Parliamentary Assembly

Accountability in the management of public funds - good practices and model legislation for budget transparency

Dear colleagues, ladies and gentlemen,

The Council of Europe and the Parliamentary Assembly which I represent have addressed the issue of accountability in the management of public funds in several of our reports over the last couple of years.

Accountability and transparency are the pillars of good governance and parliaments play a key role in ensuring that these principles are implemented. Nowadays, parliamentary scrutiny over public finances is even more pertinent against the background of widespread socio-political turbulences and the loss of confidence by the public in institutions and politicians.

Let me therefore start by outlining concrete problems we have to face today.

In our recent report on "Over-indebtedness of states: a danger for democracy and human rights", we concluded that shortcomings in transparency and accountability had far reaching negative consequences on the overall management of public funds in some European states. I do not need to name them, we all know the examples. In this context, the Assembly called for closer interaction and information exchange between parliaments, governments and relevant international organisations.

Moreover, in countries where public debt had swollen out of healthy proportions, governments are obliged to implement painful but necessary austerity measures which have a devastating effect on the living standards of the population. The financial markets, too, keep ringing alarm bells by sanctioning national governments which fail to exert financial discipline.

Many developed countries have now entered a vicious circle whereby years of imprudent spending and living beyond one's means erode the national capacity to uphold the quality of life and to invest into better future. Worse still, this vicious circle is also eroding national sovereignty in a number of countries as foreign creditors aggressively claim their dues and the spectrum of state bankruptcy cannot be ruled out.

How has the situation span out of control and how could we, parliamentarians, help find a solution? Let me now suggest some concrete ideas in order to focus our discussion.

Ladies and gentlemen,

In fact, despite the difficulties we are facing, overall, the picture is not all bleak: examples of sound management of public funds abound, including in Europe. The Netherlands and Germany are the most obvious examples and we should stress these countries' commitment to balanced budgets, which is anchored in their constitutions. Most of you will have heard of this approach as a "golden rule". And clearly, in these economically turbulent times, more and more countries move in this direction.

Therefore, parliaments must demonstrate a sense of leadership, political will and national unity around the public interest, notably in voting for the adoption of "golden rule" principles. The Parliament of Spain, for instance, has recently shown such a resolve by taking an exemplary decision in that direction. Other parliaments, such as in Italy and France, are looking into ways to make this happen too.

Moreover, parliamentary committees can play a very positive role in scrutinising government expenditure within their sectoral areas of responsibility. Here again, our research points at the German and Dutch practices which can be a source of inspiration for other Parliaments too.

Furthermore, external independent audits of national accounts play a highly valuable role in securing financial accountability, especially if their findings and recommendations are duly channelled to parliaments. I therefore plead for strengthening the links between parliaments and independent auditors so that the two could work hand in hand. Where independent audits of state accounts do not exist or have only marginal function, parliaments should put in place the necessary legal framework for their normal operation.

At the same time, parliamentary efforts are greatly needed to enhance transparency in public procurement and, as the case may be, privatisation processes. This can be done by the adoption of legislation on conflicts of interests and fight against corruption, as well as by putting in place various codes of conduct.

I should stress, in this context, the need to regulate lobbying activities properly, so that vested interest groups (notably from the private sector) would not distort legislative and budgetary processes, especially as regards the benchmarking of national strategic priorities and the earmarking of public funds for their implementation. In this respect, the Assembly report on "Lobbying in a democratic society (European Code of conduct on lobbying)" offers a wealth of useful recommendations and guidelines.

Finally, let me stress that, while in-country action is essential to address specific situations, international co-operation is crucial to prevent the spreading of bad financial management practices. In this respect, the work of international organisations is very important: they provide national legislators with concrete examples of good practices as well as models to follow. The 2000 OECD Best Practices for Budget Transparency and the 2007 IMF Code on Fiscal Transparency are very valuable guidelines for governments and parliaments.

Dear colleagues,

I am sure you too have a lot of concrete examples from the practice of your parliaments to share with us. Therefore, I look forward to a very interesting discussion. Thank you very much for your attention.