THE IMPACT OF THE FISCAL CRISIS ON BELGIAN FEDERAL

GOVERNMENT: CHANGES IN THE BUDGET DECISION MAKING

PROCESS AND INTRA-GOVERNMENTAL RELATIONS

Paper for the Conference on the Impact of the Fiscal Crisis on Public

Administration, 3-4 May 2013, Tallinn, Estonia.

Steve Troupin, Jesse Stroobants, Trui Steen

KU Leuven, Public Management Institute

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Abstract  

In this article, we analyse the impact of the fiscal crisis on budget decision-

making and governance in Belgium’s federal government by relying on

interviews with key stakeholders. After our introduction, the second section

situates the beginning of the fiscal crisis in Belgium by end 2008. The third

section analyses the budget decision-making process in Belgium, which is

found relatively unaffected by the fiscal crisis. The fourth section reports

differentiated impacts of the fiscal crisis on governance in the regular

administration and social security sector. The paper concludes that Belgium’s

federal government up to now has not seized the opportunity provided by the

fiscal crisis to engage in public management reform. We emphasize a number of

contextual factors able to trigger such a move.

Keywords: Belgian politics, fiscal crisis, budget decision-making processes, public management reforms, governance.  

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1. THEORETICAL INTRODUCTION

In this paper, we study the impact of the fiscal crisis on federal government in

Belgium. The objective of this contribution is twofold. First, the paper provides fresh

empirical evidence as to the management of the fiscal crisis in federal Belgium.

Second, it aims at testing a hypothesis linking the magnitude of the fiscal crisis to that

of the state responses to it: big problems require big solutions, it sounds.

The relevance of such a research cannot be denied. Since the bankruptcy of

Lehman Brothers in fall 2008, the banking crisis and all its metastases remain on top

of the policy agenda in almost all OECD countries. Crises, however, also provide

windows of opportunities to engage in long-postponed reforms. By examining the

relation between crisis and reforms, this contribution helps understanding conditions

supporting reform implementation.

Public administration literature on the current crises remains scarce. Kickert

(2012) could nevertheless make two important points. First, he developed a sequential

model for unfolding of crises in the public sector. Banking crises required

governments to take recovery and other measures aimed at supporting the economy.

These weighted on public finances in such a way that deficits came to be seen as

excessive, leading to the current fiscal crisis. Second, he observed ambiguous impacts

of the fiscal crises on public administration. While some de-politicization of the

budget decision-making process could be observed in the Netherlands, with

“financial-economic institutions […] actually predetermin[ing] and maintain[ing] the

budgetary process” (Kickert, 2012: 309), modes of governance have shifted toward

more centralization and less administrative autonomy in Germany.

In this article, we examine whether these findings apply to federal Belgium as

well. We enquire whether crises have indeed unfolded according to Kickert’s

sequence, and whether the fiscal crisis has affected the budget decision-making

process and governance in federal Belgium.

We rely on COCOPS (2012: 5) for defining the fiscal crisis as the third phase of

the global crisis. In the initial phase, the banking crisis, “banks […] [face] difficulties

and governments undert[ake] different support and rescue measures to save the

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financial institutions”. The second phase of economic crisis emerges when “drastic

falls in GDP and employment [force] governments to undertake economic recovery

measures”. Finally, the fiscal crisis arises in the period when “the deficits c[o]me to

be seen as excessive”, in response to which “governments [start] consolidating the

budgets and undertaking cutback management”.

For observing changes in the budget decision-making process, we rely on

Johnson’s (1971) classification of governments’ budgets: the “A” budget contains all

expenditures required to merely continue existing policies at present levels, the “B”

budget contains expenditures foreseen to finance new policies or improve existing

ones; and the “X” budget contains the expenditures from previous “A” and “B”

budgets to be suppressed, so that “A + B – X = total government revenues”; the latter

falling outside the scope of this research. This classification allows distinguishing two

main types of budget decision-making process (Pollitt & Bouckaert, 2004; Pollitt,

2010): line-item and performance budgeting. The difference between both lies in the

way expenditures are transferred from the “A” and “B” budgets to the “X” budget:

while the former imposes an equal sacrifice to all policies through linear measures,

the latter relies on analysis to select those particular policies from “A” and “B”

budgets to be sacrificed. In this article, we define performance budgeting by two

attributes: it is a kind of budget decision-making process relying on targeted measures

versus linear ones, AND (Boolean “and”; Ragin, 1987) supporting these targeted

measures by analytical rather than partisan input; line-item budgeting corresponding

to all situations where one or both attributes are absent.

Finally, building further on some COCOPS’s (2012: 8, 13) indicators – such as

degree of (de)centralization and (de)politicization, modes of coordination, use of

(performance) management and budgeting instruments, autonomy versus control of

civil servants and public sector organizations, and relationships between public,

private and third sector to study the impact of crises on governance – , we

conceptualize the impact of the fiscal crisis on governance as shifts in the division of

labour (and level of responsabilisation) between political and administrative actors

related to public management.

In order to answer the research questions outlined earlier, next to document

analysis, six interviews were performed with key stakeholders: budget experts from

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two Vice-PM cabinets, a policy expert from a ministerial cabinet, administrative

budget experts in the subgroups “primary expenses” and “social security”, and one

administrative top manager.

Next, section two examines how crises unfolded in federal Belgium and situates

the beginning of the fiscal crisis. Section three presents the actual budget decision-

making process in federal Belgium and examines whether the fiscal crisis has affected

the process. Section four examines the impact of the fiscal crisis on governance, and

does so by contrasting the regular administration with the social security sector.

Finally, section five is devoted to discussion and section six to the conclusions.

2. CRISES IN BELGIUM

In federal Belgium, the unfolding of financial crises is tightly intertwined with

the unfolding of political crises, with no less than four different governments, three

PMs and two different coalitions following each other in a short time period.

 

A. The Belgian banking crisis

The banking crisis has hit Belgium very hard since its beginning in September

2008. Less than two weeks after the bankruptcy of Lehman Brothers, governments of

Belgium, the Netherlands and Luxemburg had to invest 11,2 billion euros in the

failing Fortis Bank. Two days later, Dexia Bank required a capital investment of 6,4

billion euros from the governments of Belgium, France and Luxemburg. On October

5th, Fortis Bank was nationalized by the Belgian government for 4,7 billion euros,

75% of the shares being sold to BNP Paribas. Two and three weeks later, the federal

government had to recapitalize other banking institutions, Ethias and KBC, for 4

billion euros.

