By Derek Gill
New Zealand risks losing its leading role in public budgeting
New Zealand has climbed back with the second ranking overall for Budget Openness in the latest international Open Budget Survey. While reversing a temporary drop from the top ranking in the previous 2021 survey, the latest survey results raise bigger questions about what New Zealand needs to do next to continue to raise the bar on the transparency and credibility of the budget documents.
The latest Open Budget Survey for 125 countries - including New Zealand - was released on 30 May 2024. The big headline is that NZ, which has been ranked first (or first equal) since the survey ‘s inception in 2006 but dropped to 4th in 2021, has clawed its way back to 2nd behind Georgia, and just ahead of Sweden.
The Open Budget Survey is truly international covering 125 countries
The Open Budget Survey (OBS) is part of the International Budget Partnership’s (IBP) Open Budget Initiative, a global research and advocacy program to promote public access to budget information and the adoption of inclusive and accountable budget systems. The OBS is widely recognized as one of the best comparative sources of data on accountability in government budgets. Its data not only provides a snapshot of the current levels of transparency, formal oversight, and public participation in national governments’ budgets, but also provides a time series on changes in practices in countries.
The survey provides a systematic review of transparency, participation and oversight
The overall score masks performance across the different dimensions of the survey.
New Zealand ranks highly in first or second place on budget transparency and public participation while on oversight, New Zealand comes in much lower at number 18. As a result, much can be learnt from the practices of other jurisdictions about how New Zealand can be more transparent and accountable.
Budget Transparency
The OBS assesses Budget Transparency by measuring public access to information on how the central government raises and spends public resources. It focuses on the online availability, timeliness, and comprehensiveness of eight key budget documents.
New Zealand scores highly - as shown in the graph above - as it publishes all eight documents. With the move to Wellbeing Budgeting, New Zealand now systematically publishes state data on living standard outcomes – something not available in many other jurisdictions or assessed by the survey.
The main area of weakness identified in the survey was the need to improve the current Citizens Budget (Budget at a Glance), so it provides a simpler and less technical version of the government's Budget.
Public participation is the weakest link for all countries
Public Participation assesses to what degree the executive, the legislature, and the national audit office each provides opportunities for the public to engage during different cycles of the budget process.
Across the globe public engagement in budget decision-making is the weakest link in countries’ accountability systems. Budgets remain a primarily elite conversation with few avenues for ordinary people to engage and have a say. Few countries worldwide have formal channels to engage underserved communities.
New Zealand is ranked second overall on this pillar, but its relatively low absolute score suggests there is plenty of scope to improve budgeting practices.
Budget oversight – limited legislative scrutiny
Budget oversight examines the role played by formal oversight institutions such as the legislature and the national audit office (The Office of Auditor General in New Zealand) in the budget process and the extent to which they are able to provide robust oversight of the budget.
Across the world budget oversight by legislators and national auditors is limited and there are serious gaps in checks and balances in the management of public funds. Legislative oversight has declined due to a variety of factors, such as political unrest, the pandemic, and executive overreach. Executives in some countries have found ways to undermine Supreme Audit Institutions (SAIs) while staying within the boundaries of the law.
New Zealand is only ranked 18th in the survey on this pillar. In part that reflects the constitutional arrangements in Westminster systems with the lack of a sharp formal separation of powers between the executive and the legislature.
Budget oversight – New Zealand lacks a Parliamentary Budget Office
New Zealand has been slow to adopt practices such as an independent fiscal institution. The Treasury has a well-developed proposal for a Parliamentary Budget Office (PBO) the functions of which were agreed by Cabinet in 2019. However, the proposal did not garner the political support as it requires cross-party support to proceed as an Office of Parliament.
Changes in the political situation provides a window of opportunity to reverse the declining credibility of budgeting in New Zealand.
Creating a PBO would significantly strengthen New Zealand’s fiscal constitution. This would:
- provide for independent evaluation and commentary on New Zealand’s fiscal policy performance;
- improve parliamentary scrutiny of public finances and fiscal policy and
- provide for independent costings of political party policies to better inform public debate and general elections.
New Zealand has come a long way, but we still have a lot to learn and do
New Zealand has been a world leader in public financial management for over two decades. Public financial management is a race without a finish line. We need to learn from others to continuously improve.
Returning to the average is a common pattern in time series data. Without the impetus from the creation of a Parliamentary Budget Office and an improved Citizen’s budget, we are on the road to mediocrity in budgeting.
Derek Gill
Derek Gill was the Open Budget reviewer for New Zealand in 2021 as well as 2023. Derek has spent most of his career working on public finance and public management issues during his career at the NZ Treasury, the OECD, as a deputy at what is now called the Public Service Commission and as a researcher at Victoria University of Wellington School of Government.
Derek is a Board member at IPANZ, and several other NGOs and a research associate at NZIER and the VUW School of Government.
This article is prepared in his capacity as New Zealand's Open Budget Reviewer.
