiminteach. Ní bheartaítear é a bheith uileghabhálach ná críochnúil. Féadfaidh an OBP aon fhaisnéis atá ann a bhaint as nó a leasú aon tráth gan fógra roimh ré. Níl an OBP freagrach as aon tagairtí d’aon fhaisnéis atá á cothabháil ag tríú páirtithe nó naisc chuig aon fhaisnéis den sórt sin ná as ábhar aon fhaisnéise den sórt sin. Tá baill foirne an OBP ar fáil chun ábhar na bpáipéar seo a phlé le Comhaltaí agus lena gcuid foirne ach ní féidir leo dul i mbun plé leis an mórphobal nó le heagraíochtaí seachtracha.

Disclaimer

This document has been prepared by the Parliamentary Budget Office (PBO) for use by the Members of the Houses of the Oireachtas to aid them in their parliamentary duties. It is not intended to be either comprehensive or definitive. The PBO may remove, vary or amend any information contained therein at any time without prior notice. The PBO accepts no responsibility for any references or links to or the content of any information maintained by third parties. Staff of the PBO are available to discuss the contents of these papers with Members and their staff, but cannot enter into discussions with members of the general public or external organisations.

Executive Summary 2

Introduction 4

Independent Fiscal Institutions 5

Improving Parliament’s capacity to exercise its budgetary oversight role 7

Factors influencing the effectiveness of PBOs 8

Publication protocols 9

Access to information 9

Budget and Staffing 9

Relationship with the legislature, and leadership 10

Advisory support and evaluation 11

Functions of OECD PBOs 13

The potential role and functions of the PBO in Ireland 15

Briefing on Economy and Public Finances 16

Analysis of the Government’s budget proposals 16

Supporting parliamentary committees 16

Costings 16

Conduct work at own initiative 17

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The role and functions of Ireland’s Parliamentary Budget Office (PBO)

Contents

This Briefing Paper sets out:

n The roles and functions of OECD Independent Fiscal Institutions (IFIs);

n The distinction between PBOs and other IFIs (in the case of Ireland, the Irish Fiscal Advisory Council (IFAC));

n How PBOs can improve Parliament’s capacity to exercise its budgetary oversight role;

n Some of the factors influencing the effectiveness of PBOs;

n The range of functions of OECD PBOs; and

n The potential role and functions of Ireland’s PBO.

It briefly recaps the background to the establishment of the PBO in Ireland and that of IFAC, and how they fit into the

budgetary landscape. It is intended that this will help to provide context to a discussion about the further development

of the PBO’s functions and the services to be provided to Members of the Houses of the Oireachtas.

Given Ireland’s membership of the OECD and the extensive OECD literature and experience in this area, this paper

addresses OECD countries only.

The PBO and the Irish Fiscal Advisory Council (IFAC) – Independent Fiscal Institutions (IFIs)

The term ‘Independent Fiscal Institutions (IFIs)’1 includes both Parliamentary Budget Offices and Fiscal Councils.

Both are publicly funded, independent bodies under the statutory or administrative authority of either the

legislature or the executive, which provide non-partisan oversight and analysis of (and sometimes advice on)

fiscal policy and value for money.

In Ireland, the PBO’s dedicated focus is on assisting the Houses of the Oireachtas and its committees.

With the establishment of the PBO, Ireland now has two IFIs. While they operate in the same policy sphere,

the PBO and the Irish Fiscal Advisory Council (IFAC) have different roles, objectives and statutory status. However,

in establishing the PBO, it will be important to ensure that there is no duplication with the work of the IFAC. To this

end, the two organisations are meeting regularly and intend to explore how they may co-operate with each other

to further develop the overall breadth and depth of analysis available – both to parliament and to other

stakeholders (including the public).

Ireland has previously been categorised as having the lowest parliamentary engagement with the budget process

of any OECD country.

1 As defined by the OECD.

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The role and functions of Ireland’s Parliamentary Budget Office (PBO)

Executive Summary

There are a number of benefits the establishment of a well-designed PBO can bring to parliament in relation to

improving budgetary scrutiny and accountability, particularly when it forms part of an inter-connected, and mutually

supporting, series of actions to enhance the Parliament’s role in the budget process. This includes making complex

budget information more easily accessible and providing it to parliament quickly, thereby facilitating increased

transparency in the budget process.

There is no single model for establishing IFIs in general, or PBOs in particular, and the institution must address local

needs and conform to the country’s legal framework and political culture. In addition, the resources available to PBOs

and the relative size of countries (see Table 1) should be taken into account.

However, the OECD suggests some fundamental principles be observed including:

n Impartiality;

n Sufficient technically competent staff;

n Ready access to timely information from the Government; and

n Effective communication channels (including with the media).

Various factors influence the effectiveness of PBOs and this paper reviews how Ireland’s PBO sits in the overall

framework of OECD PBOs with regard to these factors. The OECD recommends, for example, that the leadership of PBOs

should be selected on the basis of merit and technical competence and affirms that non-partisanship and independence

are pre-requisites for a successful IFI (see Table 2).

The mandates and functions, governance structures, leadership/staffing arrangements and budgets of PBOs differ from

country to country, depending on local institutional and environmental context. A significant amount of this variation

relates to whether or not the PBO is in an EU Member State, and accordingly is subject to the obligations of the Stability

and Growth Pact (SGP), the sequence of IFI establishment and the nature of the associated parliamentary debate.