In total, the federal government in 2008 invested about 20 billion euros or 5%

of GDP in rescuing the three failing banks Fortis, Dexia and KBC, while the federated

governments invested an additional 5 billion euros (Eijffinger, 2010, FPS Budget,

2013). Accordingly, it can be argued that the fiscal crisis in Belgium began in

September 2008. The government investment in banks was obviously so huge that

other fields of government activity needed to provide a budgetary contribution.

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The next years, the situation seemed to calm down a bit. In 2010, the federal

government got a dividend of 700 million euros from its shares in banks, and

expected additional dividends of 9,48 billion euros over the next four years. At that

moment, some ministers remained optimistic as to a quick recovery of banks and

hence of public finances.

By the end of 2011, this optimism definitely faded away. On October 4th, the

Dexia share dramatically fell, obliging government to guarantee citizens’ depots, to

split the bank and its risks in two, to nationalize the healthier part for 4 billion euros,

and to guarantee the “bad bank” part. The following months, this “bad bank” required

2,915 billion euros additional recapitalization.

An important side effect of the banking crisis was the resignation of the

Leterme government, in late 2008. Nationalization of Fortis led to appeal in courts by

shareholders. When the head of the Belgian magistrates wrote Parliament that the

PM’s cabinet had tried to influence the court’s ruling, the PM had no other choice

than to resign; what happened on December 19th, 2008. No new elections were

organized and Van Rompuy became the new PM presiding the same coalition in

January 2009.

B. Limited Economic Recovery Measures

According to all interviewees, Belgium has not invested as heavily in economic

recovery measures as neighbouring countries immediately after the banking crisis. At

this time indeed, not every politician was equally conscious of the seriousness of the

banking crisis and of its long-term impact on the economy. Moreover, Belgium is a

very open economy, what makes some economic recovery measures, such as

subsidizing new car acquisitions, ineffective for Belgian economic recovery. Finally,

the Leterme government had resigned by the end of 2008. A full-fledged government

could have taken more economic recovery measures and maybe also some first

cutback management measures, like the suppression of a number of premiums.

The period of government vacancy was finally quite short, Parliament remained

in place, and the Van Rompuy government could agree on a limited “anti-crisis

package” principally consisting of temporary measures related to economic

unemployment and VAT reduction in the property market. Quite revealing of the

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consciousness the government then had of the seriousness of the crises, the anti-crisis

package expected total economic recovery by early 2013.

C. A  crisis  of  confidence  

When Van Rompuy was appointed President of the European Council on

November 19th 2009, Leterme recovered his PM-seat. This second Leterme

government was, however, short-lived: by April 24th 2010, one governing party

withdrew its confidence for lack of agreement on the scission of the single remaining

bilingual constituency of Brussel-Halle-Vilvoorde. The upcoming June elections led

to disparate results and the longest period of government formation in world’s history.

There was no total vacancy of power, with federated governments in place, and the

resigning federal government letting the new Parliament adopt new laws on a case-

by-case basis. Nevertheless, this situation led to legitimate questions as to the

financial credibility of Belgium, in a period where the Euro crisis was spreading over

the continent.

From October 2011 onwards, the pressure from financial markets on Belgium

increased, as reflected by interest rates. At the same time, Standard & Poor’s,

followed by Moody’s, downgraded Belgium’s credit rating. On November 24th, the

resigned PM Leterme called the Belgian savers to help, by offering 3.4% interest rate

for 5 years. This allowed federal Belgium to finance its debt at a much lower rate than

the 5.85% rate the financial markets were asking for 10 years on November 25th.

The Leterme loan was an enormous success, also thanks to the competitive

interest rates it offered in comparison with those offered by classic savings books in a

depressed banking market. The road shows organized abroad were able to convince

international investors of the recovered financial credibility of Belgium. This gave a

message to the financial markets that Belgium was not dependent at all on them for

financing its public debt.

A positive side effect of the increased tension on financial markets has been to

speed up government formation talks. By December 6th 2011, an agreement was

found on the sixth constitutional reform, the coalition agreement and the budget 2012,

and Di Rupo became PM.

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D. Conclusion: five years of limited fiscal crisis

Our analysis of how crises unfolded in Belgium leads to two conclusions. First,

the Belgian empirical pattern does not totally correspond with Kickert’s model linking

banking crisis to fiscal crisis through economic recovery measures: the banking crisis

was serious enough to trigger a fiscal crisis, without economic recovery measures

which remained limited anyway. Second, crises in Belgium were not only of a fiscal

nature but at least equally were of a political nature.

To conclude, it can be stated that the fiscal crisis began simultaneously with the

banking crisis in late 2008. It reached its highest point together with that of the

Belgium 10-year interest rates by Autumn 2011. The advent of the Di Rupo

government, coupled with the Leterme loan, brought some confidence back.

However, defined as “the consciousness that budget deficits are excessive”, the fiscal

crisis in Belgium is more a matter of degree than nature, highly dependent on the

actors’ perceptions of how the international economy in general and that of the

eurozone in particular was to evolve.

 

3. DECISION-MAKING PROCESS IN THE FEDERAL GOVERNMENT

A. Introduction: The players

Before examining the actual decision-making process in budgetary matters, it is

worth setting the stage by distinguishing the actors involved.

First, it is possible to distinguish different roles for political actors. The PM,

who most often is the leader of the most powerful political party in the coalition, is

expected to be neutral and to play a role ranging from chairman to compromise-maker

in the negotiations. The Vice-PMs are the most powerful ministers from each

governing party. They are expected to defend their parties’ points of view in the kern,

gathering the PM and the Vice-PMs in what literally means the “core” of the federal

government. Three ministers fulfil a particular role in budget matters: the minister of

Budget is responsible for the whole process, the minister of Finance is responsible for

the revenues side of the budget, while the minister of Social Affairs is responsible for

revenues and expenditures of social security. These ministers may be Vice-PMs, but

are not necessarily so. The other ministers are each responsible for a given policy

field. Together, all the ministers gather in the council of ministers, most of the time

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ratifying decisions made in the kern. Parliament, formally adopts the budget, yet it

intervenes only after the actual decision-making process.

On the administrative side, the most prominent players are the FPS (Federal

Public Service) Budget accompanying the budget decision-making process, and the

FPS Finances, responsible for revenue collection. The other administrations are mere

objects of the budgetary process. Worth mentioning is a range of semi-autonomous

administrative bodies providing input to the decision-making process: the National

Bank and the Plan Office focus on macro-economic projections and large-scale

societal evolutions, while the Inspection of Finances has the role of budget adviser to

the individual ministers.

