With effect from 1 January 2014 the legislator has extended the duties designated to the Advisory Division of the Council of State by way of the Sustainable Public Finances Act.
Independent budgetary monitoring
The Advisory Division is designated as the body charged with the independent supervision in the Netherlands of compliance with the fiscal rules that have been agreed upon in Europe. This duty stems from the Stability Treaty agreed to by 25 EU Member States in 2012.
An important objective of the Stability and Growth Pact and Stability Treaty is to strengthen fiscal discipline. So in conformity with the European agreements, the Sustainable Public Finances Act legally anchors the European fiscal objectives on a national level. Part of the agreements is that a Member State must have an independent institution which is charged with the supervision of compliance with the European fiscal rules.
The Advisory Division assesses whether the draft budget complies with the European fiscal agreements. For its independent budgetary monitoring, the Division analysed the legal basis and assessment framework. The Advisory Division deals with the budget policy followed by the government and ascertains whether this is in accordance with European fiscal rules. This scrutinising role is distinct from the advisory role the Advisory Division already had in respect of the Budget Memorandum. In its assessment, the Advisory Division makes use of the estimations done by the CPB Netherlands Bureau for Economic Policy Analysis.
A proper division of tasks and cooperation with the CPB prevents the need for the Advisory Division from having to make its own quantitive analyses and calculations. This division of tasks ensures a good differentiation between the independent CPB analyses and forecasts, and the normative evaluation and administrative consideration of compliance with the fiscal rules by the Advisory Division. To this end, the Advisory Division and the CPB have concluded working arrangements.
Working arrangements with the Ministry of Finance
In order to realise a timely, careful and correct assessment, collaboration with the Ministry of Finance, with respect to the provision of information and timely supply of relevant fiscal documents, is a condition. Furthermore, the Advisory Division deems it important to review its provisional findings with the Minister. Since the time available for the Division’s assessments will always be limited, the Minister of Finance and the Advisory Division of the Council of State have agreed a set of working agreements, to assist in the proper and timely process.
Budget and Budget Memorandum
In September 2014, the Advisory Division assessed the budget and the Budget Memorandum for the first time in light of the European fiscal rules. The assessment as the supervisory authority must not be confused with the traditional opinion on the Budget Memorandum which the Council of State has already published over more than a hundred years. From 2015 the assessment of the draft budget to the European budget rules appears as a separate document to the Budget Memorandum.
For an adequate fulfilment of the independent fiscal monitoring, the Advisory Division considers it important that it corresponds with the most important moments in the national budget cycle. Aside from its assessment in September, the Advisory Division therefore also provides an update in the spring: the Spring Report on Budgetary Monitoring. This is an assessment of the so-called Stability Programme that the government must present to the European Commission and the Council of Ministers before 1 May.
The independent supervisory authority compiles assessments that are accessible for the public. The Advisory Division is responsible for publishing the reports. The assessments are available full text on the website of the Council of State. The Advisory Division offers the reports to the government and to European institutions. The government submits the reports to the House of Representatives.