Table 3 of this paper provides an overview of different functions, which a number of PBOs in OECD countries perform

(including Ireland). Ireland’s PBO was established in mid-August 2017 and the functions it will perform have yet to be

finalised. Ireland’s PBO, however, already addresses most of the functions that would be expected of a PBO. This paper

describes those functions in the context of the Houses of the Oireachtas, the potential role of Ireland’s PBO and what the

PBO has achieved to date. It also sets out the initial objectives and services of Ireland’s PBO.

Two significant functions are not being carried out at present. These relate to:

1. Costings;

2. Individual Member budget inquiries.

It should be emphasised in relation to both of those functions that the PBO is in its establishment phase and that there

is a substantial body of work to be carried out in relation to recruitment of staff; development of econometric models;

stakeholder relationship building and securing access to information.

A Discussion Paper is being prepared by the PBO in relation to the issue of Costings.

In relation to individual Member budget inquiries, the PBO is focussing on providing support, initially, to the Committee

on Budgetary Oversight.

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3

Ireland’s Parliamentary Budget Office (PBO) was established (on 15th August 2017) within the Houses of the

Oireachtas as part of the process of Dáil reform.2 A commitment in relation to its establishment was also made in

the Programme for a Partnership Government. The PBO is one of the specialist units which have been established in

recent years within the Houses of the Oireachtas Service. These include the Office of the Parliamentary Legal Advisor

and the Library & Research Service (L&RS).

2 The need for a Parliamentary Budgetary Office was identified by the OECD in its review of budget oversight by the Irish Parliament. The Oireachtas Sub-Committee on Dáil Reform, in its final report in May 2016, recommended that the office be established.

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The role and functions of Ireland’s Parliamentary Budget Office (PBO)

Introduction

The term ‘Independent Fiscal Institutions’ (IFIs) is used by the OECD and includes both Parliamentary Budget Offices

and Fiscal Councils. Both are publicly funded, independent bodies under the statutory or administrative authority of

either the legislature or the executive, which provide non-partisan oversight and analysis of (and sometimes advice on)

fiscal policy and value for money. This term is also employed by the European Union (EU) – another term is used by the

International Monetary Fund (IMF).3

A clear trend of establishing IFIs is evident in OECD member countries. The number has tripled since the financial

crisis of 2008, with the largest growth occurring in the European Union (EU) due to the changes to the fiscal framework.

According to the OECD (p.1), “Today IFIs are considered among the most important innovations in the emerging

architecture of public financial management.”4 A total of 26 out of 35 OECD countries have an IFI and a number

of those have multiple IFIs (e.g., Austria, Ireland).

In this regard, while fiscal decision-making is ultimately the responsibility of democratically elected representatives

(and the executive in most instances), IFIs are seen as a mechanism to:

n Help address bias towards spending and deficits;

n Generally enhance fiscal discipline;

n Promote greater fiscal transparency and accountability; and

n Raise the quality of public debate on fiscal policy.

It is also suggested that PBOs in particular help to lend credibility to the budget process, promote a culture of evaluation

and develop greater use of evidence-based policy making. IFIs generally have no legally binding enforcement power –

their primary tool of influence is communication and dissemination of their analysis through various channels. Part of

their objective is therefore to influence Government behaviour through promoting transparency and constructive debate.

IFIs differ from audit institutions in that their analysis is generally ex-ante rather than ex-post. Lack of ex ante

parliamentary debate on budget priorities was one of the issues noted by the OECD in their report (2015) on Ireland’s

parliament’s role in the budget process. Essentially therefore, their function is to promote accountability and

transparency in the management of public finances during the policy-making and budget formulation process.

One of the main differences between the Parliamentary Budget Office (PBO) institutional model and the Fiscal

Council model (e.g. IFAC) is that PBOs place their primary focus on parliamentary oversight of the budget process

and supporting the work of the Budget Committee (in whatever form that may take).5

3 While broadly analogous with the OECD definition, the EU definition of IFI encompasses a wider range of bodies. The IMF uses the term ‘Fiscal Council’ to describe IFIs but restricts the categories of organisations it includes, i.e. to Fiscal Councils and PBOs, i.e. in keeping with the OECD approach. For further information in an EU context click here; in respect of the IMF, here.

4 Principles for Independent Fiscal Institutions and Case Studies, OECD (2016), OECD Journal on Budgeting – Volume 2015/2. Available here.

5 A full overview of the role and function of the IFAC is available in the Oireachtas Library & Research Service Note available here.

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The role and functions of Ireland’s Parliamentary Budget Office (PBO)

Independent Fiscal Institutions

The establishment of a fiscal council was a requirement of the EU/IMF Programme of Financial Support for Ireland

(December 2010). However, it had been proposed domestically in the National Recovery Plan 2011-2014, by a report

of the Oireachtas Joint Committee on Finance and the Public Service6 and also in a Department of Finance discussion

document.7

The IFAC was formally established as an independent statutory body under the Fiscal Responsibility Act 2012 (FRA).