Finally, the ministerial cabinets fulfil a transmission role between political and

administrative players. Composed of temporary staff appointed on a partisan basis,

cabinets prepare most ministerial decisions and communicate them to the

administration. Inside each cabinet, three roles may be distinguished. The policy

experts monitor particular fields of government activity, watching over the political

parties’ interests. The budget experts do most of the budget negotiation. The cabinet

chief of staff arbitrates issues.

B. Preparing the budget

Determining “A” and “X” budgets: The monitoring committee

The budget decision-making process starts with the prognoses of expected

economic growth for the coming year provided by the Plan Office. This is the input

on which three working groups make their own prognoses: the FPS Finance calculates

expected government revenues, the FPS Budget uses departmental input to calculate

expected government expenditures, the social security sector uses each branch’s (i.e.:

unemployment, family allowances, health care,…) input to calculate its expected

expenditures and revenues. These three players provide their estimates to the

monitoring committee, and update them regularly based on updated macro-economic

forecasts.

The monitoring committee is a relatively new institute, established during the

1999-2003 governing period. The chief of staff of the minister of Budget provided

input to the decision-making process by making prognoses of how public

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expenditures were expected to evolve within given macroeconomic parameters. He

used to distinguish between primary expenditures, social security expenditures and

revenues, and fiscal revenues. This practice has been progressively institutionalized in

a monitoring committee, gathering senior civil servants from the social security, the

FPS Finance and the FPS Budget. Starting from the assumption that existing policies

remain in place, the committee determines how much these policies would cost or, in

other words, how huge the “A” budget would be. By confronting this “A” budget with

the federal government revenues, the committee can determine how big the “X”

budget should be in order for public debt to stay at its current level.

According to most interviewees, the most significant evolution of the decision-

making process in budget matters in crisis times has been the ever-growing role that is

taken by the monitoring committee. While the committee used to be but one source of

information among many others, it now seems to be the most legitimate source of

financial information for government.

It should be noted that the monitoring committee only estimates how great the

“A” and “X” budgets are, but does not propose any transfer of policies from the

former to the latter; this work is the object of the actual budget negotiations.

Filling in the “B” budgets: Administrative input

In the meantime, departments also transmit their own spending proposals to the

negotiators. These are classified in three categories, according to their more or less

compulsory character. Category C contains all new expenditures flowing from newly

adopted laws and regulations that should in principle be granted. Category C’ reflects

expenditures incurred by already adopted decisions not totally translated in legal

documents yet, what means that these could still be somewhat delayed. Category D

contains all own departmental initiatives.

According to the interviewees, departments propose increases to the “B” budget

but never to the “X” budget or, in other words, they only propose new expenditures,

and never cutback measures. Sometimes, however, they propose budgetary

reallocations, i.e. transfers of funds from, say, staff to investments.

All these “B” budget proposals are submitted to a pre-selection process, in a

negotiation process involving the concerned administration, its policy cabinet, the

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budget cabinet and the Vice-PM cabinets. After this pre-selection, a number of new

spending proposals are excluded.

Fiscal federalism: Transferring part of the “X” budget to Regions and

Communities

Belgium is a federal state. In contrast with most federal countries, the Belgian

constitution has not established a hierarchy between the laws of the federal

government and those of the Regions and Communities. This means that matters of

common interests have to be ruled by a cooperation agreement, a kind of intra-

national treaty between the federal government and the governments from Regions

and Communities.

As shown in Figure 1, the federal government collects most taxes (about 95

billion euros in 2010, versus 10 billion euros by regions and communities) and is

compelled to transfer a significant share of it to Communities and Regions to finance

their policies (about 25 billion euros in 2010) and to international institutions like the

EU (10 billions). The Belgian social security is Bismarck-inspired, i.e.: it is financed

and managed by employers and workers and its benefits are limited to the system’s

subscribers. Yet over time, benefits have expanded to the whole population and

contributions from employers and workers (50 billion euros in 2010) proved

insufficient. This is why the federal government automatically transfers funds to the

social security sector (about 25 billion euros in 2010), in exchange for which it has

earned sovereignty over the sector at least equal to that of employers and workers, so

that some now speak of a tripartite management of the social security workers-

employers-federal government. After all these transfers, the federal government is left

with 35 billion euros. From this amount, between 10 and 15 billion euros are spent

each year to pay interests on the public debt. There remain between 20 and 25 billion

euros to finance the federal “A”, “B” and “X” budgets.

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Figure 1 – Financial flows between Belgian financial entities, in billion euros

(Tegenbos, 2010)

While the federal government is, for international creditors, the sole responsible

for all the country’s public expenditures, which can be evaluated at 197,13 billion

euros in 2011 (Countryeconomy.com, 2013), it has but total sovereignty over between

20 and 25 billion euros, a shared sovereignty over the 70 billion euros of the social

security sector, and has no legal way to impose Regions and Communities to this

overall financial responsibility.

The repartition of the overall financial responsibility (and thus budgetary

efforts) between the federal institutions and lower government levels are agreed upon

and specified in the national stability programme, the budgetary strategy document

that Eurozone member states have to prepare annually for the European Commission

as part of the European Stability and Growth Pact (Van Hecke, 2013), A first

repartition occurs between entity I, comprising the federal government and the social

security, and entity II, encompassing the regional and community governments, the

provinces and the municipalities; a second repartition further spreads this financial

responsibility within these entities. The process leads to the attribution of a “X”

EU andothers

FederalGovernment

Regions andcommunities

Socialsecurity

95

10

50

35

40

70

Selfcollected

Availabletoday

10

35

25

25

10

5

45

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budget to the federal government, the social security, the Regions and Communities,

and the provinces and municipalities.

Table I shows the outcome of this negotiation process for the budget years

2009-2013. First, entity I carries most of the financial burden of the crisis: the

constitutionally granted transfers of funds to Regions and Communities put them

indeed in a strong negotiation position vis-à-vis the federal level. Second, inside

entity I, the contribution of the social security sector remains limited. This is partly

due to the formal and partial “ownership” of the social security by employers and

workers, partly to the political equilibrium reached in the coalition agreement that is

somewhat protecting social security policies from transfers to the “X” budget. It

nevertheless means that the federal government has to fill in the greatest part of the

overall “X” budget on its own. In 2011 for instance, the federal government had a “X”

budget of 12,94 billion euros. This is also why this article focuses on the federal

government: if the fiscal crisis has any impact on budget decision-making process and

governance, it should be most observable at the federal level.

