Introduction: How trust affects policy outcomes in budgeting

In each country, the relationship between citizens and the institutions of government is shaped by the various pillars of modern public governance: transparency, integrity, openness, participation, accountability, and a strategic approach to planning and achieving national objectives. Good budgeting is supported by, and in turn supports, these various pillars and, as recognised within the OECD Recommendation of the Council on Budgetary Governance: “Budgeting is thus an essential keystone in the architecture of trust between states and their citizens” (OECD, 2015a).

A government’s budget is a political appeal to voters, a statement of its programme ambitions, a guide to economic policy, a means of organising the work and activities of public agencies, a communication link within government, an opportunity for parliament to express its preferences and concerns, a ritual for legitimising public expenditure, an accounting of past decisions and actions, and a means of financing ongoing programmes and operations. Budgets can be seen as contracts that establish rights, obligations and expectations. Every fiscal contract is inherently a political covenant in which citizens entrust the government with authority to manage the public finances, and the government commits to do so in a prudent manner to improve public welfare. It is this trust that rationalises paying taxes today in expectation of benefits to be received 30-50 years hence.

The global financial crisis blew public finances off course, with the situation exacerbated in many OECD countries by the fact that they went into the crisis running a fiscal deficit. This has severely damaged fiscal contracts and resulted in citizens having reduced trust in the ability of governments to manage public finances in a sensible and sustainable way. Repairing the budget contract is a key challenge facing contemporary governments. Similar issues have since arisen in country after country. What institutions can help oversee fiscal policy exercised by government, to ensure that it will be resilient to fiscal shocks and be in the best interests of citizens in the long term? How can a government involve citizens in decision making to enhance trust in the integrity of public policy making? How can the government show citizens that it is using public funds effectively?

Over recent years, a number of reforms have been introduced to improve budgetary governance and the level of trust between citizens and the institutions of government. This is in recognition that good budgetary governance delivers more effective resource allocation and greater longterm economic stability, which can help rebuild citizens’ trust in government.

 
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