Further EU regulations (July 2013) resulted in the council being assigned the role of endorsing the macroeconomic

forecasts produced by the Department of Finance on which budgets and stability programmes are based

(implemented by the Ministers and Secretaries (Amendment) Act 2013). The process of this additional function

is outlined in a Memorandum of Understanding (MoU) between the IFAC and the Department of Finance.

In general terms, it can be assumed that the functions of a PBO should be focussed in such a way as to avoid

duplication with another IFI, if such exists in that country. In Austria, for example, the Head of the PBO sits in the

Austrian Fiscal Council meetings as a non-voting member thus promoting good communication and co-ordination

between the institutions. In Ireland, and to this end, the Director of the PBO and the Chief Economist/Head of

Secretariat of the IFAC have already met on a number of occasions to clarify roles/objectives and to discuss

potential areas of co-operation.

6 Joint Committee on Finance and the Public Service, Fourth Report, Report on Macroeconomic Policy and Effective Fiscal and Economic Governance, November 2010.

7 Reforming Ireland’s Budgetary Framework: A Discussion Document, Department of Finance (March 2011).

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Anderson (2009)8 explores the value of an independent budget capacity located in the legislature for expanding

parliament’s role in budgeting and for holding the executive accountable. He finds that the role of an independent unit,

within parliament, can be to provide information which places the legislature on a more equal footing with the executive

branch. Providing such information is essential if the legislature is to play an effective role throughout the budget cycle.

Apart from this important function Anderson (p. 6) suggests that there are additional benefits which an independent,

analytic, budget unit can deliver. The most important of these functions are:

1. Simplifying complexity. Budget information – when made available by government – may be so complex that

the legislature has difficulty understanding it. An independent unit should be in a position to ‘translate’ this

information into a more easily understood format.

2. Promoting transparency. The knowledge and expertise of an independent budget unit should encourage the

promotion of transparency within the budget process.

3. Enhancing overall credibility. Government budget forecasts may benefit from enhanced credibility, as a result

of reduced complexity and enhanced transparency.

4. Improving the budget process. The work of the independent unit in providing a more simple, transparent,

credible, and accountable version of the budget may promote the revision and introduction by the government

of a budget process which is more straightforward and easier to understand.

5. Rapid responses. An independent budget unit which is an internal part of the legislature should provide much

more rapid responses to budget inquiries from the legislature than would usually be provided by government

bodies.

8 Anderson, Barry (2009), The Changing Role of Parliament in the Budget Process, OECD Journal on Budgeting Volume 2009/1

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Improving Parliament’s capacity to exercise its budgetary oversight role

There is no unique model for establishing IFIs and they are a relatively recent and novel feature within the scrutiny

framework. However, some lessons on good practice have been learned over the last number of years that identify

important factors in the effectiveness of IFIs in general:10

n The institution must address local needs and conform to the country’s legal framework and political culture.

In general, importing a model from abroad is not effective;

n Independence and non-partisanship is crucial to the effectiveness of IFIs of any institutional model.

They must be seen as impartial and able to express views freely and openly;

n They must have skilled, technically competent staff – in addition, staff numbers must be adequate

and commensurate with the institution’s mandate;

n Ready access to timely information from the Government is vital and this continues to be one of the biggest

challenges for institutions. Ideally, right of access to information should be set out in legislation and/or in

Memoranda of Understanding although it is understood that this does not necessarily guarantee such access;

n Most IFIs make all their research and material publicly available so as to reinforce the independent and

non-partisan nature of the work and to contribute to public debate on the public finances.

The following sub-sections provide (including in tabular format) an overview of how Ireland (in its establishment phase)

sits in the overall framework of OECD PBOs with regard to factors that would influence its effectiveness. Specific aspects

addressed are:

n Publication protocols;

n Access to information;

n Budget and Staffing;

n Relationship with the legislature (including leadership appointment);

n Advisory support and evaluation.

The PBOs in both Austria and Canada, in particular, have similar structures and stakeholder relationships to Ireland’s

PBO and thus are specifically referenced by comparison.

9 This section draws on data provided by the OECD (Personal communication, 13th September 2017) and from the OECD IFI Database.

10 Source: Kopits, G. Independent Fiscal Institutions: Developing Good Practices, Prepared for the 3rd Annual meeting of the OECD Parliamentary Budget Officials meeting in Stockholm, Sweden, on April 28th/29th, 2011 (Draft for discussion, pp.17-18).

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The role and functions of Ireland’s Parliamentary Budget Office (PBO)

Factors influencing the effectiveness of PBOs9

Publication protocols

With regard to open publication, the Austrian PBO publishes all analyses on the Austrian Parliament’s website, where

they are freely accessible. The Canadian PBO is committed to using a fully transparent, open publishing model and all

of its analysis is reported openly to committees and parliamentarians, as well as being published on its website, where

it is freely available to the public. Ireland’s PBO emulates this model and has published all its publications to date on

its dedicated webpage (www.Oireachtas.ie/PBO) on the Houses of the Oireachtas website.

In some cases, in the interests of facilitating good relations and/or in the context of fact-checking, PBOs give

Government sight of reports in advance of publication. However it is understood that this is not a universal approach.

Access to information

Access to information is a critical success factor when establishing any PBO as the effectiveness of the institution

is limited if it cannot access timely and accurate budgetary information.

