Cabinet Paper CAB-19-SUB-0215: Establishing an Independent Fiscal Institution

Cabinet Paper CAB-19-SUB-0215: Establishing an Independent Fiscal Institution

Proposal

1. This paper proposes establishing an independent fiscal institution (IFI). The paper proposes the functions the IFI should undertake and sets out options for the institutional form. A further Cabinet paper will seek decisions on detailed operational design.

Executive Summary

2. In order to deliver the Budget Responsibility Rules and Policy Costing Unit manifesto commitments made by parties that now make up the Government, we propose establishing an IFI to undertake the following functions, consistent with the stated overarching purpose.

Purpose

To enhance fiscal responsibility, accountability and transparency, promote better informed public debate, and strengthen Parliamentary scrutiny.

Fiscal council functions

Assess compliance with the government’s fiscal strategy.

• Comment on the Treasury’s economic and fiscal forecasts.
• Comment on long-term fiscal sustainability and key fiscal risks.
• Produce research and information relating to its fiscal council functions.

Policy costing functions

• Provide financial costings of political party policies, including election manifestos and any costings requested during negotiations to form a government.
• Produce research and information relating to its policy costing function.

3. Our preference is to appoint a new Officer of Parliament to carry out the IFI’s functions. We consider this appropriate given the functions are being established to provide a check on the Executive, and the need for a high level of independence in carrying out the functions. Bipartisan support is usually required to create a new Officer of Parliament.
4. We propose establishing the IFI from 1 July 2021, to allow sufficient time to pass legislation and set up the new body. As this date falls after the next general election, we also propose establishing an interim unit in the Treasury to undertake the policy costing function in the build-up to the election.

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