Pro-poor Budget Monitoring

The national budget is a document that, once approved by the legislature, authorises the government to raise revenues, incur debts and effect expenditures in order to achieve certain goals. Since the budget determines the origin and application of public financial resources, it plays a central role in the process of government, fulfilling economic, political, social, legal and administrative functions. The purpose is to help development actors identify issues, partners, tools and methods which will help to build citizen accountability and a pro-poor focus into public expenditure management and budget processes.

The argument is that integrating a rights perspective with a good understanding of the mechanics and politics of public expenditure management has potential for advancing understanding of the key question of how a pro-poor focus can be encouraged and fostered in the mainstream of public policy. The process of allocation of resources to different institutions and purposes is essentially a political, rather than purely technocratic one. A holistic understanding of public expenditure systems - and the institutional cultures that condition them - is important in order to formulate strategies for change and improvement. It should never be automatically assumed that allocations translate accurately into spending. What money actually gets spent by whom, on what items and for what purpose is often determined during the process of budget execution.

The politics of budget formulation and execution
There is a growing consensus that public expenditure management is a political, rather than a simply technocratic, process. Studying the politics of the budget process essentially means examining the ways in which the distribution of power within that process affect the subsequent distribution of public resources. From a social theory perspective, this has two key dimensions – power as formal structures, and power as the informal incorporation of dominant norms and values into operating procedures and practice. In any given process of budget formulation and execution, unequal power relations may be expressed by: inclusion/exclusion or proximity by different social groups to the decision-making process; norms and values explicitly expressed in the statement of purpose and implicitly embedded in the priorities and assumptions contained within the process, structure and content of the budget. Power also plays a significant role in the legitimation of knowledge, and in determining who has access to information which guides decision-making.

The prevailing balance of interests and pressures in any system of public expenditure management is unlikely to reflect a pro-poor, gender-equitable, orientation in any simple sense. It is also unlikely to reflect an uncomplicated commitment to sharing information about the process, and including the excluded in decision-making. It is very likely that attempts to move in this direction will run into both overt and covert resistance, with adoption of formal commitments to policy goals by governments being insufficient to guarantee meaningful change. Ideally, therefore, for a development actor to understand the politics of a given budget process it would be valuable to have information about the following:
a) The formal structure of roles and responsibilities within the budget process;
b) The formal rules governing decision-making, political choice and accountability within the public expenditure management system;
c) The networks of stakeholder power and influence (outside the formal allocation of roles and responsibilities), which influence the outcomes of the budget process; d) Incentives for action (covert as well as overt) affecting the decision making of politicians and officials during budget formulation and execution;
e) The latitude for independent discretionary action of bureaucrats at all levels of the budget execution process;
f) The norms and values prevailing in key institutions within the budget formulation and execution process.

New ideas of accountability based on values of ‘performance’ and ‘effectiveness’ and a focus on
‘outcomes’ are an important part of the way that the debate about pro-poor politics is evolving. If politicians are prepared to commit themselves to achieving particular results (e.g. improved health status) then the focus of their accountability may be more clearly geared to equitable outcomes for all citizens. By contrast, if the promises politicians make relate to increasing inputs (levels of spending on health, education etc.) or delivering outputs (e.g. building public housing) then the possibility exists that these inputs or outputs can be delivered to particular client groups. Robust systems of pro-poor targeting, with transparent procedures, can act to prevent this happening, but require strong technical and ethical standards in implementing institutions.

The hypothesis that an ‘outcome focus’ can contribute to enhanced accountability in governance
has an attractive logic. It resonates well with a human rights approach in that the formulation of economic and social rights in relevant treaties is generally formulated in ‘outcome’ terms (the right to health is about health outcomes, not specific rights to the outputs of public health services).
There are, however, a number of significant challenges which are associated with putting this into operation including:
􀂄Developing information systems capable of a) providing feedback on timescales which policy makers can respond to, and b) reliably assessing complex phenomena;
􀂄Communicating to the public measures of result and effectiveness of institutions at the local level so that pressure for improvement in areas with poor conditions and public services can develop;
􀂄Addressing barriers to institutional change, which prevent institutions from effectively collaborating across structural boundaries to achieve outcomes (e.g. health and education services working together to improve child health);
􀂄Creating space for local level identification of problems and solutions, so that top-down output ‘targets’ do not constrain the possibilities for action of public sector managers.