The OECD Principles for Independent Fiscal Institutions suggests that it is useful to set out an institution’s access to

information in legislation, as well as clearly defining any restrictions to access. It can be challenging to achieve such

access to budgetary information – both the Austrian and Canadian PBOs have cited such challenges.11 At present there

are no special provisions in place in Ireland regarding access to this information. However, Ireland’s PBO intends to

begin the process of formally agreeing with various stakeholders the most appropriate means of accessing the

information the Office requires.

Budget and Staffing

Staffing complement varies significantly between institutions and countries. The wide range of staff complements and

budgets are illustrated in Table 1 (over). It should be noted that Canada’s staffing complement is due to more than

double in size (to 42 over the next 18 months) due to a significant legislative amendment to its role and functions.12

11 In respect of Austria, see OECD Parliamentary Budget Officials and Independent Fiscal Institutions 6th Annual Meeting, The Knesset, Jerusalem Austria Parliamentary Budget Office Update. In respect of Canada, see 2013-14 Report on Activities of the Parliamentary Budget Office (p.ii).

12 This relates to ‘costings’ and is addressed in more detail later in this paper.

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Table 1 – OECD PBOs: Budget and Staffing

Country Institution name Institution’s budget (year) € equivalent

Staffing (FTEs)

Total Government expenditure (2015) € equivalent

Australia Parliamentary Budget Office (PBO) €4.49 million (2014) 38 €385.8 billion (2014)

Austria Parliamentary Budget Office (PBO) €0.9 million (2017) 8 €175.4 billion

Canada Parliamentary Budget Office (PBO) €1.85 million (2014) 17 n/a

Greece Parliamentary Budget Office (PBO) €0.5 million (2017) 16 €97.3 billion

Italy Parliamentary Budget Office (PBO) €6 million (2014) 33 €827.8 billion

Korea National Assembly Budget Office (NABO)

€11.06 million (2017) 138 €391.1 billion

Mexico Centre for Public Finance Studies (CEFP)

€2.26 million (2016) 60 n/a

USA Congressional Budget Office (CBO) €39.28 million (2016) 235 €5.87 trillion

Ireland Parliamentary Budget Office (PBO) €0.96 million (2018 projected)

15 (projected)

€75.3 billion

Source: OECD, Updated 9th November 2017 and PBO (Ireland)

Relationship with the legislature, and leadership

The OECD recommends that the leadership of PBOs should be selected on the basis of merit and technical competence,

without reference to political affiliation. It also states that, “[n]on-partisanship and independence are pre-requisites for a

successful IFI.”13 PBOs generally have an individual leadership structure and the Director is usually appointed for a fixed

term extending beyond the term of the Government. Ideally, the Office should have its own technical staff and the

director should have control over recruitment.

The report of the Oireachtas sub-committee on Dáil Reform (2016) recommended (p.15) that the PBO should be

established on a statutory basis. It has, initially, been established on an administrative basis.

Table 2 (over) situates Ireland in a comparative OECD context.

13 Von Trapp, Lisa & Nicol, Scherie, OECD (2016, p.20), Designing effective independent fiscal institutions.

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Advisory support and evaluation

The OECD Principles for Independent Fiscal Institutions14 recommend that IFIs develop a mechanism for external

evaluation of their work (principle 9.1). Almost half (44%) of the IFIs across OECD member countries have an external

advisory panel in place (or in development) in order to enhance the credibility of their work. This is particularly the case

in respect of those IFIs which prepare economic forecasts.

Advisory panels can be in place for a number of reasons. They may, for example, make suggestions in relation

to an institution’s programme of work and topics of concern or provide methodological or technical advice.

A small number of IFIs also engage in peer review – both formally and informally. For example, the Australian PBO

uses peer review processes, as required, for its major reports. Peer reviewers are familiar with the data, methodologies

and estimation techniques and have, in the past, been sourced from independent think tanks, academia, international

organisations, private sector economists and other IFIs. In each case their identity has been made public. The Canadian

PBO has also actively sought to have its work peer reviewed for external validation and to ensure the rigour of the

methodology and the results. To do this, it regularly collaborates with other institutions such as universities, think tanks,

the Canadian Association for Business Economics, the United States CBO and the International Monetary Fund (IMF).

The Irish Fiscal Advisory Council (IFAC) published their first external review in 201515 and have indicated a willingness for

external evaluation to take place on a regular basis – having also committed to initiating a second external review of the

Council’s operations in 2020 taking into account performance over the period since 2015.16 This approach may act as a

future model for Ireland’s PBO.17

Ex Post Evaluation of PBOs’ impact

In relation to ex post analysis of the impact of PBOs, the OECD has (2015, p.6)17 noted that various practices exist

within the OECD IFI community, to assess specific elements of an IFI’s mandate. These tools for assessment

include peer review of products, stakeholder satisfaction surveys, as well as resource compliance audits.

The OECD notes, however, that these tools do not provide a comprehensive evaluation of the IFI as an institution

in a specific context, with a defined set of inputs, which produces outputs and that considers the outcomes of its

work through the perceived confidence of its stakeholders.

The OECD is therefore developing a framework for a more comprehensive evaluation of IFIs and notes that a full

evaluation of an IFI can serve to legitimise the institution relevant to its environment, resources, products and

perceptions of its legislated and non-legislated stakeholders.

