5.3 The Relationship Between CBA and Fiscal Impacts
If Cabinet or Ministerial approval is required by Cabinet Office Circulars CO(99)7 [56], CO(01)4 [57], or CO(02)17 [58] (refer to section 1.1), and the agency concerned is not intending to fund the proposal internally, then the paper should also clearly indicate the impacts on fiscal aggregates. The typical approach is to use financial recommendations of the form set out in the financial recommendations technical guide.[59] Financial recommendations usually contain appropriation tables similar to the following:
| $m – increase/(decrease) | |||||
|---|---|---|---|---|---|
| 2005/06 | 2006/07 | 2007/08 | 2008/09 | 2009/10 & Outyears | |
| Vote Example1 | |||||
| Departmental Output Expense: | |||||
| Output Class Name1 | 0.956 | 1.148 | 1.148 | 1.148 | 1.148 |
| (funded by revenue Crown) | |||||
| Net Asset Schedule of [department name]: | |||||
| Capital Injection | 10.000 | 2.000 | - | - | - |
| Total Operating | 0.956 | 1.148 | 1.148 | 1.148 | 1.148 |
| Total Capital | 10.000 | 2.000 | |||
This table is a key input into the financial recommendations of the cabinet paper or business case.
Fiscal impacts/costings and economic CBA differ in four key respects:
- economic CBA includes effects on all sectors of the economy, while fiscal costings focus upon the government sector only
- economic CBA uses discounting and often looks beyond the five-year horizon that is reported in the Crown financial statements
- economic CBA reflects real resource use, while fiscal costings can include resource transfers and accounting items such as depreciation and capital charge, and
- economic CBA does not distinguish between capital and operating costs.
The relationship between CBA and fiscal impacts is illustrated below.
- Figure 5.3a: Linking CBA and Fiscal Impacts
That is, economic benefits and costs are replaced with the fiscal impacts (to the Crown) split into operating and capital components. These include financial/accounting costs such as the capital charge, interest costs, and depreciation, to arrive at the overall fiscal impact to the Crown (in terms of impacts on the Crown’s operating balance and/or debt).
For guidance on presenting information to Cabinet, refer to the Cabinet Office step-by-step guide.[60]
Notes
- [56]http://www.dpmc.govt.nz/cabinet/circulars/co99/7.html
- [57]http://www.dpmc.govt.nz/cabinet/circulars/co01/4.html
- [58]http://www.dpmc.govt.nz/cabinet/circulars/co02/17.html
- [59]Treasury’s Financial Recommendations Technical Guide is available at http://www.treasury.govt.nz/finrecs/.
- [60]http://www.dpmc.govt.nz/cabinet/guide/index.html
