Budget Control and the Role of the National

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Budget Control and the Role of the National
Assembly Budget Office in Korea
Dr. Jhungsoo Park Director General for
Budget Analysis NABO, Korea
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contents

1. Introduction
2. Government Spending and Budget Control
3. Executive vs Legislative Power of the Purse
4. Details about the NABO in Korea
5. Conclusion

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1. Introduction
1-1

• New budget policy in Korea
• Medium-term expenditure framework
• Top-down budgeting system
• Performance management
• Digital budget and accounting system
• Structure of Korean government and the budget
  process
• Focus on the issue Can legislature gain an
  effective voice in budget policy?
• Weak role of National Assembly in budget
  process, traditionally

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1. Introduction
1-2

• The budget process and the decline of control
  capacity

• Todays process is a layering of various
  processes developed over time
• Significant development
• Budget committee (standing, but special)
• NABO
• The decline of independence and control comes
  from three external
• development
• The rise of disciplined political parties
• The enormous escalation in public spending
• The rise in interest groups and corporatist
  political arrangements

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1. Introduction
1-3

• New roles requires

• Legislators have to define a new role
• Promoting fiscal discipline
• Improving allocation of public money
• Stimulating administrative entities to manage
  their operations more efficiently
• Fulfilling these new roles requires
• Enhancement of legislative capacity and
  resources
• Changes in both executive and legislative
  budgeting
• New tools for reconciling long term commitments
• Redefinition of relationships with the
  government

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1. Introduction
1-4

• Characteristics of legislative budgeting

• The legislature participates with the government
  in developing budget
• policy
• Still vote estimates
• Setting out a medium-term framework
• Sectoral allocation policies
• Statements of policy

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1. Introduction
1-5

• Three restrained characteristics of legislative
  budgeting
• Budgets limit what the legislature may do with
  public money
• Budgets intrude on other legislative functions,
  such as law-making
• Budgets have the potential to turn legislative
  work into a technocratic
• exercise
• Focus on three subjects
• Government Spending and Budget control
• Executive vs legislative power of the purse
• Role of the National Assembly Budget Office

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2. Government Spending and Budget Control
2-1

• There are three major causes for the fiscal
  outcomes
• General performance of the economy
• The political commitment to fiscal discipline
• The institutional arrangements for budgeting
• Current legislative work on the budget
• To discipline public finance by constraining the
  fiscal aggregates
• To enlarge the legislatures role in revenue and
  spending policy

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2. Government Spending and Budget Control
2-2

• The seven institutional features that the OECD
  recommends

• Medium-term budget frameworks
• Prudent economic assumptions
• Top-down budgeting techniques
• Relaxing central input controls
• Focus on results
• Budget transparency
• Modern financial management practices

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2. Government Spending and Budget Control
2-3

• The theory of bureaucracy by William Niskanen
• want more for their agencies and programs
• Anthony Downs
• Why the government budget is too small in a
  democracy?
• voters are consistently misinformed
• Gordon Tullocks theory
• growth of the bureaucracy is self-generating
• William Rikers theory
• Rulers are trapped in a system of exchange of
  benefits
• The larger government grows, the more policies
  become their own causes

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3. Executive vs Legislative Power of the Purse
3-1

• Legislative roles and information needs

Transformative Legislature
Informed Legislature
Emerging Legislature
Rubber Stamp Legislature
Role in Policy Making
Need for Information
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3. Executive vs Legislative Power of the Purse
3-3

• Heart of executive-legislative relations

• The Budget Process

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3. Executive vs Legislative Power of the Purse
3-4

• Legislative powers to amend the budget

Rights Number of countries
Unlimited powers to amend the budget 32
Reductions of existing items only 17
May reduce expenditure, but increase only with permission of government 4
Increases must be balanced with commensurate cuts elsewhere 13
Rights not specified 15
Total 81
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3. Executive vs Legislative Power of the Purse
3-5

• In practice, does the legislature generally
  approve the budget as presented by the government?