14 See Footnote 4 of this paper.

15 Available here.

16 IFAC Strategic Plan 2017-2019 (p.13). Available here.

17 See Draft Discussion Handout from the 7th Annual Meeting of OECD Parliamentary Budget Officials and Independent Fiscal Institutions, Austrian Parliament, Vienna, 16-17 April 2015, entitled Evaluating the Performance of Independent Fiscal Institutions: Towards a Common Evaluation Framework for Independent Parliamentary Budget Offices and Fiscal Councils.

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Table 2 – Relationship with legislature (IFIs including Ireland – PBO and IFAC)

Country Organisation

Rep

orts

pub

lish

ed

Key

repo

rts

sent

to

the

legi

slat

ure

Lead

ersh

ip

part

icip

ates

in

parl

iam

enta

ry

hear

ings

Parl

iam

ent p

lays

a

role

in a

ppoi

ntm

ent

or d

ism

issa

l pro

cess

fo

r le

ader

ship

Lead

ersh

ip te

rm

leng

th

Lead

ersh

ip

appo

intm

ent-

rene

wab

le

Canada Parliamentary Budget Office (PBO)

• • • × 5 years Once

Italy Parliamentary Budget Office (PBO)

• • • • 6 years Non-renewable

Korea National Assembly Budget Office (NABO)

• • • • Not defined1

Not defined

Mexico Center for Public Finance Studies (CEFP)

• • • • 5 years2 Once

US Congressional Budget Office (CBO)

• • • • 4 years Without limit

Greece Parliamentary Budget Office (PBO)

• • • • 5 years Once

Australia Parliamentary Budget Office (PBO)

• • • • 4 years Once

Ireland Parliamentary Budget Office (PBO)

• • • × 5 years Not defined

Austria Fiscal Advisory Council (FISK)

• • • × 5 years Without limit

Ireland Fiscal Advisory Council

• • • • 4 years Once

Footnotes:1 In Korea, in practice every two years the Speaker of the National Assembly changes and the NABO Chief resigns at the same time.

2 In Mexico none of the past 5 Directors to date have served a full 5 year term or been renewed.

Key:• = Yes × = No

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While there are many similar features as outlined above, nonetheless there is significant variation between institutions

which are described as PBOs. Their mandates and functions, governance structures, leadership/staffing arrangements

and budget differ from country to country, depending on the local institutional and environmental context.

Variations arise based on whether or not the PBO is in an EU Member State, the order of IFI establishment18 and

the nature of the associated parliamentary debate.

Outside of the EU, the PBO tends to be the dominant model and it typically has a broad range of functions. In the

United States of America for example, the Congressional Budget Office (CBO) has a broad mandate because Congress

is the budget-maker, rather than because there is no other IFI.

Therefore, the functions of a PBO depend on a number of aspects including:

n What functions are being served by existing institutions (including other IFIs);

n The nature of the parliamentary system; and

n The local political context.

Table 3 (over) provides a comparative overview of OECD PBO functions – a selected number of these functions are then

described in more detail.

It may be noted that Austria has a similar institutional framework to Ireland’s, given that it also has both a PBO and a

Fiscal Advisory Council and is also an EU (and Euro Zone) Member State.19 For this reason, the table details both

Ireland’s IFAC and the Austrian FISK in addition to a range of OECD PBOs.

18 i.e. which IFI is first established – in the case of Ireland, this was the IFAC.

19 Greece also has both a fiscal council and PBO. Portugal has the UTAO (a technical budget support unit) in Parliament in addition to the Public Finance Council (CFP).

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The role and functions of Ireland’s Parliamentary Budget Office (PBO)

Functions of OECD PBOs

Tabl

e 3

– O

ECD

PB

O f

unct

ions

(Ir

elan

d/A

ustr

ia I

FI f

unct

ions

)

Coun

try

FUN

CTIO

NS

Briefing on economy and

public finance

Analyse executive’s

budget proposals

Support parliamentary

committees

Long Term fiscal sustainability

analysis

Role in macroeconomic

or fiscal forecasts

Cost estimates (policies,

legislation)1

Individual member budget

inquiries2

Monitoring compliance w/

fiscal rules

Costing election platforms

Tracking cost of legislation

(scorekeeping)

Analysis of performance

budgeting

Evaluation of major national

projects

Conduct work at own initiative

Kore

a•

••

•

••

××

××

••

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ico

••

•×

•

•×

××

××

•

Uni

ted

Stat

es•

••

•

••

××

•×

ו

Aus

tral

ia•

••

•×

••

ו

××

ו

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da•

••

•

•×

××

××

ו

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ece

••

••

n×

ו

××

××

•

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y•

••

•n

××

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tria

– P

BO

••

••

××

•×

××

•×

•

Irel

and

– PB

O3

••

•×

×TB

D×

×TB

D×

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•

Tota

l – P

BO

99

97

65

52

11

11

9

% o

f OEC

D P

BO

s10

0%10

0%10

0%78

%67

%55

%55

%22

%11

%11

%11

%11

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0%

Aus

tria

– F

AC (F

ISK)

•×

ו

n×

ו

××

××

•

Irel

and

– IF

AC4

•×

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foot

note

•Se

e fo

otno

te×

ו

××

××

•

Foot

note

s:1

The

Aus

tria

n P

BO

, the

Gre

ek P

BO

and

the

Ital

ian

PB

O u

nder

take

impa

ct a

sses

smen

t of n

ew le

gisl

atio

n

2 Th

e A

ustr

ian

PB

O a

nd th

e M

exic

an C

EFP

cond

uct i

ndiv

idua

l mem

ber i

nqui

ries

for m

embe

rs o

f the

bud

get c

omm

itte

es o

nly.

