Parliamentary Budget Offices (PBOs) exist around the world and typically provide budget projections, budget risk analyses, estimates of policy changes, impact assessments, flow of funds analyses, macro-trend analysis, and financial analysis where, prospective policies can be independently costed. The PBO also has an outreach function to show the public the work parliament does in assessing the fit of new proposals.
PBOs are different from Fiscal Councils, in that fiscal councils occupy a watchdog function, evaluating the health of the economy generally and assessing compliance with constitutionally-mandated fiscal rules. Ireland has a fiscal council, it does not have a PBO. The new programme for government commits (on pages 14 and 15) to establishing one.
Much of the work of a modern PBO is already done, either by the Oireachtas Library Service, the Departments of Finance and Public Expenditure and Reform, the Central Bank, and the Fiscal Advisory Council.
For example, the Oireachtas Library Service commissions pieces of work on costing different policies through e-tenders, we find the Stability Programme Update from the Department of Finance containing a set of risks to the economy; we find the Central Bank’s Macro-financial Review looking at trend analysis, we find the Department of Public Expenditure and Reform doing work on open data and database management, we find the Comptroller and Auditor General looking at costing exercises, and we find the Fiscal Council doing lots of work on fiscal spaces and debt sustainability.
Right now, there are two ways most political parties or interest groups do their costing of policies in Ireland.
First, the Departments of Finance and Public Expenditure and Reform have a series of models (spreadsheets, basically) which give their best guess as to what happens when you do things like cut income taxes or abolish USC or something like that. Typically a TD submits a Parliamentary Question to the Department of Finance, or the Revenue Commissioners if it’s just a tax matter. The diligent civil servants will then do their best to come up with a number for you for how much it will cost to implement your policy. The problem is these costings are both static, partial, and sometimes based on weak assumptions.
Second, the estimates are run through a model like HERMES or COSMOS or something else. Models are a good way to cost some policies, but the Departments’ existing models only go so far. If you want to introduce a new policy like a tax on net assets over €1m, then the model can’t run that because it has no previous data and the work to include the new equations for the model is beyond the scope of a simple ‘costing’ exercise.
A PBO would allow parliament more consistent access to a suite of models for policy costings and would relieve the Departments of some of the difficulties associated with these costings, because the PBO’s office is independent and a creature of the Oireachtas, while the Department of Finance is bound to serve the Government. It is also true that committees would benefit from the PBO’s existence because members of the PBO would be required to appear before the committee to discuss the costings of various policies.
Take the 10 year plan for Health currently mooted by 89 TDs and endorsed as an idea by the new Minister for Health, Simon Harris. The estimates of the costs of re-organising the health service could be put to the PBO to figure out. We would also see where the data stores were, and how they should be aggregated. The PBO could also sponsor new data-gathering processes and hold a central data-repository functions, and there is a large OECD network of PBOs to tap into, which has already produced a review of budget oversight by parliament (.pdf)
The PBO could form a part of the new budgetary process as soon as next year, and it’s a very exciting policy initiative and a big opportunity.