Transparency as a Concept
Transparency is a concept utilised in public policy and governance to indicate a need for openness and accessibility of information on decisions, the decision-making process, the cost of the decision, and the funding source of the decision. Kopits and Craig (1998) define transparency in finance as the ‘openness toward the public at large about government structure and functions, fiscal policy intentions, public sector accounts, and projections. It involves ready access to reliable, comprehensive, timely, understandable, and internationally comparable information on government activities’. Moreover, from an information sharing standpoint, the idea of transparency incorporates the perception of the quality of the information shared from a sender (Schnackenberg & Tomlinson, 2014). In decision-making, information sharing is particularly important for quality of governance. Transparency is therefore seen as an important underpinning of public trust and assurance in how public funds are utilised (Downes, R., Moretti, D., Nicol, S., 2017: 5).
Transparency is often described alongside ‘accountability’ as concurring notions (Dyrberg, 2002: 83). Accountability implies awareness of what is done, how well it is done, how much it costs, and who paid for it (Bird, R. & Smart, M., 2001). This further implies that accountability is reliant upon the existence of transparency, which is the openness of information. Accountability provides the ability to see the players in the decision-making processes, thus highlighting the sources of policy creation, initiation, and implementation as well as revenue collection and spending. Accountability allows for scrutiny and review of governance. Effective accountability arrangements generate a supervision process aiming at improving quality in decision-making and providing the means for correction, prosecution and redress (Sigma, 1999:25 as cited in Cipriani, G., 2010).
Cipriani (2010) provides a distinction between the notions of ‘giving account’ and ‘holding to account’ likened to the difference between ‘responsibility’ and ‘accountability’. The idea of ‘responsibility’ surrounds a specific role with duties and prescribed tasks within a framework or system, whereas accountability is ensuring those responsibilities are carried out or addressed when found to be lacking (Cipriani, G, 2010: 3). Thus, a clear identification of responsibilities is imperative for the quality of accountability.
European Union Budget Transparency
In 2017, Ivailo Kalfin, member of the Monti group on the future EU budget, said in an interview with EURACTIV, “If you want to be transparent with EU citizens, EU budget should be decided by a very transparent procedure. The EU budget is not transparent at the moment. Nobody can explain how is made. […] This has to change…” (Gotev, 2017). Likewise, there is a body of literature dedicated to the reform and improvement of the EU budget, most of which mentions the need for increased transparency in the budget negotiation, formulation, and implementation processes. European Union reports also call for the same attention to transparency and accountability. Common critiques of the financial framework’s lack of transparency and openness includes its complexity and corruption by unequal correction mechanisms and a net balance approach to financing the EU.
While there are numerous sources of analysis on the EU’s current financial framework and its needs for reform, the notion of transparency and accountability are especially highlighted by the High Level Group on Own Resources report published in 2016. This report analyses the current and suggested own resources of the EU in relation to various factors such as Transparency and Simplicity, Democratic Accountability, and Equity and Fairness. This report’s account shows the importance of transparency and accountability in the policy-making process.
Budget transparency can be understood as the disclosure of all relevant fiscal information in a timely and systematic manner, but it can also account for the existence of authoritative checks and review to promote accountability. These elements create a structural platform supporting transparent measures for effective governance. Another element to be considered is the role of information, previously indicated by the discussed relationship between the perceived quality of information shared from a sender and transparency (Schnackenberg & Tomlinson, 2014). Performance information on aims and goals can help institutions and stakeholders (e.g. EU citizens) understand not just what is being spent, but also what is being bought on behalf of citizens – i.e. what public services are being delivered, to what standards of quality, and with what levels of efficiency (OECD, 2015). Further, this is reflected in the attitude of the net balance approach, which inherently neglects the consideration of the ‘European added value’ to expenditure.
The net balance approach’s underlying sentiment of ‘getting as much benefit from all of my cost’ is reflected beyond the finances of the Member States – this is also a political attitude which inhibits the further progress of the European Union’s aims. Euroscepticism in the top contributors to the EU budget via GNI own resource contributions is a notable impediment, especially as evidenced through the recent membership referendum in the United Kingdom bolstered by a wave of Eurosceptic mobilisation across the EU. Some Eurosceptics elsewhere may be less inclined to interfere, as they are net recipients and benefit from the status quo. Yet, there is something similar between the two groups which is driven by a lack of transparency and accountability across the EU – the information gap.
Accurate and assessible information on the budget reduces information asymmetry and can diminish politicians’ abilities to strategically manipulate data to meet opportunistic gains as they have little incentive to produce simple budget information (Downes, R., et. al., 2017; Alensia, A. & Perotti, R., 1999: 25). This lack of clarity on budgetary information and results of EU policies and added value, which Cipriani (2010) argues is a driver for public opinion toward the EU spending, across all instruments causes a disillusion between the citizen taxpayer and the EU institutions. Alensia and Perotti (1999) argue that a disconnect can negatively impact budget control particularly when fiscal adjustments and reform is needed. Considering the EU’s financial framework and revenue system are under scrutiny, this implication is important to consider. Low interest in EU affairs is evidenced through voter turnout, which is dangerous when considering the implications of the decision-making process taking on the character of the principal-agent relationship delegating power up to politicians which can then act independently of voter desire. Improved transparency limits this behaviour through introducing accountability.
The accountability gap in relation to the EU budget rides along with the idea of the lack of transparency and the information gap. If we understand accountability to mean the making explicit performance objectives and targets as well as the addressing of areas lacking in progress, the EU budget has significant room to grow. In addition to the attempts of the EU to provide summary guides and citizen budgets, Downes, et. al (2017) note the benefits to be achieved from having a single, strategic frame of reference for how EU resources are deployed, which can command public understanding as well as political authority. Increasing public trust in the EU fundamentally is the only way to further the ambitious political and economic aims, as there will always be a competitive, nation-state based ‘net balance approach’ financially and ideologically if citizens will not fully support paying for something they cannot understand or from which they derive perceivable benefits. Member states are also responsible for doing their share of providing accountability and accurate information regarding their involvement and benefits from EU membership. Until this is achieved, the underlying issues impeding a stronger sense of cohesion and success at the European level remains difficult to achieve.
Bird, R. and M. Smart (2001), “Intergovernmental Fiscal Transfers: Some Lessons from International Experience”.
Cipriani, G. (2007). Rethinking the Budget? Three Unavoidable Reforms. Centre for European Policy Studies: Brussels.
Ciprani, G. (2010). The EU Budget: Responsibility without Accountability? Centre for European Policy Studies: Brussels.
Downes, R., Moretti, D., & Nicol, S. (2017). Budgeting and performance in the European Union: A review by the OECD in the context of EU budget focused on results. OECD Journal of Budgeting, Volume 2017/1.
Dyrberg P. (2002), Accountability and Legitimacy: What is the Contribution of Transparency?
OECD (2015), Recommendation on Budgetary Governance, as cited in Downes, R., Moretti, D., & Nicol, S. (2017). Budgeting and performance in the European Union: A review by the OECD in the context of EU budget focused on results. OECD Journal of Budgeting, Volume 2017/1.
Monti, M. et al. (2017) Future financing of the EU: Final report and recommendations of the High Level Group on Own Resources, Brussels: European Commission: http://ec.europa.eu/budget/mff/hlgor/index_en.cfm
Schnackenberg, A. & Tomlinson, E. (2014). “Organizational transparency: a new perspective on managing trust in organization-stakeholder relationships”. Journal of Management. Sage. Stable: doi:10.1177/0149206314525202.