MISSION AND TASKS
Under the Budgetary Framework Law, the CFP’s mission is “to pronounce on the objectives proposed in relation to the macroeconomic and fiscal scenarios, on the long-term sustainability of public finance and on compliance with the budget balance rule, with the central government expenditure rule and the regional and local government indebtedness rules laid down in their respective finance laws.” This independent assessment that supports fiscal transparency contributes to the quality of democracy and of economic policy decisions and enhances the State’s financial credibility, under the terms of the CFP’s Statutes.
Under the combined provisions of the applicable Community legislation and the Budgetary Framework Law, the CFP supervises compliance with the numerical fiscal rules and endorses the macroeconomic forecasts underlying the budgetary programming documents.
The CFP’s mission is focused on the current and future fiscal and financial effects of political decisions and public sector management. Thus, the CFP differs from other specialized bodies that supervise and monitor the management of the entities making up the public sector.
The CFP supports the public finance monitoring mechanisms that bring about a medium-term framework consistent with a sustainable path, while respecting the principles of transparency. This framework is one of the key pillars of a stable macroeconomic environment, which is a necessary condition for increasing the Portuguese economy growth capacity.
The CFP’s tasks
In order to fulfil its mission, the CFP’s Statutes assign it the following tasks:
- Assessment of the macroeconomic scenarios adopted by the Government and the consistency of budget projections with those scenarios;
- Assessment of compliance with the fiscal rules;
- Analysis of the dynamics of public debt and its sustainability;
- Analysis of the dynamics of existing commitments, with special emphasis on the pensions and health systems and on public-private partnerships and concessions;
- Assessment of the financial position of regional and local governments;
- Assessment of the economic and financial situation of public sector enterprises;
- Analysis of tax expenditure;
- Monitoring of the budget outturn.
The Budgetary Framework Law also assigns the CFP a decisive role in the recognition of a significant deviation from the medium-term objective and in the deviation correction mechanism, in line with the assessing of compliance with the fiscal rules and pursuant to the Community legislation. The CFP is also responsible for appraising the macroeconomic scenario underlying the budgetary programming documents.
The publication of documents is the main instrument used by the CFP to fulfil its mission and is required to produce publications on:
- The Stability Program and other procedures within the European regulatory framework of the Stability and Growth Pact;
- The Multi-annual Budgetary Programming Framework (which will be replaced by the Multi-annual Public Expenditure Framework as from 1 April 2020);
- The Draft State Budget.
The CFP shall also analyse the sustainability of public accounts and other matters it deems relevant, including an assessment of the previous year budget outturn. All publications produced shall be sent to the President of the Republic, Parliament, the Government, the Court of Auditors and the Bank of Portugal. All publications are made available on the Council's website.
Independence is one of the core features of the CFP when performing the functions assigned it by law and its statutes. Due to that fact, it cannot request nor receive instructions from Parliament, the Government or any other public or private entity. Its financial independence is guaranteed through the State Budget.
The CFP was set up in May 2011 at the end of the 11th legislative period, under the 5th amendment to the Budgetary Framework Law. In Portugal, the need to create such a body had been recognized for some time. An agreement was reached between the two main political parties in October 2010, even before the approval of the European guidelines on the subject.
At the time, the Government - headed by the Socialist Party - and the Social Democrat Party agreed to form a working committee to establish the statutes of the future council. This initiative was part of the political agreement that allowed Parliament to approve the Draft State Budget for 2011. The signatory parties committed the acceptance of the proposals made by the working committee, appointed in January 2011, headed by António Pinto Barbosa and including Teodora Cardoso and João Loureiro. The draft statutes were presented in April and the final version was approved by Parliament in October (Law no. 54/2011, from 19 October).
In its first year, the CFP produced four documents, followed by ten in 2013. From 2014 to 2016 there were 13 publications per year, with the number of documents published rising to 15 in 2017. In 2018, 17 reports were published amongst other documents. A list of all the publications is available at CFP’s Activity Reports.
In 2019, at the request of the CFP, the OECD conducted an analysis of the institution's impact to that date. In this report, the OECD concluded that, in a relatively short period of time, the CFP has become a well-regarded independent institution providing high-quality analysis of public finances in Portugal. CFP reports are often discussed in Parliament and referred to during national fiscal debates. The OECD also concluded that the institution has also played an important role in improving fiscal transparency and providing new information to facilitate fiscal oversight and a greater understanding of issues affecting Portugal’s long-term fiscal sustainability.
