Budgeting in a time of COVID: A crisis is not an excuse for lack of transparency

Derek Gill
Institute of Governance and Policy Studies at Victoria University
New Zealand Institute of Economic Research

COVID has seen an unprecedented fiscal response

The COVID crisis has resulted in governments committing more than $US14 trillion in emergency spending. 

In New Zealand the COVID Response and Recovery Fund (CRRF) – a notional fund used as a planning envelope for budget management purposes - was included in the 2020 Budget. The CRFF set up $NZ 50 billion (18% of GDP) to manage the fiscal costs of COVID-19 response and recovery. This is the largest  fiscal package in our economic history, forecast in the 2021 Budget to return NZ to peak levels of Net Debt of nearly 40% of GDP – a level not seen since 1995. 

COVID was a major shock

This was an undoubtedly difficult emergency for governments to manage. It required swift action, but too many are using the excuse of urgency to not be as transparent, accountable, or inclusive as they could be. 

To build back better, governments should facilitate public debate and oversight. When governments  are transparent and answerable it is more likely that scarce resources are used wisely. When speed and accountability are pursued together, the public gets better services, which builds confidence that government can deliver. Public trust is critical to recover and renew our societies after COVID.

New Zealand exceptionalism 

Unlike almost all other  countries  New Zealand didn’t use  Executives Decrees to approve  COVID funding and other measures or suspend Parliament. 

The New Zealand Minister of Finance – under Section 25 of the Public Finance Act – had the powers to approve emergency spending without the legislature approving Appropriations, and the conditions for this were met with the state of national emergence between March and May 2020. 

However, the authorities took the view that the financial management regime and wider constitutional arrangements were sufficiently flexible to accommodate the emergency fiscal measures required, and Section 25 was not used.  

Due to the flexibility of New Zealand's financial management system, and the timing of the COVID outbreak, New Zealand was able to mainstream the fiscal responses to COVID through the standard Budget process. (We were one of only a handful of countries to do this). 

In addition, during the 3 months of lockdown, when normal Select Committee operations were suspended, the special Epidemic Response Committee was in operation, so  legislative scrutiny continued even though Parliament was unable to sit.  

New Zealand was included in global scorecard on COVID Budgeting 

With the onset of the COVID-19 pandemic in 2020 causing extensive additional stress to public financial management systems around the world, the International Budget Partnership (IBP) – an international NGO -  set out to supplement the Open Budget Survey (OBS) 2021 with a rapid assessment of 120 countries' performance on transparency, oversight and public participation in funding their COVID relief packages. 

This expedited assessment on the emergency fiscal policy packages introduced by governments between 1 March and 30 September 2020 was carried out through a set of 26 new indicators.

New Zealand did not do very well

New Zealand came out well down the batting order which was very surprising given we had been ranked as first equal in the world for open budgeting in 2019 and had mainstreamed the fiscal response to COVID through that same process that had been ranked so highly. 

New Zealand ranked in the second to top group on  transparency (“Some Information”), the bottom group on participation  (“Minimal Participation”) the top group on Oversight (“ Adequate Oversight”) and the second to top group on accountability ( “Some Accountability”).  This put us on a par with Canada,  the United States and Sweden but below those assessed as being in the top group : Australia, Norway, Peru, and the Philippines as shown in the table below.

Poor performance due to survey instrument design

In part New Zealand’s ranking reflects the survey instrument design rather than the underlying reality. 

For example, as the COVID fiscal measures were mainstreamed through the budget, the Office of Auditor General (OAG) had the flexibility, resources and mandate to undertake their statutory functions. However, the survey assessed audit oversight as ‘’limited “ apparently because the business as usual approach did not tick survey boxes for adopting special measures. 

Failings in New Zealand response

The reality is, though, that some good practices fell by the wayside. In particular Citizens Budget information – like the Budget at a Glance and BEFU Basics   – which had been features of previous  Budgets – were not produced in 2020. 

It was pleasing to see the 2021 Budget reinstated this citizens budget information, no doubt in part because of the low score on citizen participation that the COVID module had highlighted. 

Serious lack of disclosure about Emergency Procurement

Another area where New Zealand fell short was in the transparency of information around emergency procurement. Transparency International New Zealand (TINZ) raised concerns with the Ministry of Business, Innovation and Employment (MBIE)  and Department of Prime Minister and Cabinet  MBIE in July 2020 about the lack of disclosure.  

Subsequent analysis of the contract award data published by MBIE by Laurence Millar for TINZ  reveals the depressing news is that only 26 award notices relating to COVID-19 emergency procurement were published in 2020, and only five contained information on the value of the contract.

View the details of The New Zealand’s COVID assessment for IBP at Open Budget Survey COVID-19 Module: Questionnaire New Zealand May 2021. 

A crisis is not an excuse for lack of transparency

The work of TINZ on procurement highlights that in times when emergency procurement is required, the need for transparency is heightened rather than reduced. 

More generally the IBP's survey research in 120 countries shows government fiscal policy responses to the COVID crisis are undermining accountability and transparency including by bypassing legislatures, and relaxing procurement procedures. 

To find out more about how the survey assesses about open and accountable the New Zealand  and other government have been in their COVID response  see www.internationalbudget.org/covid #OpenBudgets

About the author: Derek Gill is the Open Budget Reviewer for New Zealand. He has extensively researched, taught and published on a range of public policy and management issues, while based at the Institute of Governance and Policy Studies at Victoria University of Wellington and at New Zealand Institute of Economic Research. His previous experience includes roles as a deputy chief executive at Child, Youth and Family  and the precursor to the Public Service Commission, as a diplomat, a long-standing Treasury employee and a secondment to the OECD.

 
Levels of Accountability in early COVID fiscal policy responses - Source: International Budget Partnership

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