Table I: Stability Pact Agreements (FPS Finance, 2011, 2012; FPS Budget, 2013;

NBB, 2013)

Respective contribution of Entity I and II to the budgetary objective (in % GDP)

2009 2010 2011 2012 2013 (e) Belgian governments -5,9 -4,1 -3,7 --3,9 -2,15 Entity I -5,0 -3,2 -3,5 -3,5 -2,15

Federal government -4,2 -3,1 -3,4 -3,4 -2,15 Social Security -0,8 -0,1 -0,1 -0,1 0,0

Entity II -0,9 -0,9 -0,2 -0,4 0,0 Federated governments -0,8 -0,7 -0,2 -0,1 -0,1

Provinces and Municipalities -0,1 -0,2 0,0 -0,3 0,1

Splitting the “X” budget in three

Once the “X” budget of entity I is known, a first round of political discussions

occurs as to its repartition over three categories: primary expenses and non-fiscal

revenues, fiscal revenues, and social security revenues and expenditures. The starting

point for the discussion is one third each. Participants however generally try to let one

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of these categories wear a higher burden. Ideally, this issue is ruled before the actual

negotiations start. It is not uncommon, however, for this issue to remain pending

during the budget negotiations. In such a case, one generally works with different

hypothetical scenarios.

The output of this phase is the attribution of a particular budgetary objective to

each category. The discussions next occur in three working groups, one for each

category.

Diminishing the “X” budget: Technical inter-cabinet meeting

The first meeting of the budget experts from the Vice-PMs’ cabinets is devoted

to the technical examination of the input provided by the monitoring committee: are

the prognoses related to the expected cost increases of the “A” budget and hence the

“X” budget correct? If not, an agreement is sought on modifications of the prognoses.

This, for instance, can happen when macro-economic parameters have evolved since

the work of the monitoring committee and the inter-cabinets. However, according to

our interviewees, the boundary between technical and political decisions is not that

clear. Most participants generally try, through technical arguments, to underestimate

the expected automatic increase of existing policies and hence the size of the “X”

budget to be filled in with cutback measures. The output of this is a final agreement

on the “X” budget of the working groups.

C. Negotiating the budget: Filling in the “X” budgets

The participants in each working group are expected to make proposals to reach

the budgetary objective. These proposals are of two kinds.

Linear measures, on the one hand, are imposed on every administration. In close

coordination with the policy experts and cabinet staff from the other ministers of each

political party, the budget experts generally try to protect “their” administrations and

policies from linear measures. This dynamic leads to specify as precisely as possible

where the linear measures will be applied.

On the other hand, budget experts propose targeted measures. Most often, they

are elaborated jointly by each political party’s own sources of policy input, inside and

outside the cabinet. There is no routine system of impartial performance analysis

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feeding this process. There is, however, an exception to this principle, with the

Inspection of Finance providing input to the ministers on the “opportunity” of public

expenditures. Apparently, the role of the Inspection of Finance has become more

important during the crisis.

According to all interviewees, there is in federal Belgium a political consensus

to rely as much as possible on “painless” measures to fill in the “X” budget, that is:

linear measures. In coalition governments indeed, as in federal Belgium, debates on

targeted measures generally tend to degenerate into a “catalogue of horrors”, with

each government party attacking other government parties’ fundamental choices.

The discussions on the index is quite revealing on that point. In Belgium, all

loans, social security benefits, but also rents and taxes automatically increase with the

inflation, calculated on basis of a pondered sample of consumption goods known as

the “household basket”. At one side of the political spectrum, this index system is

defended for protecting the lower income class’ purchasing power, at the other it is

attacked for carrying with it a snowball effect on inflation and ultimately on

Belgium’s economic competitiveness vis-à-vis neighbouring countries. Almost each

year when the “X” budget is known, governing parties attack each other through the

media on the opportunity of targeted measures aimed at amending this system.

D. Formally adopting the budget

When a compromise is agreed upon in the kern, the output is presented for

ratification to the whole Council of Ministers. It never questions the decisions made

in the kern by each political party’s governmental leader.

The compromise is then sent to the FPS Budget and the FPS Social Security for

translation into formal budget documents to be tabled at Parliament. This is a

laborious, essentially technical work which consists of translating political categories

of the “X” budget (i.e. -10% on investments except in those administrations or for

those projects) into the ESR95-categories (the basis allocations) which are the much

more numerous and specialized objects of Parliament’s vote. This work is generally

performed under tremendous time pressure, as budget negotiations have generally

experienced some delays and the budget law formally needs to be adopted by

Parliament before the next budget year. In the meantime, the PM and the Vice PMs

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together elaborate the message to be delivered to Parliament when presenting these

documents.

The work in Parliament is mainly done in commissions, based on the

commentaries provided by the Belgian Supreme Auditing Institution, the Court of

Audit. Seldom amendments are adopted, unless government in the meantime reached

additional compromises with budgetary implications to be inserted last minute in the

budget by majority MPs.

E. Outputs: main cutback measures

Overall, the interviewees report the following measures as contributing most to

the “X” budget: selective hiring freezes, working costs reduction, delaying projects,

contributions from public enterprises, one-shot non-fiscal revenues and

underutilization of allocated budgets.

Because federal budget ultimately consists of marginal adaptations to the

previous year’s budget, we searched for supporting evidence indicating those items

transferred year by year from the “A” and “B” budgets to the “X” budget. In this

form, we could only find data for the budget years 2010 and 2011.

Table II is structured according to these categories: “X” measures relate to

transfers from the “A” to “X” budget, “R” measures relate to fiscal revenues

increases, “R’ ” to non-fiscal revenues increases, “B” measures ultimately concern

economic recovery measures, “X’ ” concern the additional transfers from “A” to “X”

budget required to finance the “B” budget.

Table II: Marginal budgetary measures in 2010 and 2011, in million euros (FPS,

2011)

2010 2011 X Cuts in administrative expenditures 200 200 • loans 100 100 • other expenditures (i.e.: underutilization) 100 100 Health care expenditure’s automatic growth rate reduction 644 812 Cuts in social security administrative expenditures 107 141 R Fiscal revenues 696 1075 • professional diesel 141 141

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• pawl system for diesel 140 285 • DBI deduction 140 140 • tobacco excise duties 59 118 • enterprises car fleet 95 105 • advantages in nature 117 109 R’ Non-fiscal revenues 547 1180 • fiscal fraud fighting 134 232 • social fraud fighting 48 133 • financial sector contribution 130 580 • energy sector contribution 235 235 X’ Additional cuts to finance economic recovery 338 528 B Economic recovery measures 719 594 • prolongation “anti-crisis package” 238 0 • new measures for the labour market 124 204 • lowering VAT in catering sector 255 255 • fiscal regime agriculture sector 20 20 • poverty plan and social integration 26 26 • independent workers 25 58 • administrative expenditures 31 31 Total X + R + R’ + X’ – B 1813 3342

4. IMPLICATIONS FOR GOVERNANCE

A. Introduction

In this part of the paper, we examine the impacts of the fiscal crisis on

governance in two ways. First, we comment on the results of the COCOPS WP3

survey in federal Belgium. Second, we examine the governance implications of the

budget decisions made. Belgium has undertaken modest NPM-like reforms, resulting

in a system of strategic planning. This system is affected by the fiscal crisis, through

the linear measure of underutilization. Yet its impact differs in two sectors (regular

administration and social security), resulting from the way it is implemented. Finally,

we discuss the governance implications of a targeted measure, the reform of pensions.

