Subcommittee on Ideal Government and Organizations (Fourth Meeting)

Thursday, June 5, 2003

Meeting Agenda

Matters relating to ideal government and organizations (public finances, with special reference to the relationship between the audit system and the Diet, including the bicameral system)

After statements were heard from Prof. KUBOTA Yoshio and Prof. SAKURAUCHI Fumiki concerning the above matters, questions were put to them; this was followed by free discussion among the members.

Informants

  • KUBOTA Yoshio, Associate Professor, Department of Law, Faculty of Law, Kobe Gakuin University
  • SAKURAUCHI Fumiki, Associate Professor, Niigata University

Members who put questions to Prof. KUBOTA and Prof. SAKURAUCHI

Main points of Prof. KUBOTA's statement

1. Policy evaluation and the background to its current prominence

>> There are two types of policy evaluation: (a) measuring the outcomes of particular policies (such as their effectiveness, cost-benefit ratio, and any unwanted effects), and feeding back the results in subsequent policy-making; (b) evaluating policy goals and directions in the light of broadly recognized social values such as freedom, equality, and democracy.

>> The prominence of policy evaluation in recent years can be attributed to three background factors: (a) the emphasis on accountability; (b) the need to make policy decisions amid uncertainty as to the effects of policies; (c) the need for principals to control their agents in the model which posits a principal-agent relationship between the people, with whom sovereignty resides, and the Diet, between the Diet and the Cabinet, and between the Cabinet and the bureaucracy.

2. Why policy evaluation is needed in the Diet

>> The Board of Audit's inspections have traditionally focused on accuracy and legality. In recent years, further criteria known as "the three e's"-economy, efficiency, and effectiveness-have been added. Generally speaking, the Board of Audit is expected to perform the function of policy evaluation.

>> However, I believe that the Diet itself should carry out this function. Among other reasons, this is because policy evaluation by the Board of Audit, which has less democratic legitimacy than the Diet and the Cabinet, arguably interferes with the right of those bodies to decide policy.

3. The DPJ's proposal for an Administrative Oversight Board

>> In a bill it submitted unsuccessfully to the Diet in 1997, the Democratic Party of Japan (DPJ) proposed an Administrative Oversight Board. (This became known as the "Japanese GAO bill" as the proposal was modeled on the General Accounting Office in the U.S.A.) However, the DPJ's proposal contained several misconceptions about policy evaluation. In particular, (a) it made policy evaluation a tool of pursuing Cabinet responsibility, and (b) it empowered an auxiliary body of the Diet to offer opinions on the enactment, revision, and repeal of legislation, which meant that the body would have issued decisions like those of a judge in a court of law, and it would be unrealistic to require the Diet and the Cabinet to comply with decisions of this kind.

>> The Liberal Democratic Party (LDP) also showed a lack of understanding of policy evaluation. The LDP saw no need to create a policy evaluation body in the Diet, considering it sufficient that policy-makers receive inputs of information from the bureaucracy. However, in policy-making there is no absolute truth, and it is necessary that the Diet, as the body responsible for policy decisions, integrate and analyze the data supplied by the ministries from its own vantage point at the helm of national affairs.

4. A policy evaluation body as an auxiliary to the Diet

>> The measure that was passed instead of the Administrative Oversight Board bill consisted mainly of amending the Diet Law and related legislation to establish the House of Representatives Committee on Audit and Oversight of Administration. However, critics have pointed out problems in this committee's proceedings, noting that the audit process is being used as an opportunity to pursue responsibility and that there is no review based on the Diet members' own investigations.

>> In view of these problems, there is a need for a body attached to the Diet to assist members' work in the area of policy evaluation. The U.S. institution most relevant here is probably the Congressional Budget Office (CBO) rather than the GAO.

>> Although it is Diet members themselves who carry out policy evaluation, the measuring of its effectiveness and other related work require highly specialized skills. Thus, a policy evaluation body should be established in the Diet in order to provide members with expert assistance in policy evaluation.

5. Evaluation of proposed reforms to make auditing (policy evaluation) the role of the House of Councillors

>> Recently, it has been suggested, from the viewpoint of the division of roles between the two Houses, that the Constitution should be amended to make auditing (policy evaluation) the role of the House of Councillors. This requires careful study, however, in light of such considerations as what election system is desirable for the House of Councillors and the relationship between decentralization and the bicameral system. Even if such a reform were made, it would be unlikely to work well in the absence of an auxiliary body for policy evaluation such as I described earlier.


