expenditure policy proposals, the focus should be on ensuring that significant proposals are fully costed for the budget year and the two following fiscal years, and that they include the recurrent costs associated with capital investment projects. For policy proposals that are expected to have only a limited effect on aggregate revenue or expenditure, such as minor changes to fees and charges or minor adjustments to line item allocations, it is sufficient for the ministry of finance to prepare an estimate of the total fiscal impact of such adjustments for revenue and expenditure.
15.1:3. Details of the costs and assumptions of policy proposals approved by government should be included in the budget documentation, submitted to the legislature for an A score. Typically, this would include a breakdown of expenditure by major economic classification – current (by category) and capital – and an explanation of any variable factors that affect the cost estimates, such as number of recipients, average amount of payment or grant, major purchases of capital equipment, etc. It should also include the fiscal impact of policy proposals related to social security funds (e.g., increases in social security contributions and/or benefits), extrabudgetary units and other aspects of CG that may not be covered by the annual budget law.
15.1:4. Assessors should mention in the narrative if the significant fiscal implications of actions taken outside
the budget process are also estimated, submitted to the legislature, and published. This would include expenditure policy decisions after the budget has been approved. The fiscal implications of such decisions should include the costs (and assumptions) of both the current budget year and the following two fiscal years. The size and frequency of actions taken outside the budget process should be noted in this dimension. This information also has implications for the budget reliability pillar and PI-16, PI-17 and PI-21.
15.1:5. Information on fiscal impact of policy proposals under this dimension should be checked for consistency with information on element 10 under PI-5 (Budget documentation), i.e., explanation of budget implications of new policy initiatives and major new public investments, with estimates of the budgetary impact of all major revenue policy changes and /or major changes to expenditure programs.
15.1:6. When there are proposed changes with estimates of the fiscal impact submitted to the legislature during budget preparation, assessors may consider them as their basis for assessment. When there are no estimates at all submitted to the legislature, assessors will need to check whether those estimates are prepared or not. Table 15.1 below presents the various cases that may occur.
15.1:7. A suggested process for assessing information on the fiscal impact of revenue and expenditure
Table 15.1. Proposed changes with estimates submitted to the legislature during budget preparation
| Proposed changes with estimates submitted to the legislature during budget preparation | Proposed changes with estimates not submitted to the legislature during budget preparation | |||||||
|---|---|---|---|---|---|---|---|---|
| Estimates prepared by the government but not submitted | Estimates not prepared | |||||||
| All | Not all | All | Not all | |||||
| For T, T+1 and T+2 for all three FY under review | At least T for all three FY under review | If two FY only | For T, T+1 and T+2 for all three FY under review | At least T for all three FY under review | If two FY only | |||
| A | C | D | D | B | C | D | D | D |
Pillar Four: Policy Based Fiscal Strategy and Budgeting