These challenges are considerable. The development of effective performance assessment frameworks, which enable both policy makers and the public to judge institutional and personal performance, is difficult. When the measures and incentive frameworks are inappropriate, there is a danger of creating perverse incentives.

Without a wide-scale effort at transforming the structures of authority within the government system, it also will remain unlikely that a simple change in policy rhetoric (‘results orientation’)
will be enough to change the deeply embedded norms and values in public institutions that impede effective poverty reduction action. An ‘output’ focus is more in tune with the hierarchical ‘command and control’ structures which characterise the public sector in most countries. Moving to a focus on ‘outcomes’ requires a willingness to allow space for creativity, institutional learning and decision-making at more levels in the system.

Rights, statutory entitlements and policy
A range of work has emphasised the importance of an entitlement or rights-based approach to the provision of public services and transfers on the grounds that this is empowering for the poor and socially marginalized. A common theme is the importance of translating international human rights norms into national budget processes through establishing entitlements to resources and standards of service delivery.

The arguments for the development of statutory entitlements take a number of forms. If mechanisms of redress are effective and accessible, then statutory entitlements are likely to be more transparent and equitable than other policy instruments. Statutory entitlements are more secure than narrowly targeted discretionary safety nets or market-based entitlements. They can be changed by the political process and their real value may be eroded by rising prices, but it is clear that the government has responsibility for these entitlements and must be held accountable for them. Such entitlements are a form of mutual assurance and symbolise citizenship as a social bond. The fact that an entitlement is statutory, and in theory universal, does not guarantee that all can access it. Legal recourse is beyond the means of many poor and excluded people, but without effective redress a universal statutory entitlement may be in practice ‘anti-poor’. If a notional entitlement to a publicly provided service or transfer is beyond the means of the state to provide for all, then it is very likely that rationing will occur and that the poor will be the losers, rather than the beneficiaries of the process.

Approaches to overcoming or guarding against distortion or unwanted effects include:
a) restricting entitlement-based provision to goods or services which add little or nothing to the welfare of the better off (e.g. literacy, public works employment schemes) so the incentive to claim is greater for the poor;
b) targeting such provisions to disadvantaged groups, or sections of the population where the poor are disproportionately represented (e.g. older people, landless labourers);
c) strengthening access to mechanisms of redress for the poor or disadvantaged;
d) strengthening the capacity of the disadvantaged to make claims through improving access to information or organisational skills.

Technical adjustment to policy and budget system needs to be accompanied by a broader understanding of the political context, and more emphasis on the spaces and capacities needed for civil society to ask questions of public policy and implementation systems, and the capacity of the disadvantaged to make claims for service outcomes.

The following seven factors can be identified which are likely to facilitate accountability and pro-poor focus in the budget process.

1. A constitutional framework and political culture oriented to citizenship and rights
2. A system of issues-based political competition- Since socially disadvantaged groups are best able to influence state policy in contexts where there is institutionalised political competition between ideologically diverse parties or factions.
3. Sufficient fiscal resources for wide-scale delivery of some basic services
This suggests that there is a strong argument for backing countries which make a real commitment to accountability, transparency and a poverty focus in the implementation of the public budget with direct budget support – so the dynamic of citizenship is reinforced through ensuring that the domestically accountable public sphere is the channel of delivery.
4. A clear framework of policy goals, aligned to a vision of society with respect for social justice - The establishment of effective systems for monitoring the achievement of policy goals provides a potentially powerful framework for citizen engagement – although so far empirical examples of this seem rare.
5. Transparent systems of decision-making about budget allocation, and of budget execution
6. An active, engaged civil society able to access information, produce analysis and hold
government to account
7. Active, informed citizens able to draw down services, make claims and hold service providers
and policy makers to account Making claims on public services involves factors such as: access to information; group solidarity; development of skills and capabilities; the help of allies capable of providing advocacy at other levels.