The CFP’s establishment precedes Council Directive 2011/85/EU, which lays down requirements for Member States' budgetary frameworks, and Regulation (EU) No 473/2013 of the European Parliament and of the Council of 21 May 2013, which lays out common provisions for monitoring and evaluating draft budget plans and for the correction of the excessive deficit of euro area Member States.
As a response to the financial crisis, the European economic governance stressed the importance of specific numerical fiscal rules for each country, in order to ensure that Member States’ fiscal policies are consistent with their obligations under the Treaty on the Functioning of the European Union (TFEU).
In 2011, Council Directive 2011/85/EU of 8 November 2011 stated that one of the specifications that national numerical fiscal rules must include is an “effective and timely monitoring of compliance with the rules, based on reliable and independent analysis carried out by independent bodies or bodies endowed with functional autonomy vis-à-vis the fiscal authorities of the Member States”.
In 2013, the publication of the so-called “Two-Pack” made it compulsory for euro area Member States to have in place independent bodies monitoring compliance with fiscal rules. Article 5 of Regulation (EU) No 473/2013 of the European Parliament and of the Council of 21 May 2013, which applies directly to euro area Member States, states that:
“1. Member States shall have in place independent bodies for monitoring compliance with:
- numerical fiscal rules incorporating in the national budgetary processes their medium-term budgetary objective as established in Article 2a of Regulation (EC) No 1466/97;
- numerical fiscal rules as referred to in Article 5 of Directive 2011/85/EU.
2. Those bodies shall, where appropriate, provide public assessments with respect to national fiscal rules, inter alia relating to:
- the occurrence of circumstances leading to the activation of the correction mechanism for cases of significant observed deviation from the medium-term objective or the adjustment path towards it in accordance with Article 6(2) of Regulation (EC) No 1466/97;
- whether the budgetary correction is proceeding in accordance with national rules and plans;
- any occurrence or cessation of circumstances referred to in the tenth subparagraph of Article 5(1) of Regulation (EC) No 1466/97 which may allow a temporary deviation from the medium-term budgetary objective or the adjustment path towards it, provided that such a deviation does not endanger fiscal sustainability in the medium-term.”
The same Regulation also states that “national medium-term fiscal plans and draft budgets (…) shall be based on independent macroeconomic forecasts”, that is, budgetary forecasts that have been produced or endorsed by an independent body [see Articles 4 (4) and 2(1b)].
The EU legislation also sets out the minimum conditions that these bodies should comply with in order to be considered “independent bodies”. Pursuant to article no. 2 of Regulation (EU) No. 473/2013, “independent bodies’ means bodies that are structurally independent or bodies endowed with functional autonomy vis-à-vis the budgetary authorities of the Member State, and which are underpinned by national legal provisions ensuring a high degree of functional autonomy and accountability, including:
- a statutory regime grounded in national laws, regulations or binding administrative provisions;
- not taking instructions from the budgetary authorities of the Member State concerned or from any other public or private body;
- the capacity to communicate publicly in a timely manner;
- procedures for nominating members on the basis of their experience and competence;
- adequate resources and appropriate access to information to carry out their mandate.”
The CFP’s legal framework complies with all the conditions laid down in the European legislation in order to be considered an independent body pursuant to Regulation (EU) No 473/2013 and Directive 2011/85/EU.
The Senior Board is CFP’s highest body and is responsible for fulfilling the Council’s mission, the performance of its tasks, the definition of its action plan and the approval of its internal regulations.
The Senior Board is a collegiate body and comprises five members, appointed by the Council of Ministers following a joint proposal from the Chair of the Court of Auditors and the Governor of the Bank of Portugal.
The Executive Committee is charged with the CFP’s day-to-day management and comprises, by reason of the respective functions, the President of the Senior Board, the Executive Member and the Head of Technical Services.
The President of the Senior Board presides over the Executive Committee. The Executive Member shall replace the President of the Executive Committee in his/her absence, but only as far as executive functions are concerned.
The Single Auditor is responsible for the control and legality of the Council’s financial and asset management. The Single Auditor shall hold office for a non-renewable period of five years.
Under an act published in the Portuguese Official Journal (only available in Portuguese), the Minister of Finance appointed Pedro José Gomes do Nascimento Barreira as the CFP’s Single Auditor.