Main points of Prof. SAKURAUCHI's statement

1. Perspectives for thinking about the Constitution

>> There are three possible perspectives for thinking about the Constitution: (a) the institutional approach; (b) the approach of comparative constitutional law; (c) the historical approach. In presenting my comments on the ideal Diet decision-making and fiscal system from a public accounting viewpoint, I will basically rely on (a), but I will also take (b) and (c) into account, largely to ensure compatibility with reality.

2. What is public accounting?

>> "Public accounting" refers to the accounting techniques and methods applied to economic entities in the public sector in general (the central government, local public bodies, special public corporations, etc.), which are non-profit-making and for which profitability is not a criterion in assessing performance.

>> The public accounting system (a) is directly related to the design of the governance structure, which regulates the state's decision-making through fiscal constraints; at the same time, (b) it serves as an institutional infrastructure that makes clear the government's fiduciary responsibilities.

3. The basic structure of the relationship between government and people; the position of the people

>> The people, as trustors, pay taxes to the government (their trustee). At the same time, they are beneficiaries of the government's fiscal activities; this includes not only the generations currently paying taxes but also future generations (who will be future taxpayers). The government's fiduciary responsibilities are discharged when the people (the principals) accept reports based on accountability.

>> The Constitution of Japan is in the tradition of the theory of trust as represented by the social contract; this can be seen, for example, in the first paragraph of the Preamble and the second part of Article 11.

>> The Constitution's provisions on the organization of government prescribe the governance structure to be adopted by the state in order to protect the interests of the people, who are its beneficiaries.

4. Fiscal constitutionalism, two models of democracy, a comparison with the fiscal system under the old constitution, and public governance

>> The fiscal system under the Meiji Constitution was a simple governance structure in which the people played no part.

>> In contrast, under the fiscal constitutionalism declared by Article 83 of the present Constitution, there is a dual governance structure in which the Diet exercises governance over the Cabinet and the people exercise governance over the government (the Diet and the Cabinet). Although the former has been strengthened, the latter is inadequate to protect the interests of the people as taxpayers and the people of future generations as beneficiaries.

>> Under fiscal constitutionalism, which strengthens governance by the Diet over the Cabinet, in the direct participation model (strong governance), the people, as beneficiaries and principals, are identified completely with the decision-making Diet (their trustee). Thus, this model does not address the question of governance by the people over the government (the Diet and the Cabinet).

>> The indirect participation model of democracy (weak governance) differentiates between decision-makers and non-decision-makers. In terms of resource distribution along a time axis, this model distinguishes between the government (Cabinet and Diet) as trustee, which compiles the budget and which consists only of the present generation, and the people of both present and future generations (beneficiaries). In this case, there is a need to strengthen governance by the people over the government (discipline and rationalization of fiscal management decisions = public governance) by establishing a public accounting system and making clear the fiduciary responsibilities of government decision-makers.

5. A fiscal system for fair fiscal management

>> Fiscal constitutionalism is a broad principle of the Constitution, but we cannot protect the interests of the people as beneficiaries, including future generations, merely by the formal application of this principle. To protect those interests, we should strengthen public governance by making clear the fiduciary responsibilities of those who make fiscal management decisions in the present generation (effectively complementing fiscal constitutionalism).

>> Specifically, we need to: (a) improve public accounting (in particular, to reflect the interests of future generations, who do not have a voice); (b) achieve fiscal discipline in tandem with evaluation of the administration; (c) introduce a dual account system or similar system that divides the budget into a current account and a capital account, which has large medium- to long-term effects; (d) make explicit provision for national emergency rights in the area of public finances.

6. Relationships with the bicameral system and the Board of Audit

>> We need to design a body that functions as a spokesperson for future generations or a fiscal system able to reflect their interests. In practice, this could take several forms: (a) making the House of Councillors an independent body without a specific constituency under the Constitution; (b) strengthening the budgetary powers of the House of Councillors in regard to fiscal management from a medium- to long-term perspective (merely strengthening its powers of audit would not be enough); (c) attaching the Board of Audit to the Diet as an auxiliary body which retains a certain degree of neutrality.