The

CB

O e

ncou

rage

s in

divi

dual

mem

bers

to c

hann

el in

quir

ies

thro

ugh

com

mit

tees

. The

Can

adia

n P

BO

doe

s no

t pro

cess

indi

vidu

al m

embe

r inq

uiri

es re

lati

ng to

the

budg

et –

it d

oes

proc

ess

finan

cial

cos

ting

s fo

r ind

ivid

ual m

embe

rs.

3 W

ith

rega

rd to

Cos

t est

imat

es, a

Dis

cuss

ion

Pape

r is

bein

g pr

epar

ed b

y th

e P

BO

. TB

D: T

o be

det

erm

ined

. Wit

h re

gard

to “

Ana

lysi

s of

per

form

ance

bud

geti

ng”,

the

PB

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ay m

ake

use

of p

erfo

rman

ce b

udge

ting

dat

a bu

t doe

s no

t pr

epar

e ex

ant

e pe

rfor

man

ce a

naly

sis.

4 W

ith

rega

rd to

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le in

Mac

roec

onom

ic o

r fisc

al fo

reca

sts”

, IFA

C ha

s an

end

orse

men

t fun

ctio

n (f

or m

acro

econ

omic

fore

cast

s) a

s w

ell a

s an

ass

essm

ent f

unct

ion

(for

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roec

onom

ic a

nd b

udge

tary

fore

cast

s) a

nd a

rare

nor

mat

ive

man

date

to a

sses

s th

e fis

cal s

tanc

e. A

“Lo

ng T

erm

fisc

al s

usta

inab

ility

ana

lysi

s” is

not

spe

cific

ally

man

date

d in

the

case

of t

he IF

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ut is

rega

rded

as

part

of i

ts ro

le a

nd re

gula

r out

put.

Whi

le th

e IF

AC d

oes

not h

ave

a fo

rmal

role

in

supp

orti

ng O

ireac

htas

com

mit

tees

it d

oes

appe

ar b

efor

e th

e Co

mm

itte

e on

Bud

geta

ry O

vers

ight

on

regu

lar o

ccas

ions

.

Key:

• =

Yes

× =

No

= A

sses

s fo

reca

sts

only

n

= P

repa

re a

lter

nati

ve fo

reca

sts

Sour

ce fo

r non

-Iri

sh d

ata:

OEC

D (P

erso

nal c

omm

unic

atio

ns o

f 13t

h Se

ptem

ber 2

017

and

3rd

Nov

embe

r 201

7)

The

role

and

func

tion

s of

Irel

and’

s Pa

rlia

men

tary

Bu

dget

Off

ice

(PB

O)

The role and functions of Ireland’s Parliamentary Budget Office (PBO)

14

According to Wehner (2010),20 Ireland has the lowest parliamentary engagement with budget process of any OECD

country (based on the ‘index of legislative budget institutions’).21

The establishment of the PBO was one of a number of recommendations made in the OECD report Review of Budget

Oversight: Ireland (November 2015). The OECD suggested (p.41) that the Office would (in line with the role of PBOs

generally), “provide specialist analytical support to parliamentarians and…facilitate effective scrutiny throughout

all stages of the budget cycle.”

The purpose of these recommendations was to improve Dáil Éireann’s engagement with the budget process, and in

turn improve the evidential basis and quality of budgetary policy development, decision making and accountability.

The OECD review highlighted (p.14) the need to, “equip parliamentarians to engage more effectively on budgetary

matters, including through analysis of information on taxation, expenditure and performance, as well as policy

costings.”It also noted (p.41) that the functions of the PBO, “should complement and not overlap with those of IFAC”.

Following on from that report, the Oireachtas sub-committee on Dáil Reform also recommended, in May 2016, that the

office be established.

The establishment of the PBO was then provided for in the Programme for a Partnership Government (p.16) following

the 2016 General Election.

In respect of Government, the 2015 Spring Economic Statement (SES) had also noted (p.46) that it would examine,

“establishing an Independent Budget Office”. This proposal did not undergo any subsequent development and was

superseded by the OECD’s recommendations.

