1 Strategic Phase (usually August to November)
During the strategic phase, Cabinet considers its overall approach to the Budget, including priorities and intentions, key themes and the economic and fiscal situation. Aggregate budget allowances are set for capital and operating spending, parts of which may be allocated or ring-fenced for specific purposes or sectors.
Ministers look at the economic situation, the long-run costs of policy settings, likely revenues and expenses, and how these shape the Government's fiscal and budget strategy. In the Budget Policy Statement, the Government sets out its broad strategic priorities for the Budget.
Ministers work to identify priorities for their Votes in line with the Government's priorities. Since 2009 this has been done through an exchange of letters with the Prime Minister. These priorities drive planning in the relevant department and shape planning and budgeting across the wider state sector. The results from the strategic phase feed into the development of agencies' Statements of Intent and budget submissions.
- Figure 4: Main Products of the Budget Cycle - Minimum Timeframes[11]
The Half-year Economic and Fiscal Update (HYEFU)
An economic and fiscal update is required by the Public Finance Act[12] to be published in November or December. This includes economic and fiscal forecasts for the current and following three years, updated with new information received since the main budget forecasts were prepared. (Similar updates are required with the Budget and 20-30 working days prior to an election.)
Decisions taken by Cabinet on budget priorities during the strategic phase are the basis for the content of the Budget Policy Statement. The Budget Policy Statement also reports against the short-term intentions expressed in the Fiscal Strategy Report, which sets out the Government's fiscal strategy (eg, intentions around operating expenses, operating revenue, operating balance, net debt and net worth). The Budget Policy Statement is informed by the most recent economic forecasts and the results of the strategic phase.
The Budget Policy Statement
- includes information about the Government’s short-term fiscal intentions, long-term fiscal objectives and priorities for the coming Budget
- identifies and explains any inconsistencies with the Fiscal Strategy Report and the principles of fiscal responsibility
- is reviewed by Parliament’s Finance and Expenditure Committee (FEC), whose report is debated in Parliament before final budget decisions are taken.
The Budget Policy Statement must be published no later than 31 March each year. Usual practice is to publish it with the HYEFU in December.