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B. COCOPS WP3 Survey Results

In the framework of COCOPS WP3, a survey on the impact of the fiscal crisis

on governance was sent to top civil servants. While the number of respondents

remained low (61 respondents working at central government level), the survey

nevertheless provided a first impression on the impact of the fiscal crisis on

governance.

The first question concerned the broader approach to fiscal crisis, and ultimately

relates to the previous section. Results show, first, that expenditures are cut

everywhere. Second, most respondents consider these cutback measures as targeted

ones. However, what is considered as a linear measure from government point of

view (i.e.: -10% on investments) generally amounts to targeted cuts in administrations

(i.e.: these investment projects are delayed to reach the norm). Moreover, almost as

many respondents consider the cutback measures as linear ones. Finally, some

respondents emphasize that efficiency gains are taken to realize savings in their policy

area.

Table III: In response to the fiscal crisis, how would you describe the broader approach to realizing savings in your policy area? (N=61)

N % Proportional cuts across-the-board over all areas 22 35,5 Productivity and efficiency savings 15 24,2 Targeted cuts according to priorities (reducing funding for certain areas, while maintaining it for the prioritized ones)

24 38,7

None / no approach required 1 1,6 Total 62 100,0

The second question related to the specific responses to the fiscal crisis in the

respondents’ organization. The survey results indicate that hiring freezes are the most

important response to the fiscal crisis. In contrast, little reliance on staff layoffs, pay

cuts, and pay freezes were observed. This can easily be explained by the public sector

employment rules at hand. The survey also confirms reliance on delaying and

cancelling “B” budget policies, as well as cuts in the “A” budget. Fees and users

charges seem to remain relatively unaffected.

19    

Table II: In response to the fiscal crisis, to what extent has your organization applied the following cutback measures? (N=61; 1= not at all; 7 = to a large extent)

Mean Stand.dev. Staff layoffs 1,80 1,39 Hiring freezes 5,13 2,01 Pay cuts 1,12 0,45 Pay freezes 1,78 1,67 Cuts to existing programmes 4,19 1,88 Postponing or cancelling new programmes 4,79 1,63 Downsizing back office functions 3,19 1,79 Reducing front line presence 2,44 1,65 Increased fees and user charges for users 1,71 1,41

The last survey question dealt more directly with this section’s concerns, by

discussing shifts in power relations and division of labour. Strong evidence of an

increased power of the FPS Budget could be found (in Belgium, the FPS Finance is

responsible for fiscal revenues, the FPS Budget for expenditures; “Ministry of

Finance” was hence translated to “FPS Budget”). Most results gravitated around the

middle position. Most important is increased power of FPS Budget. More surprising

is the reported greater reliance on performance information. While this may indicate

that administrations rely more on performance information, our analysis shows that

government-wide budget decision-making level still makes limited use of it.

Table VI: As a result of the fiscal crisis (N=61; 1= not at all; 7 = to a large extent)

Mean Stand.dev. The power of the Ministry of Finance has increased 4,75 1,71 Decision making in my organisation has become more centralized

3,90 1,85

The unit dealing with budget planning within my organisation has gained power

3,78 1,83

The conflict between departments has increased 2,95 1,74 The power of politicians (vs. nonelected public officials) in the decision making process has increased

3,83 1,88

The relevance of performance information has increased

4,41 1,77

20    

C. New Public Management in federal Belgium: Strategic planning

It is generally argued that the New Public Management (NPM) wave only

reached continental European countries like Belgium by late 1980s/early 1990s

(Pollitt & Bouckaert, 2004; Christensen & Lægreid, 2011). Beyond compliance with a

handful of common principles, each country’s government is responsible for the

organization of its administration. Brans et al. (2006) argue that NPM principles and

thoughts spread from the Flemish government (Bouckaert & Auwers, 1999) to the

federal one. This took the form of strategic planning, which can be defined by two

attributes: an increased autonomy for administrations in exchange for output steering.

Strategic planning was implemented in the traditional administration and in the social

security sector (agencies ruled by a board composed of workers’ and employers’

representatives). Both regimes however somewhat differ.

In 1999, PM Verhofstadt announced a major public administration reform

called Copernicus. It foresaw in a new structure, a modern personnel policy, a new

management culture and new operating procedures (Hondeghem and Depré, 2005).

This reform marked NPM’s advent in Belgian federal government (Brans et al.,

2006), with market-orientation, opening of senior positions to candidates external to

administration, and a new relation between the politicians and the administration

based on performance and responsibility (Broucker et al., 2009). With hindsight onto

the rather selective implementation of the Copernicus reform, the NPM-glass,

however, is but half-full (De Visscher et al., 2011; Montuelle et al., 2009): the basic

structure and principles of functioning of the Belgian regular administration remains

Weberian, with some elements of NPM, making federal Belgium a “Neo-Weberian

State” (Pollitt & Bouckaert, 2004). Notably, the administration remains highly

politicized (Drumaux & Goethals, 2007). However, senior civil servants are expected

to prepare and implement management plans, for which they receive annual budgets

and a certain degree of managerial autonomy (Drumaux & Goethals, 2007; De

Visscher et al., 2011).

The social security sector begun its modernization somewhat earlier, in the

framework of the fiscal crisis of the 90’s, when Belgium had to struggle to meet the

Maastricht criteria and join the Eurozone. Resources and information were centralized

inside the sector, and NPM reforms were progressively undertaken. By 1997, the

legislation foresaw in the contractualisation of the relation of social security agencies

21    

vis-à-vis the federal government. A number of capacity problems however delayed

implementation until 2002, when a first round of administration contracts between

each of the fifteen social security agencies and the federal government were signed.

These defined the service to be provided to the public, the administrative

modernization projects to be carried on, process and output indicators, and granted a

multi-annual management budget (Legrain et al., 2005).

