The federal government should open up the budget process to greater transparency and public participation, says tax expert Professor Miranda Stewart. Other countries offer plenty of innovative ideas.
It’s commonly argued we’re living through a time of low public trust in government, so could giving citizens a greater say in the budget process strengthen democracy?
If it does, Australia has been heading in the wrong direction. The federal budget now contains less information than in the past about the distributional effects of budget policy on taxes and welfare, either by income or gender, which could help to inform the public debate about such choices.
Australia “was once at the forefront” of promoting budget transparency, but enthusiasm “seemed to fade” after the 2008 global financial crisis, argues a policy brief published by the Tax and Transfer Policy Institute at the ANU.
The paper, authored by Stewart and research assistant Teck Chi Wong, examines the Australian findings of the international Open Budget Survey, which ranks 115 countries on budget transparency, oversight mechanisms and opportunities for public engagement.
“Many citizens want to weigh in on policy decisions frequently, not just at election time,” argues the 2017 Open Budget Survey report.
“There is a need to bridge the gap between citizens and their representatives and to ensure that the voices of all citizens are included in ongoing policy decisions. Such a bridge would sustain democracy by opening and improving it, building on the strengths and correcting the weaknesses of modern representative democracy.”
New Zealand leads on transparency
By world standards, Australia does very well on transparency, but with a score of 74/100, we’re still a long way behind frontrunner New Zealand on 89/100.
Australia ranks equal 10th with France and the United Kingdom. The top five are NZ, South Africa, Sweden, Norway and Georgia, with the United States taking out eighth place.
The only measure on which we get full marks is for the ability of the supreme audit institution — the Australian National Audit Office, in this case — to conduct oversight of the budget.
How comprehensive is the information provided in the key budget documents? Comparison between Australia and New Zealand
There are a few key areas where Australia could do better.
Unlike NZ and the UK, Australia does not publish a pre-budget statement, hampering the capacity of both the parliament and the public to scrutinise and participate in the budget process before key decisions are taken.
There’s also a lack of distributional information in the budget papers which could help public debate about the effects of spending by age, income or gender.
Nothing is included in the federal budget papers about gender. “This is in contrast to the 1980s, when Australia was a pioneer in introducing gender budget analysis,” note Stewart and Wong. The gap has been partly filled by non-government bodies, but “this kind of information would be a valuable input into budget deliberations and policy development”, they argue.
It’s not always easy for citizens to understand how the budget will affect them. In the past, the government printed “cameo” tables showing the projected impact of policies on the disposable incomes of different hypothetical families, but this ceased in the 2014-15 budget. The UK, on the other hand, now regularly includes a supplementary document in its budget to illustrate the distributional impact of tax and welfare changes on households.
Public participation in budgeting
Public participation “is the weakest link in Australia’s budget accountability system”, argue Stewart and Wong.
Although again it does better than most other countries, on this measure Australia scored only 41 out of 100, “indicating limited opportunities for the public to engage in the budget process.”
The Australian participation score is particularly low for the executive branch (score: 30), which reflects the lack of opportunities for the public to participate when the budget is formulated. Opportunities are greater, but still limited, for the public participation in the legislative branch (score: 50). The ANAO, with a score of 67, is the only institution found to provide adequate opportunities for the public to engage.
To improve in this area, the Tax and Transfer Policy Institute recommends the government make a systematic attempt to engage vulnerable and underrepresented communities in the budget process.
“Disadvantaged communities such as Indigenous Australians, recent migrants or rural and remote communities may face more obstacles than others to participate in the process,” they argue.
“The survey finds no concrete and proactive steps by the government to include disadvantaged communities in the budget process.”
Ideas to improve participation
One possibility is the use of citizen juries to engage citizens in policy formation and debate.
Giving civil society organisations a formal role is another option. In the Philippines civil society bodies are given access to spending information, participate in consultations and engage in oversight and evaluation of completed projects. Agencies must publish and respond to the demands of these organisations.
Public participation in Brazil is institutionalised through public policy management councils consisting of elected officials, citizen representatives and experts. The councils have the authority to review municipal, state or federal ministry budgets and if the budget is not approved, the federal government can withhold financial transfers to the relevant agencies.
South Korea has an interesting mechanism. It operates a waste reporting centre that has resulted in budget savings worth US$16 billion over the past 16 years. Any citizen can use the website, visit one of 300 reporting centres, or connect to a call centre that allows them to register their allegation that government resources are being used inefficiently or illegally. The government must then respond within 30 days.
When waste is uncovered, the individual filing the claim is eligible for a small cash award (200,000 Korean won or about US$175), though if the budget saving is particularly large, the award can go as high as US$50,000. Participation is formally open to all residents, but in practice professional experts and people with inside information on public programs make the most extensive use of it.