The inclusion of fiscal councils into these decisions would inevitably reduce a trust of public about their independence by which a cornerstone of their existence would vanish. Thus, fiscal councils in the EU do not propose single measures of economic policies, but rather provide general views on the impact of measures within budgetary documents on compliance with fiscal rules and on the long-term public finance sustainability.
When the Fiscal Council provides an opinion on compliance of budgetary documents with fiscal rules, the Government has to explain how the opinions are to be taken into account or why it will not be taken on board so called »comply-or-explain« principle.
As an independent institution, the Fiscal Council is also invited to certain sessions of the Parliamentary Commission on Public Finance Supervision, where it presents opinions related to current topics from its field of expertise.
What are the fiscal councils in other countries like? Fiscal councils exist in all EU countries and also in many other, predominantly developed, countries. The solutions regarding the institutional framework of fiscal council operations differ to a large extent. Fiscal councils in the EU mostly operate as independent institutions, although in some cases they operate as part of the Parliament Italy, Croatia or within the Courts of Audit Finland, Lithuania.
Independent fiscal institutions within the parliament are typical of countries outside EU Canada, USA, Australia, South Korea,… and are usually older and larger bodies compared to fiscal councils within the EU. They also differ regarding the tasks performed: while within the EU the fiscal councils are mostly tasked with assessing the compliance with fiscal rules, the independent institutions operation within parliaments usually provide non-partisan views about public finance impacts of legislation in the legislative process.
Why do we need fiscal rules? The result of multi-year cummulation of budget deficits is higher general government debt, which is not problematic in normal circumstances at low debt level. However, the persistence of such behaviour may lead to unsustainable developments, when debt can not be financed, and the government is faced with high costs of remedying such position.
Fiscal rules thus take care of guiding economic policy towards stability and medium- to longer-term sustainability of public finances. Are fiscal rules the same in all countries? There are different kinds of fiscal rules. They include rules on structural budget balance, debt and maximum expenditure. Countries follow different rules according to their institutional framework and national specifics. What is the budget balance and what is the primary budget balance?
The budget balance is calculated as the difference between total budget revenues and expenditures in a certain year. The positive difference is shown as a surplus and the negative as a deficit.
Within the budgetary surveillance framework of EU, data on general government is used ESA methodology. Primary budget balance excludes interest paid on debt financing. What is the structural budget balance? The budget balance, excluding impacts of economic cycle cyclical part of the budget balance and one-off measures. Structural budget balance thus reflects the position of public finances more appropriately than the headline budget balance, while a balanced structural budget forms a basis for an environment where no debt cumulation is present in the longer run.
What are one-off and temporary measures? Measures and transactions, which impact the budget only temporary and do not contribute to its permanent change. What is public debt? Consolidated gross debt of the general government.
It includes total nominal value of debt of all institutions of general government, with the exception of the debt for which these institutions are liable to public institutions in the country itself. What is included in the general government sector? This sector includes the government sector, local government, social security funds and public institutions, funds and agencies. The general government sector excludes corporates owned by the state.
This definition of general government is used by EU in the budgetary surveillance within The Stability and Growth Pact. What is the maximum expenditure benchmark? The highest general government expenditure and expenditure of budgets of government, health insurance and pension insurance funds and of local government which is allowed within the Framework for drawing up budgets. This benchmark depends on the cyclical position of economy. The formula for its calculation is defined in Article 3 of the Fiscal Rule Act.
What are the Maastricht Treaty values for the debt and budget balance of general government? What is the significant deviation regarding the compliance with fiscal rules? Following EU legislation, significant deviations with regard to budget developments are those, where the deviation in the convergence of structural balance toward medium term objective amounts to at least 0. The same is valid in case of deviation from the expenditure rule.
The other is the Parliamentary Budget Office, which, in contrast to the Council, is specifically focused on assisting the Houses of the Oireachtas and their Committees with analysis and advice on macroeconomic and fiscal developments and the financial implications of budgetary proposals. For more information on the PBO and to access their publications see www.
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