How does budget policy in the Netherlands actually work? What exactly does budget law entail? What are the main functions of the budget? How does the budget cycle work? In this article everything about the budget and the associated functions and processes.
Budget law
The set of parliamentary rights in the area of the National Budget is called budget rights. For example, budget bills (amendments therefor) must be approved by the House of Representatives and the Senate. The cabinet is also accountable to parliament afterwards for the budget policy pursued. Unlike the Senate, the House of Representatives can also change (amend) the budgets itself.
Budget law is the right of parliament, the Senate and the House of Representatives, to approve or reject budget bills and amendments thereto. In this way, parliament has influence on the way in which the budget is implemented. Budget law means that bills and amendments are voted on within parliament. Afterwards, the government must account for the way in which the budget policy (the way in which the planned budget was implemented) was achieved. The House of Representatives can also make changes to the budget (amendment).
It is a good thing that this budget right exists, since the current cabinet cannot simply implement plans without parliamentary control. The parliament is elected by voters, so this promotes the degree of democracy in the Netherlands. (Source: Koopmans)
Main functions of the budget
Authorization function: the government is authorized to make expenditures. After parliament has used its budgetary rights and has (amended and) approved the budget policy, the government can then do its job and realize the plans. They are authorized to spend the tax money received in a useful (!) way.
Allocation function: making assessments to what extent government expenditure is useful. Because the government can only spend a certain amount and in the extreme case risks a deficit, the plans must be feasible, but above all useful. Do the new fiscal policies meet the wishes of the people? To what extent this is the case, the function of allocation is
Management-technical function: is there an expenditure overrun? Because the budget is known, policy implementers know how much they can spend to realize the policy to be implemented.
There are also special rules for this: budget rules. The most important rules are that windfalls or setbacks must be compensated within the budget (specific compensation) and that impending setbacks must be reported in a timely manner to the Minister of Finance and the Council of Ministers.
Control function: internal and external control of orderly management. The budget must be checked for both legality and efficiency (see also question 3). Fraud must also be checked. The internal audit is done by our own accounting department, while the external audit is done by an independent body. In this way, the control is reliable and fraud or errors in the budget are virtually impossible.
Legality, effectiveness and efficiency
Legality concerns the accuracy and completeness of the budget: has there been no fraud? Has permission been given for the particular publication? Effectiveness is about achieving the set goals, to what extent is this successful? And if this is successful, will it be done at the lowest costs? This is called efficiency.
Legality is clearly defined, but some confusion can still arise between effectiveness and efficiency. With the help of synonyms that are often used in economics, it becomes a lot clearer.
Efficiency is also called effectivity and efficiency is also called efficiency.
Fundamentals
The basic principles of the budgetary procedure are publicity and prior authorization. Unity and completeness, periodicity and a clear and efficient layout are the most important principles in the design. The most important concepts are explained in more detail below.
Publicity: only when the proposed policy is made public can an opinion be given about the plans within a democratic society such as the Netherlands. Control and criticism is important for the results.
Unity and completeness: all expenditure and receipts must be shown in one document in order to maintain completeness (whether it is all correct) and an overview.
Periodicity: According to the authorization and control functions, it is important that the budget is submitted to the parliament for adoption at regular and not too distant times (according to Koopmans). This is important because it allows us to check whether the planned policy has been achieved. If there is too much time in between, those responsible can no longer be asked for accountability.
Budget cycle
The total budget cycle covers approximately a period of 2.5 years. However, there are many pitfalls to a good budget. First of all, the preparation must be done very well so that there are no surprises when the budget is realized. Financial consequences must be carefully investigated before they turn out badly. After proper preparation, the budget is submitted to the parliament in the form of a draft budget. This decides whether the budget will be implemented or not (determination). After the budget draft has been approved, its implementation follows. During and after implementation, internal and external control is carried out on the legality and effectiveness of the budget (internal control is carried out by the company’s own accounting department, while external control is carried out by an independent body (see also question 2)).