20 Wehner, J. (2010). Legislatures and the Budget Process: The Myth of Fiscal Control. New York, Palgrave Macmillan.

21 This index is a composite metric that compares legislative budget engagement across countries, based on a range of objective criteria.Tabl

e 3

– O

ECD

PB

O f

unct

ions

(Ir

elan

d/A

ustr

ia I

FI f

unct

ions

)

Coun

try

FUN

CTIO

NS

Briefing on economy and

public finance

Analyse executive’s

budget proposals

Support parliamentary

committees

Long Term fiscal sustainability

analysis

Role in macroeconomic

or fiscal forecasts

Cost estimates (policies,

legislation)1

Individual member budget

inquiries2

Monitoring compliance w/

fiscal rules

Costing election platforms

Tracking cost of legislation

(scorekeeping)

Analysis of performance

budgeting

Evaluation of major national

projects

Conduct work at own initiative

Kore

a•

••

•

••

××

××

••

Mex

ico

••

•×

•

•×

××

××

•

Uni

ted

Stat

es•

••

•

••

××

•×

ו

Aus

tral

ia•

••

•×

••

ו

××

ו

Cana

da•

••

•

•×

××

××

ו

Gre

ece

••

••

n×

ו

××

××

•

Ital

y•

••

•n

××

•×

××

ו

Aus

tria

– P

BO

••

••

××

•×

××

•×

•

Irel

and

– PB

O3

••

•×

×TB

D×

×TB

D×

××

•

Tota

l – P

BO

99

97

65

52

11

11

9

% o

f OEC

D P

BO

s10

0%10

0%10

0%78

%67

%55

%55

%22

%11

%11

%11

%11

%10

0%

Aus

tria

– F

AC (F

ISK)

•×

ו

n×

ו

××

××

•

Irel

and

– IF

AC4

•×

See

foot

note

•Se

e fo

otno

te×

ו

××

××

•

Foot

note

s:1

The

Aus

tria

n P

BO

, the

Gre

ek P

BO

and

the

Ital

ian

PB

O u

nder

take

impa

ct a

sses

smen

t of n

ew le

gisl

atio

n

2 Th

e A

ustr

ian

PB

O a

nd th

e M

exic

an C

EFP

cond

uct i

ndiv

idua

l mem

ber i

nqui

ries

for m

embe

rs o

f the

bud

get c

omm

itte

es o

nly.

The

CB

O e

ncou

rage

s in

divi

dual

mem

bers

to c

hann

el in

quir

ies

thro

ugh

com

mit

tees

. The

Can

adia

n P

BO

doe

s no

t pro

cess

indi

vidu

al m

embe

r inq

uiri

es re

lati

ng to

the

budg

et –

it d

oes

proc

ess

finan

cial

cos

ting

s fo

r ind

ivid

ual m

embe

rs.

3 W

ith

rega

rd to

Cos

t est

imat

es, a

Dis

cuss

ion

Pape

r is

bein

g pr

epar

ed b

y th

e P

BO

. TB

D: T

o be

det

erm

ined

. Wit

h re

gard

to “

Ana

lysi

s of

per

form

ance

bud

geti

ng”,

the

PB

O m

ay m

ake

use

of p

erfo

rman

ce b

udge

ting

dat

a bu

t doe

s no

t pr

epar

e ex

ant

e pe

rfor

man

ce a

naly

sis.

4 W

ith

rega

rd to

“Ro

le in

Mac

roec

onom

ic o

r fisc

al fo

reca

sts”

, IFA

C ha

s an

end

orse

men

t fun

ctio

n (f

or m

acro

econ

omic

fore

cast

s) a

s w

ell a

s an

ass

essm

ent f

unct

ion

(for

mac

roec

onom

ic a

nd b

udge

tary

fore

cast

s) a

nd a

rare

nor

mat

ive

man

date

to a

sses

s th

e fis

cal s

tanc

e. A

“Lo

ng T

erm

fisc

al s

usta

inab

ility

ana

lysi

s” is

not

spe

cific

ally

man

date

d in

the

case

of t

he IF

AC b

ut is

rega

rded

as

part

of i

ts ro

le a

nd re

gula

r out

put.

Whi

le th

e IF

AC d

oes

not h

ave

a fo

rmal

role

in

supp

orti

ng O

ireac

htas

com

mit

tees

it d

oes

appe

ar b

efor

e th

e Co

mm

itte

e on

Bud

geta

ry O

vers

ight

on

regu

lar o

ccas

ions

.

Key:

• =

Yes

× =

No

= A

sses

s fo

reca

sts

only

n

= P

repa

re a

lter

nati

ve fo

reca

sts

Sour

ce fo

r non

-Iri

sh d

ata:

OEC

D (P

erso

nal c

omm

unic

atio

ns o

f 13t

h Se

ptem

ber 2

017

and

3rd

Nov

embe

r 201

7)

The

role

and

func

tion

s of

Irel

and’

s Pa

rlia

men

tary

Bu

dget

Off

ice

(PB

O)

15

The role and functions of Ireland’s Parliamentary Budget Office (PBO)

The potential role and functions of the PBO in Ireland

PBO initial objectives and services

The initial objectives and services of Ireland’s Parliamentary Budget Office (PBO) are set out in a publication

available on its webpage. The key objective is to support the Houses of the Oireachtas and its committees in

relation to fiscal issues and the management of the public finances. The PBO’s services will include advising

Members in relation to:

l The EU fiscal rules including the Stability and Growth Pact (SGP), the Expenditure Benchmark (EB),

the Medium Term Objective (MTO), and the EU Semester process;

l Irish and international macro-economic developments;

l The national budgetary process and rules including the Medium Term Expenditure Framework (MTEF);

l The composition and sustainability of the revenue base;

l The efficiency, effectiveness and value for money of public services especially in the context of voted

expenditure (which forms the great bulk of Government expenditure).

