The Gillard Government will provide $24.9 million over four years to establish an independent Parliamentary Budget Office (PBO) that will assist Parliament in its scrutiny of the budget and fiscal policy.
The PBO will be established as a separate entity headed by an independent statutory officer - the Parliamentary Budget Officer.
Other key design and operational aspects of the PBO will be informed by the recommendations of the Joint Select Committee on the Parliamentary Budget Office ('the Committee') whose report was tabled in Parliament on 23 March 2011.
The Government supports the broad framework for the PBO outlined in the Committee's report. To ensure that this new entity can operate effectively and deliver on its objectives, more detailed consideration of the key design and operational aspects of the PBO are still required. The Government's final position will be announced in the next few months.
The Government will undertake further work to determine the most appropriate response to the Committee's recommendations in relation to the specific functions of the PBO, governance and accountability arrangements and the PBO's interactions with Government agencies. The Government will also carefully consider the Committee's proposed amendments to the Charter of Budget Honesty Act 1998.
This initiative delivers on the Government's commitment to establish a PBO as part of the Agreement for a Better Parliament: Parliamentary Reform, negotiated between the Government, the Coalition and the Independents in September 2010, as well as the Government's post-election agreement with the Australian Greens. The Government will work closely with all members of the Parliament to establish this important new institution.
Further information against the Committee's recommendations is attached.CANBERRA
The Government agrees with the Committee's assessment that 'the establishment of a specialised Office dedicated to providing the Parliament with high quality analysis and advice on Budget related matters is warranted.' The Government considers that the establishment of a PBO is an important element of broader parliamentary reforms, which will enhance the credibility and transparency of Australia's already strong fiscal and budgetary frameworks. (see Parliamentary Budget Office in Budget Paper 2)
The Committee's proposed mandate for the PBO was 'to inform the Parliament by providing independent, non-partisan and policy neutral analysis on the full Budget cycle, fiscal policy and the financial implications of proposals' (Recommendation 2).
The Government agrees that this proposed mandate will assist the Parliament in its scrutiny of the budget and fiscal policy matters, but in implementing this mandate specific details of the proposed functions warrant further consideration and development.
In particular, the proposed role for PBO in costing election commitments (Recommendations 3, 6, 7 and 8) poses a number of implementation challenges that will need to be considered in detail before a final position is determined. It will be important to put in place arrangements which will ensure that the PBO can carry out its mandate efficiently and effectively, and which also provides guidance on the potential interactions with costings under the Charter of Budget Honesty Act 1998. (consistent with Recommendation 9).
The Government will carefully consider the Committee's proposed amendments to the Charter of Budget Honesty Act 1998 (Recommendations 4 and 5), which complement the operations of the proposed PBO role in costing certain election commitments.
To ensure the PBO operates in support of the Parliament and is best able to fulfil its mandate, the Government supports the PBO being headed by an independent statutory officer, the Parliamentary Budget Officer ('the Officer') (Recommendation 10).
Legislation establishing this office will need to include provisions to support the work of the Officer (Recommendation 11), as well as the Officer's mandate and functions, confidentiality and disclosure provisions, oversight and accountability arrangements, and appointment, dismissal, remuneration and term of office provisions (Recommendation 12).
The Committee recommends that arrangements relating to the PBO accessing data and information held by government agencies be through negotiated memoranda of understanding (Recommendations 13 to 15), rather than through legislative requirement. The Government considers that this will provide the flexibility necessary to manage a range of different scenarios.
Nevertheless, the specific details of proposed memoranda of understanding between the PBO and Government agencies will need to be more carefully considered and developed, having regard to existing legislative requirements and addressing areas of potential conflict of interest.
For similar reasons, detailed arrangements relating to confidentiality and disclosure will also need to be considered as part of this process, although the Government supports the principles of transparency and accountability advocated by the Committee (Recommendations 15 to 18).
The Committee recommends that the Joint Committee of Public Accounts and Audit play a key role in overseeing the ongoing operations of the PBO, similar to the arrangements in place under the Auditor-General Act 1997 (Recommendation 23 to 25).
The Committee recommends that the PBO be provided with ongoing funding of no less than $6 million per annum with consideration of additional resourcing in election years (Recommendation 26).
The Government has announced funding of $24.9 million over four years for the PBO in the 2011-12 Budget. This funding will enable the engagement of appropriate staff, technical capacity, and external consultants where required, as well as providing establishment costs for the office. The ongoing level of funding for the PBO will be subject to the normal budgeting review processes.
The physical location of the PBO is yet to be determined and will be considered alongside the development of other operational aspects to establish the PBO.