As such, to strengthen voice, accountability and responsiveness to the poor in policy and budget processes - it refers to the range of measures – such as complaint, organised protest, lobbying, making claims and direct participation in decision-making and product delivery – used by civil society actors to put pressure on service providers and policy makers to demand better service outcomes and performance of public policy. Responsiveness describes the extent to which the public policy system, at all levels, demonstrates a willingness to gather, absorb and act on the views, complaints and suggestions of citizens.

With reference to policy and budget systems the key term ‘accountability’ obviously has multiple meanings and dimensions. People can be held to account formally – on the basis of legal or administrative rules, or informally – on the basis of norms and values (including the failure to fulfil promises or live up to standards which have been claimed). Different professional groups have different models for accountability (financial, legal, political), different methods for constructing ‘accounts’, and different sanctions to apply when standards are not met or rules are broken. There are horizontal forms of accountability (checks and balances internal to the state, such as public audit systems) and vertical forms of accountability (external mechanisms used by non-state actors to hold power holders to account). for a development actor to understand the politics of a given budget process it would be valuable to have information about the following:
a) The formal structure of roles and responsibilities within the budget process;
b) The formal rules governing decision-making, political choice and accountability within the public expenditure management system;
c) The networks of stakeholder power and influence (outside the formal allocation of roles and responsibilities), which influence the outcomes of the budget process;
d) Incentives for action (covert as well as overt) affecting the decision-making process of politicians and officials during the budget formulation and execution process;
e) The latitude for independent discretionary action of bureaucrats at all levels of the budget execution process;
f) The norms and values prevailing in key institutions within the budget formulation and execution process.

Areas for further study;

Taxation and revenue issues in public expenditures
Some commentators have argued that domestic political accountability depends fundamentally on a ‘fiscal contract’ – implying a widespread system of public taxation, which reinforces the sense of investment in public policy, and creates motivation to hold public policy accountable.78 This is clearly an important area for further work. Key questions include the relative significance of who is taxed, how much they are taxed and how they are taxed for the operation of incentives to seek accountability from those who devise and implement public policy. There is also a significant global context for changes in tax regimes, as there is a general move on an international level away from payroll taxes and trade tariffs and towards forms of indirect taxation, such as value added tax. The political context of taxation has been a largely under-studied area, but one that is of growing significance for development co-operation as donors (through budget support) seek to harmonise the system for accountability of their funds with that for national taxpayers.

Case studies on the politics of the budget process
These are largely lacking in relation to all countries, but particularly so with reference to developing and transitional countries. It is not easy to produce case study material, due to the closed nature of the budget process in most cases, and the difficulty of researching informal norms and networks and the influence they bring to bear. The material reviewed here suggests that in order to have a better platform for predicting key issues – such as under what conditions increasing decentralisation will benefit the poor – an enhanced understanding of the politics of budget formulation and execution is critical. The potential scope of this is considerable, as the politics of budget formulation and execution extend from the key organs of central government, all the way through the institutional framework to level of direct service delivery.

The impact of changing instruments of development co-operation on national budget systems
There has been a steady movement in development co-operation away from project approaches to programmatic forms of support to partner governments (sector-wide approaches, central budget support). There is a shortage of case-study material which outlines the impact of these changes on the politics of budget processes in partner countries. It might be expected that the impact of such changes would be stronger in aid dependent countries, and broadly beneficial (insofar as such change should increase incentives for strengthening systems of accountability). But it is not possible to gather much evidence on either of these hypotheses at present. National case studies following the evolution of incentives within budget processes as donor approaches change, would be valuable in providing evidence about the kinds of change which strengthen accountability and a pro-poor orientation under different conditions.


Source:
DFID working paper, What’s behind the budget? Politics, rights and accountability in the budget process, June 2002