Since this limited NPM wave, both the regular administration and the social

security sector thus enjoy a system of strategic planning, with increased managerial

autonomy in exchange for output steering. There are, however, differences between

both regimes: in the regular administration, this system binds individual senior civil

servants to the federal administration, and grants annual budgets for the realization of

output objectives; in the social security sector, the administration contracts concern

the whole agencies, who enjoy multi-annual budgets.

Let’s now look at how the fiscal crisis impacts these systems, through the most

significant linear measure taken in the framework of the budget decision-making

process: the underutilization of budgets. Overall, this measure leads to decoupling

budget allocation from the strategic planning systems. However, the way this measure

is implemented in both sectors has a different impact: de-responsabilisation in the

regular administration, responsabilisation in the social security sector.

D. Impact of the fiscal crisis in the regular administration

The rationale behind the underutilization of budget as cutback measures is an

expectation that cabinet staff members have of the behaviour of senior civil servants.

Because previous year’s budget is the basis for next year’s budget, cabinet staff

members expect senior civil servants to ask more finances than actually needed to

perform their tasks in order to safeguard their organization’s financial position in the

future. Hence the fiscal crisis budgets foresee in the automatic transfer of funds from

the “A” to the “X” budget. If a budget of, say 10 euros, is granted to a department, a

share of it, say 2 euros, is expected to be underutilized and is already booked in the

“X” budget.

This measure is implemented in two ways. On the one hand, in order to ensure

that underutilization “is a bit more than spontaneous”, a system of expenditure

monitoring has been put in place at the FPS Budget. In the longer term, this system

22    

should grow to a revamped, accrual-based accounting system for the federal

administration, eventually giving execution to the financial management part of the

Copernicus reform (Hondeghem & Depré, 2005: 232-233). On the other hand,

government expects underutilization to be inapplicable in certain circumstances, and

has foreseen in an exception to the measure. In the example taken above, a minimal

share of the automatically saved 2 euros are reserved in a fund. During the budget

year, administrations can draft demands for access to this fund, provided they can

justify the concerned expenditure is absolutely necessary for the continuity of the

public service.

It is principally this second implementation measure that creates frustration,

from the political as well as the administrative side. Cabinet staff members report the

poor cost-effectiveness of this measure. They spend much time discussing whether or

not invoices of marginal amounts should be paid immediately to preserve the

continuity of the public service. More generally, cabinet budget experts wonder

whether such discussions do belong to their core-business.

From the administrative side, this measure is perceived as a humiliation,

especially for those senior civil servants infused with NPM ideals. The Copernicus

reform foresaw in a de-politicization at least of purely operational management,

installed a system of strategic planning, and a remuneration scheme of senior civil

servants accordingly. In practice, however, the senior civil servants have to justify to

political actors why “new toilet paper is required for the continuity of the public

service”. The senior civil servants ask for clarification from the political side: either

they are seen as modern managers and at least these purely operational measures

should belong to their autonomy, or politicians row the public service and there is no

need for professional managers. Also, this measure is considered as unfair, since the

extent to which some expenditure is exempted from underutilization is perceived to

rely more on individual senior civil servants’ negotiation skills and personal network

than on some measurable yardstick if any. Finally, the measure is said to be

inefficient over the long run. What indeed counts are yearly expenditures. The

measure tends to disfavour investment projects whose immediate higher costs deliver

a structural economy year by year.

23    

E. Impact of fiscal crisis in the social security sector

The social security sector has not been exempted from linear measures of

underutilization, to the contrary. This measure has been, however, implemented

differently: there is no monitoring system to ensure the “more than spontaneous”

character of underutilization, and no exceptions are foreseen. Rather, an objective of

underutilization is granted to the social security sector as a whole, and it is up to the

agencies to collectively decide on how to spread the underutilization burden.

This has as effect to move the political conflict from each individual

administration vis-à-vis the political level as in the regular administration scheme, to

the social security agencies vis-à-vis each other. Through the interviews, we received

an indirect look into how these conflicts actually unfold. Social security agencies tried

to negotiate exceptions to non-utilization with their peers, on grounds of contextual

features. Yet also, the social security institutions succeed in upgrading some share of

non-utilization measures in common investments aimed at structural efficiency gains.

It remains unclear for the moment which efficiency projects are actually launched, but

they generally consist of centralizing support services in a pool, from which

individual agencies can draw resources, thereby pursuing the trend toward

centralization initiated during the 90’s fiscal crisis.

It would be exaggerated to state that the social security sector is satisfied with

these cutback measures. Actually, it is not: federal government has not respected its

agreement with the sector according to which the budget is granted for the duration of

the administration contracts. Nevertheless, the sector was able to preserve its

discretion over operational management issues vis-à-vis inter-cabinets and to escape

expenditure monitoring by FPS Budget, something the regular administration can

hardly claim. Also this way of implementing linear measures seems to convert short-

term expenditure reduction in longer-term innovations: while underutilization tends to

delay or delete investment projects in efficiency in the regular administration, it rather

tends to speed them up in the social security sector.

F. Example of impact of a targeted measure on governance: the pension

reform

While mostly linear, budget decisions made in period of fiscal crisis are

sometimes also targeted. One of the main targeted measures taken by the Di Rupo

24    

government is the pension reform. Confronted like many other OECD countries with

disequilibrium in its age pyramid, Belgium needed to lengthen careers and delay

pension age to support the long-term financial sustainability of the pension sector.

While Belgians could enjoy full pension at 60 after a 35-years long career until 2012,

a gradual evolution has been foreseen so that pension age amounts to 62 and career

length to 40 years by 2016.

This reform illustrates the dependence of targeted measures on public

management reforms, and hence their difficulty in fiscal crisis, and emphasizes the

political dynamics of budget negotiations. As surprising as it may seem, federal

government could not, at the time of this reform adoption, estimate its budgetary

impact. To start with, there are at least three pension regimes in Belgium, for

independent workers, private sector and public sector ones, with local variations in

this latter regime. Also, pension allowances are determined according to career length

and loans, and each employer is responsible for the registration of his/her workers’

pension information. Over their career, however, many workers shift between

employers, and sometimes also between pension regimes, and all this individual data

is compiled at pension age. In order to determine the budgetary impact of the pension

reform, one needs actualized career information over all Belgian’s careers. This

information thus requires a public management reform in the sector, consisting of a

standardization of the way employers record careers and the creation of a central

database. Basically, fiscal crisis management requires an important public investment

in IT, which is precisely made difficult in fiscal crisis period (Pollitt, 2010).

Normally, such kind of investments would have been suppressed from the “B”

budget or subjected to the underutilization of the “A” budget. However, the political

consensus over the importance of this reform and the fact that pension policy belongs

to a Vice-PM’s compentecies could protect this targeted measure from linear ones.