With no changes With minor changes only With significant changes
Australia X
Austria X
Canada X
Czech Republic X
Denmark X
Finland X
France X
Germany X
Greece X
Hungary X
Iceland X
Ireland X
Italy X
Japan X
With no changes With minor changes only With significant changes
Korea X
Mexico X
The Netherlands X
New Zealand X
Norway X
Poland X
Portugal X
Spain X
Sweden X
Switzerland X
Turkey X
United Kingdom X
United States X
Total 6 17 4
Percent of total 22 63 15
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3. Executive vs Legislative Power of the Purse
3-6

• Comparison of the growth rate of GDP and
• government budget in Korea

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3. Executive vs Legislative Power of the Purse
3-7

• Legislative influence

• Explaining the differences
• Presidential vs parliamentary systems
• Design of parliamentary powers to amend the
  budget
• Party political dynamics
• Legislative budget research capacity
• Access to relevant information
• Legislative committees as the engine room for
  financial scrutiny
• Time for scrutiny and the timing of the budget
  process

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3. Executive vs Legislative Power of the Purse
3-8

• Strengthening the capacity of the legislatures

• Responsible and effective legislative action on
  the budget depends on
• adequate information concerning the
  activities financed with public
• funds and the results ensuing from government
  programs.
• The supply of information has enriched by
  building the capacity of audit
• offices and independent budget office to
  assist the legislature.
• To make effective use of the avalanche of
  information, modern
• legislatures have added staff, invested in IT,
  and professionalized their
• operations.
• Examples in the US and in a number of other
  countries (Philippines,
• Uganda, Poland, Georgia) establish that a
  nonpartisan, independent,
• objective, analytic unit can provide budget
  information without polarizing
• the relationships between the executive and
  the legislature.

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4. The National Assembly Budget Office in Korea
4-1

• General information

• NABO was created by the National Assembly Law
  (Article 22-2) on
• October 20, 2003
• Mission
• Conduct research and analysis on budget and
  fund, settlement of
• accounts, and performance of fiscal operations
• Estimate costs for bills
• Analyze and evaluate national programs and
  medium/long-term fiscal
• requirements
• Conduct research and analysis on the requests by
  committees or members
• of the National Assembly

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4. The National Assembly Budget Office in Korea
4-2

• NABOs organization and staffing

• NABO has about 92 full-time staffs
• Chief appointed by the Speaker and approved by
  the House Steering
• Committee
• Chief appoints all NABO staff, in case of
  higher level approved by the
• Speaker, based solely on professional
  competence, not political
• affiliation
• 90 of NABO professional staff hold advanced
  degrees in economics,
• public policy, accounting or related fields

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4. The National Assembly Budget Office in Korea
4-3

• Five objectives which the NABO pursuits

• Set its status as a specialized organization
  with authority supporting
• fiscal control
• Make sure the national budget is well spent by
  making analyses of
• budget and economic policies
• Analyze budget and economic issues based on
  public opinions
• Produce reliable research results through
  enhancing its expertise
• Establish a reputation as a world class budget
  analysts and policy
• evaluators.

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4. The National Assembly Budget Office in Korea
4-4

• Job philosophy

• Impartiality
• Timeliness
• Responsiveness
• Expertise
• Excellence
• Reliability
• Activeness

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4. The National Assembly Budget Office in Korea
4-5

• Organization of NABO

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5. Conclusion
5-1

• The success of reforms and innovations in
  budgeting will ultimately be
• determined by the cooperation of the
  legislative body
• The importance of talking full advantage of the
  opportunities offered by
• developments in IT system
• Rather than as controllers of public finance,
  legislatures should aim to
• promote fiscal discipline, improve the
  allocation of public money and
• stimulate public bodies to manage their
  financial operations more
• efficiently
• In order to do this, it is necessary to enhance
  the legislative capacity to
• deal with budget issues.

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Thank you for your attention