Briefing on Economy and Public Finances

This is a standard function within most PBOs and Ireland’s PBO has commenced this with the publication of its

first Quarterly Commentary.

Analysis of the Government’s budget proposals

This too is a standard function within most PBOs and Ireland’s PBO appeared before the Oireachtas Committee

on Budgetary Oversight to discuss Budget 2018 on the following dates:

n 27th September prior to the appearance of the Minister for Finance and Public Expenditure and Reform

to present its pre-Budget 2018 Commentary and Key messages;

n 25th October to present and discuss its post-Budget 2018 Commentary.

Supporting parliamentary committees

The Austrian PBO, for example, has a special relationship with the Budget Committee of its parliament and it is

foreseen that Ireland’s PBO will, at least initially, focus on the Oireachtas Committee on Budgetary Oversight.

Costings

A Discussion Paper is being prepared by Ireland’s PBO which will set out the context, options and the potential

associated resource implications of such a function. A distinction can, however, be made between costing election

platforms and costing legislation/policy.

In general, it may be noted that costing may constitute a very challenging and resource-intensive undertaking –

not simply in analytical terms but also in terms of generating political capital and trust, i.e. establishing a ‘track record’

with all relevant stakeholders.

The

role

and

func

tion

s of

Irel

and’

s Pa

rlia

men

tary

Bu

dget

Off

ice

(PB

O)

The role and functions of Ireland’s Parliamentary Budget Office (PBO)

16

Election platforms

As can be seen in Table 3, costing of election platforms is not normally a function of PBOs.22

A recent development of interest concerns Canada’s PBO – the Parliament of Canada Act as amended (Section 79.21)23

which was passed just before the summer 2017 recess states that:

“the Parliamentary Budget Officer shall, at the request of an authorised representative or a member, estimate

the financial cost of any election campaign proposal that the authorised representative’s party or the member

is considering making.”

It is understood that this legislative expansion of the Canadian PBO’s remit will require a very significant increase in

financial resources and a doubling in size to enable that Office to undertake this function. Ireland’s PBO has, initially,

been established on an administrative rather than a legislative basis.

Reference is also frequently made to the work undertaken by the Centraal Planbureau (CPB) – the Netherlands Bureau

for Economic Policy Analysis – which was established in 1945 and is one of the longest established IFIs in Europe. Its

functions have, however, evolved over time and it does not constitute a PBO as described in this paper.24 In the 1980s,

the CPB’s role was extended to include a costing service for election manifestos, examining short and long-term effects

and impacts of party proposals. The CPB employs some 130 staff and has an annual budget of approx. €13 million.

Legislative/policy costing

When undertaken, the approach varies depending on the size of the institution and its mandate.

However, it is also possible to differentiate between initial and ongoing costing. For example, the US Congressional

Budget Office (CBO), which is very well resourced, costs between 500 and 700 Bills annually.25 In the US context

however, apart from its initial costings of legislation, the CBO routinely monitors the budgetary effects of enacted

legislation to help improve projections of spending and receipts under current law, as well as to improve cost estimates

for new legislative proposals.

Other institutions are more selective, such as the Canadian PBO which prioritises requests for costing based on whether

or not the proposal can reasonably be expected to have an impact on the Canadian economy or the Government’s

finances or estimates (a ‘materiality clause’).

Conduct work at own initiative

Most PBOs publish pro-active publications and would reserve the right to publish, on occasion, in relation to areas that

fall within their remit. This is also the case for Ireland’s PBO which has published its first two Notes – Gender Budgeting

and Public Service Performance Report 2016.26 This paper constitutes the third such publication.

22 The Australian PBO is an exception.

23 Available here.

24 The CPB’s mandate includes undertaking independent analysis relevant for economic policy making, preparation of the official Government forecasts of economic and fiscal development, the annual Central Economic Plan, and cost-benefit analyses (CBAs) of major infrastructure projects.

25 Essentially, this constitutes every Bill reported by Congressional Committees.

26 Available here.

The

role

and

func

tion

s of

Irel

and’

s Pa

rlia

men

tary

Bu

dget

Off

ice

(PB

O)

The role and functions of Ireland’s Parliamentary Budget Office (PBO)

17

Notes

The

role

and

func

tion

s of

Irel

and’

s Pa

rlia

men

tary

Bu

dget

Off

ice

(PB

O)

The role and functions of Ireland’s Parliamentary Budget Office (PBO)

18

Notes

The

role

and

func

tion

s of

Irel

and’

s Pa

rlia

men

tary

Bu

dget

Off

ice

(PB

O)

The role and functions of Ireland’s Parliamentary Budget Office (PBO)

19

Notes

The

role

and

func

tion

s of

Irel

and’

s Pa

rlia

men

tary

Bu

dget

Off

ice

(PB

O)

The role and functions of Ireland’s Parliamentary Budget Office (PBO)

20

Contact: PBO@oireachtas.ie Go to our webpage: www.Oireachtas.ie/PBO Publication date: 24 November 2017

Houses of the Oireachtas Leinster House Kildare Street Dublin 2 D02 XR20

www.oireachtas.ie Tel: +353 (0)1 6183000 or 076 1001700 Twitter: @OireachtasNews

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