Interestingly, this reform is steered directly from cabinet, with limited involvement of

the administration.

The point here is that federal Belgium may lack administrative capacity to rely

extensively on targeted versus linear reforms. Were some institutions to provide more

technical input on a routine basis specifying expected financial and maybe even

efficiency and effectiveness gains of targeted reform, federal government could adopt

targeted reforms more easily. In the lack of such information, linear measures are

25    

easier to take, because targeted ones would generate tensions inside government, and

require investments that are made difficult in period of crisis.

5. DISCUSSION

The objectives of this article were to qualify changes to the budget decision-

making process in federal Belgium during the period of fiscal crisis as amounting to

performance or line-item budgeting, and to analyse the impact of the measures taken

in that framework for governance.

A. Budget decision-making process

Three steps may be distinguished in the budget decision-making process.

During the preparatory phase, the “X” budgets for three kinds of policy expenditures

– primary expenditures and non-fiscal revenues, social security expenditures and

revenues, and fiscal revenues – are determined on basis of administrative input.

During the decision phase, funds are transferred from the “A” and “B” budgets to the

“X” budget, in an escalating system of political involvement from Vice-PM cabinets’

budget expert, Vice-PM cabinets’ chief of staff and Vice-PMs, with the higher layers

settling issues left unresolved by the lower ones and keeping a veto right on all

previously made decisions. After formal approbation, the implementation phase

consists of negotiations between ministerial cabinets and administrations, of the

precise expenses that will be sacrificed.

Two evolutions are worth mentioning. During the preparatory phase, the role of

the monitoring committee determining the “A” and “X” budget has become more

important. During the implementation phase, the balance of power between central

agencies and administrations on operational management has shifted to the benefit of

the former, mainly because of the kind of decisions taken to fill in the “X” budget.

The core of the budget decision-making process – the decision phase – has

however remained surprisingly untouched during the fiscal crisis: the political

consensus to fill in the “X” budget by linear rather than targeted measures has been

unaffected, while the few targeted measures remain grounded more in political

ideology than analytical considerations. Budget decision-making process has

remained of a line-item nature.

26    

The interviews with key stakeholders nevertheless allowed explaining why few

changes have occurred. In the theoretical introduction, performance budgeting has

been defined by two attributes: the reliance on targeted measures as opposed to linear

one to fill in the “X” budget, and the support of these measures by analytical input, as

opposed to ideological one. This discussion is structured accordingly.

B. Why don’t we have more targeted measures?

Interviews allowed detecting two factors accounting for the extensive reliance

on linear measures in budget decision-making process: the effectiveness of linear

measures to fill-in the “X” budget, and the political consensus to rely on them rather

than on targeted measures. In other words, we can expect federal Belgium to adopt

more targeted measures, when the linear measures would prove ineffective and

provided a political consensus over targeted measures could be reached.

On the effectiveness of line-item budgeting

“The Dutchmen are maybe smart with their performance budgets; but we are

effective using our cheese grater”. It is by this statement that one respondent

explained the reluctance to embrace performance budgeting: it works fine up to now,

so why would we change?

The tables below provide some supporting evidence to this statement, by

comparing Belgian budget performances to that of neighbouring countries and the

Eurozone average. They show that Belgium over the years scores better than the

Eurozone average.

Table VII: Belgian Consolidated Deficits Compared to Neighbouring Countries

(2009-2013; % GDP; OECD, 2011)

2009 2010 2011 2012 2013 Belgium -5,6 -3,9 -3,9 -2,8 -2,3 France -7,6 -7,1 -5,2 -4,5 -3,4 Germany -3,1 -4,2 -0,8 -0,2 -0,4 Luxembourg -0,8 -0,8 -0,3 -2,0 -1,7 Netherlands -5,6 -5,0 -4,4 -3,8 -3,0

27    

Euro area (15 countries) -6,3 -6,2 -4,1 -3,3 -2,8

Table VIII: Belgian Consolidated Public Debt Compared to Neighbouring

Countries in % GDP 2009-2013 (OECD, 2012)

2009 2010 2011 2012 2013 Belgium 99,8 99,5 101,9 103,2 102,9 France 91,2 95,5 100,0 105,1 108,2 Germany 77,5 86,3 86,4 87,6 86,2 Luxembourg 19,0 25,8 25,8 29,8 32,6 Netherlands 67,6 71,6 75,9 82,5 83,6 Euro area (15 countries) 87,8 93,1 95,2 100,6 102,5

The data of table VIII on the evolution of the consolidated public debt confirm

this impression. While the public debt level is historically high in Belgium, it has

raised much less than neighbouring countries and the Eurozone in general.

If the Belgian budget decision-making process has delivered relatively good

performances in times of crises, all respondents nevertheless agree that it could well

reach its limits in a rather short term, depending on two factors: the extent of the “X”

budget and the remaining “fat” in the administration.

The higher the successive “X” budgets, the higher the probability that one will

have to shift from linear to targeted measures and make tough choices as to the

suppression of entire policies. Interestingly, the fiscal crisis has an ambiguous impact

on this “X” budget and hence on the probability to shift to performance budgeting,

through two macro-economic factors: interest rates and economic growth. The interest

rates for Belgian debt are currently at a historically low level. Given the high level of

the Belgian public debt in absolute terms, this has an enormous impact on the “X”

budget. The Euro crisis has divided the Eurozone in two camps: the PIIGS-countries,

distrusted by financial markets, have to pay high interests on their public debt; the

north European club, trusted by financial markets, enjoy low interest rates. The

Leterme loan, coupled with the advent of the Di Rupo government in late 2011 has

resolutely allowed Belgium to join the club of countries with low interest rates.

Ironically, the Euro crisis had a positive impact on federal public finances. But the

28    

current crisis has a negative impact as well, through economic growth. Crises thus

have an ambiguous impact on budget decision-making: they favour stability through

low interest rates, and change through economic growth.

The endurance of the crisis impacts the effectiveness of linear measures

negatively: after some years of successive linear measures, a threshold will be reached

where additional linear measures are not “painless” anymore but significantly impact

the continuity of government policies.

The question is where this threshold lies. Political respondents provide very

general historical evidence according to which most “fat” would have been

suppressed in the previous two rounds of fiscal crisis in the 80’s and 90’s, before

being somewhat “re-injected” during the exceptional period of fiscal distress during

the 2000’s. This leads them to hypothesize some additional “creaming” could remain

possible for an indeterminate period, depending on how the crises further unfold.

Beyond such general conjectures – quite revealing over the political-administrative

relations in federal Belgium –, however, it seems quite clear that nobody has a well-

defined idea as to where this threshold precisely lies.

