In line with its commitment to strengthen transparency and accountability in how public funds are utilised, the Government has implemented the Fiscal Responsibility Act, a historic law that will bind government to transparent and sustainable fiscal governance, Finance Minister Edward Scicluna said today.
The Fiscal Responsibility Act represents an unprecedented step towards long-term fiscal planning as it will place new regulatory requirements on all current and future Maltese governments to ensure that public finances are kept on track in an accountable and transparent manner.
“In the past, there were only a handful of institutions and processes that held a government accountable to how it spends taxpayer money. Among these is the Public Accounts committee, which can only conduct post-mortems once the damage is potentially done, and the Budget itself, which is routinely steeped in mystery and secrecy. The Fiscal Responsibility Act will change all of that,” Professor Scicluna said.
The Finance Minister explained that the Act legally establishes certain fiscal rules which will ensure that the main principles of fiscal responsibility are adhered to also in respect to the commitments with EU and the responsibilities of Malta as a Euro Area Member.
The Finance Minister said that the Act will also strengthen the budgetary process and introduce a far greater degree of accountability through the institution of a number of checks and balances that will commit future administrations to transparency and public scrutiny. Among these checks and balances are:
The establishment of rolling Medium Term Fiscal Strategy (three year), which would need to be presented and debated in parliament, and would also carry the signature of the Minister for Finance, as well as the Prime Minister.
The publication of a Draft Budgetary Plan before actual budget, so as to ensure that the government’s budget direction is transparent and in line with its annual and multi-annual priorities, including its rolling medium term fiscal strategy.
A Half Yearly Report to parliament which would report on the government’s progress in implementing the budget, and any variances between the budget plan and its actual implementation.
The Act also brings into existence a Fiscal Council, which represents an independent body that will be tasked with making regular public appraisals and recommendations to government regarding public finances. The Fiscal Council is also main entity responsible for this act. The Fiscal Council chairman can be removed from the council only through parliamentary approval.
Prof. Scicluna also explained that to ensure that Budget spending allocation are adhered to, Budget Revisions will be over time replaced with a Contingency Reserve that will come into existence as an allocated expenditure within the overall budget allocation, but which would be set aside for unforeseen expenditures.
“The rules that this act will bring into force are stringent, but there are clauses that will allow the government room for manoeuvre in unforeseen circumstances. Any additional expenditure would however have to be clearly explained and reported to the Fiscal Council,” Prof. Scicluna explained.