Cabinet Paper CBC-18-SUB-0084: Establishing an Independent Fiscal Institution: Release of Public Discussion Document

Cabinet Paper CBC-18-SUB-0084: Establishing an Independent Fiscal Institution: Release of Public Discussion Document#

Proposal

1. This paper seeks Cabinet’s approval to release a public discussion document on establishing an Independent Fiscal Institution (IFI) for a six week consultation period.

Executive Summary

2. The establishment of an IFI as part of New Zealand’s fiscal policy framework will fulfil commitments made by parties that make up the Government to establish an independent body to assess the Government’s progress against its fiscal strategy and targets and to cost political party policies.
3. Establishing an IFI will require amendments to the Public Finance Act 1989. This proposal makes up one part of a wider package of reforms to the State sector with the overarching vision of looking beyond GDP to embed a greater focus on improving wellbeing. To support this, I propose making three sets of changes to the PFA this term:
   1. Amendments to reflect the changes being made as a result of the reform of the State Sector Act 1988.
   2. Embedding a focus on wellbeing by introducing a requirement for the Government to articulate and report against wellbeing objectives and the Treasury to report on wellbeing indicators.
   3. Establishing an IFI (this paper).
4. The key opportunities identified to improve New Zealand’s fiscal policy framework through the establishment of an IFI are for it to:
   • Provide for independent evaluation of fiscal policy performance.
   • Improve and support more effective parliamentary scrutiny of public finances and fiscal policy.
   • Provide for independent costings of political party policies to better inform public debate.
5. On 9 April 2018, Cabinet agreed to announce the forthcoming discussion document on the proposal to establish an IFI as part of Budget 2018. I was invited to report back to Cabinet to seek approval of the release of this discussion document.
6. I now seek Cabinet’s approval to release the attached public discussion document which contains some proposals for the new IFI’s possible roles and functions, and discusses the various options for the institutional form of the IFI in the New Zealand context.
7. The proposed functions suggested for the IFI are to:
   1. provide financial costings of political party policies, including election manifestos, and any costings requested during government formation;
   2. comment on and assess compliance with the Government’s fiscal strategy and fiscal targets;
   3. comment on the Treasury’s economic and fiscal forecasts;
   4. comment on long-term fiscal sustainability and fiscal risks;
   5. provide briefings and analysis to Parliament to support select committees and members of Parliament to scrutinise government fiscal and budgetary issues, and to help inform them on general economic and public finance developments; and
   6. produce relevant and related research and commentary on fiscal and budgetary issues.
8. While the discussion document includes some commentary on the different institutional form options (e.g., Independent Crown Entity, Officer of Parliament), it does not propose a particular form. It also asks whether an existing institution could undertake some, or all, or the proposed functions.
9. The specific proposals included in the discussion document are not final and have been developed primarily as the basis of discussion to support public engagement. The purpose of the discussion document is to seek the public’s feedback on the various roles and functions, institutional form, and any other relevant considerations prior to Cabinet considering a final proposal.
10. The consultation period will run for six weeks from 27 August 2018 to 9 October 2018. The discussion document will be published on the Treasury’s website. During this period, targeted consultation will occur with senior Public Service leaders, public servants, academics, economists and think-tanks. The consultation process will be aligned with the process the Treasury is running on amendments to the PFA to embed wellbeing [GOV-18-MIN-0050 refers], and the process the State Services Commission is running over the same period covering the reforms to the State Sector Act 1988.
11. Following the public consultation period, a summary of submissions document will be released by Treasury in late 2018. I intend to report to Cabinet in February 2019 with final policy recommendations for the establishment of an IFI.

[Extract ends]