The lack of political agreement on targeted measures

For sure, targeted measures are discussed at the negotiation table. But they are

most of the time incompatible. To a certain extent, this is due to the highly ideological

character of target measures. Each political party has its preferred policy champions

and targets, rather stable over time; one party’s champion often being the other

party’s target. These preferences, have structured the political debates for decennia in

Belgium and should thus be considered as a structural institutional feature in a

country with a proportional electoral system (Pollitt & Bouckaert, 2004).

Most of the time, only those parties with compatible policy preferences form a

government. The current Di Rupo government however represents a wider spectrum

of political ideologies. This ideological heterogeneity leads to reliance on linear rather

than targeted measures.

29    

C. Why don’t we have analytical input from the administration?

In other words, were the federal “X” budget to remain high for a longer period

of time, linear measures could prove insufficient to fill in the budget without

endangering policy continuity. Federal Belgium could then rely on targeted instead of

linear measures, yet only provided that the coming elections would allow a coalition

of parties with policy preferences that are compatible enough to make targeted

measures negotiable. Even if all these conditions are fulfilled, one would only have

but half a performance budget: governing political parties can be expected to agree on

the fulfilment of their policy preferences while sacrificing those of opposition parties,

until new elections invert the situation.

But performance budgeting not only requires reliance on targeted measures

rather than linear ones, it also requires that these measures are somewhat backed by

analytical evidence, as opposed to ideological considerations. In that respect, there is

presently no administrative body feeding the budget decision-making process with

undisputable empirical evidence. There is well a range of advising bodies, but these

focus on macro-economic data and wider societal evolutions. The performance audits

issued by the Belgian Court of Audit are more susceptible of feeding a decision-

making process, but their client is Parliament, not the governmental majority.

Actually, the sole body able to take over such kind of work is the Inspection of

Finances, already advising ministers on the opportunity of policy expenditures. But

this body is much too small to embrace these new functions without abandoning

existing ones. So there remain the departments who could, each for their own, advise

their minister on the performance of the policy they are in charge of. For the moment,

however, they don’t do it, and useless to say, the linear measures imposed on them do

not favour such investments, while it remains difficult to think how they could

provide ammunitions to politicians to sacrifice their own policies to the benefit of

other departments.

D. Budget Decision-making Outputs: Impact on Governance

COCOPS (2012: 13) defined possible impacts of fiscal crisis on governance as

moves on a set of dichotomies and as changes on particular aspects. These

dichotomies are (Peters, Pierre & Randma-Liiv, 2011):

• large and fundamental versus small and incremental decisions;

30    

• swift and episodic versus slow and continuous decisions;

• centralized versus decentralized decision-making;

• coherent, coordinated and systematic versus loosely coupled and

fragmented patchwork;

• long-term structural versus short-term quick fixes.

The discussion of the budget decision-making process shows that federal

Belgium is situated at the right end of all these dichotomies, with one exception:

decision-making remains highly centralized. Moreover, no particular shifts were

observed, at the exception of centralization having further increased.

Next to defining major characteristics of the budget decision-making processes,

COCOPS (2012: 13) also locates possible governance impacts on different

dimensions: NPM-type management instruments, autonomy and control, coordination

modes, use of performance indicators, performance budgeting, relationship between

the public, private and third sector, contracting out.

This article makes clear that there is no bigger reliance on performance

budgeting after than before the crisis, reliance on performance indicators for budget

decision-making remains exceptional. Contracting out did not appear much relevant

to our respondents, while a study of the relationships between the public, private and

third sector would bring us far beyond the scope of this paper. This article emphasizes

a rolling-back of the few NPM-type instruments implemented: their application is

somewhat suspended by the fiscal crisis. This leads to a greater hierarchical control in

the regular administration and, interestingly, to a greater responsabilization of the

social security sector, in a combination of market-type and network-type coordination

mechanisms.

6. CONCLUSION

In this article, three research questions were set. First, when has the fiscal crisis

begun in federal Belgium? Second, has the fiscal crisis led to shift from line-item

toward performance budget decision-making process in federal Belgium? Third, has

the fiscal crisis had any impact on the governance of the federal government?

31    

Discussing the occurrence of fiscal crisis in Belgian, we found a tight

intertwining between financial and political crises. Our analysis also showed that the

pattern did not fully correspond with the theoretical model linking banking crisis to

fiscal crisis through economic recovery measures. While the banking crisis was

serious enough to trigger a fiscal crisis, economic recovery measures remained

limited.

Analysis of the budget decision-making process in Belgian federal government

level showed that the core of the budget decision-making process remained

surprisingly untouched. Belgian federal government continues to rely on linear rather

than targeted measures, with few analytical input. Cheese-slicing has indeed proved

effective to manage the fiscal crisis up to date, and there is a political consensus to

rely on it, in order to share the burden of the fiscal crisis between all policies,

administrations and, ultimately citizens. Reliance on targeted measures could become

more likely if the fiscal crisis endures enough for successive linear measures to really

affect the continuity of public policies, and if government parties can reach a policy

consensus on the policies to be sacrificed. But there is currently no administration

providing analytical input to support targeted measures and the probability that

federal government will invest in such a production in period of crisis is low. So if

fiscal crisis could lead to a greater reliance on targeted measures, it is not expected to

lead to full performance budgeting at medium term.

It is also interesting to find that in Belgium the federal government is hit

harder than other central (regional) government by the fiscal crisis: it is sole

responsible for the overall debt level without however having all the means to manage

it, with significant policy fields and related resources entrusted to the other central

government levels. Overall, Belgian proves a special case, as we can even state that

for the decision-making process, the fiscal crisis appears to be a less determinant

causal factor than the political-institutional crisis.

The discussion of the fiscal crisis’ impact on governance of the federal

government required preliminary considerations. Despite being labelled as ‘NPM-

laggard’, Belgium has nevertheless introduced strategic planning, with increased

32    

managerial autonomy in exchange for output steering. This scheme has been impacted

by the fiscal crisis, through the linear measure of underutilization, taken in the

framework of budget negotiations: operating budgets are granted independently of

strategic plans. Underutilization is however implemented differently and has different

results: in the regular administration, each administration gets individual targets

leading to delaying investments in efficiency; in the social security, the sector as a

whole gets a target, which is reached by investments in efficiency.

Finally, our example of the pension reform as a targeted measure showed a

paradox: while in Belgium, the magnitude of the fiscal crisis is assumed to make it

impossible to postpone once again difficult but profitable public administration

reforms, it is precisely the lack of previous reforms that make targeted reforms even

more difficult.

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