Main questions and comments to Prof. KUBOTA and Prof. SAKURAUCHI

HANASHI Nobuyuki (Liberal Democratic Party)

(To both informants)

>> In thinking about how to divide functions between the two Houses based on the points you have raised, I believe we must also consider what form the election system for the Upper House should take. What are your views on this point?

>> On the basis of a division of roles between the Lower and Upper Houses so that the former handles the budget and the latter handles the final accounts, I am studying the idea of attaching a reorganized Board of Audit to the Upper House as an auxiliary body. What are your views on this point?


FURUKAWA Motohisa (Democratic Party of Japan and Club of Independents)

(To Prof. KUBOTA)

>> You commented that the DPJ's Administrative Oversight Board bill contained "misconceptions" about policy evaluation, but the point of the bill was to establish an administrative oversight body as a mechanism to enable both ruling and opposition parties to draft policies within the framework of the existing Constitution, in light of the Board of Audit's independent status under the Constitution and the lack of any independent think tank that drafts policy, as in Western countries. If we include the possibility of a constitutional amendment in our field of view, would your proposal for a policy evaluation body attached to the Diet involve placing the Board of Audit under the Diet's control, or would it involve establishing a body similar to the American CBO within the Diet, separately from the Board of Audit?

(To Prof. SAKURAUCHI)

>> At the heart of the public's distrust of politics is wasteful spending of taxes. If tax money were used properly, the people would willingly bear the tax burden. In thinking about a new vision for the nation and a new Constitution, I believe it is important to have a mechanism to ensure the proper use of taxes, and I suggest that it would be appropriate to make the constitutional provisions for the system for compiling the budget more specific than those now in force. What are your views on this point?

SAITO Tetsuo (New Komeito)

(To Prof. KUBOTA)

>> In the suprapartisan Science, Technology and Policy Group, whose members included this Commission's Chairman, Mr. NAKAYAMA, I once proposed a Science and Technology Basic Law and a Law for the Evaluation of Science and Technology. The former was passed but not the latter, which consisted of evaluation of actual science and technology together with policy evaluation in regard to the implementation of the science and technology budget. At the time, some people argued that policy evaluation, as a task that requires professional expertise, is not suited to debate in a public forum. What is your view in this regard?

(To both informants)

>> I would like to hear your views on the "manifestos" or policy statements issued by political parties and other groups, which have recently become a topic of discussion.

(To Prof. SAKURAUCHI)

>> You commented that under the existing Constitution, the Diet's governance over the Cabinet has been strengthened, but there is weak governance by the people over the government (the Diet and the Cabinet). In practice, however, I have the feeling that it is the ruling parties' governance over the Cabinet that has become weak, while the people and the Cabinet have developed strong ties through such means as public opinion polls. Could you explain your point about the weakness of governance by the people over the government in more detail?

TAKEYAMA Yuriko (Liberal Party)

(To both informants)

>> Why has there been no policy evaluation in Japan until today?

>> In Japan, there is still a demand for provision of social capital, but the fact is that local governments are wasting money on maintaining, operating and managing public facilities that consist of expensive physical structures with no meaningful content (commonly known as "(empty) boxes"), and the taxpayers are not aware of the true situation. In the United States, if a state government builds a "box," how is policy evaluation carried out?

YAMAGUCHI Tomio (Japanese Communist Party)

(To Prof. KUBOTA)

>> You say that policy evaluation seldom functions in local politics, but I believe that the ombudsman system in local government is meaningful. How do you evaluate this system?

(To Prof. SAKURAUCHI)

>> You explained the relationship between the government and the people in terms of the concept of trust under British and American law. Is this a different concept from that of Continental law?

>> When you speak of "resource distribution along a time axis," how broad is the axis that you have in mind?

>> Under the fiscal system of the Meiji Constitution, Japan's public finances collapsed in 1945. Was this due to problems inherent in the system, or was it due to the special circumstances of the war?

>> After the war, strict conditions were established for the issue of government bonds. I recognize that both the national government and local governments are currently in an extremely tight fiscal situation. What are your views on the issue of government bonds?

>> Several European nations and South Korea have created taxpayers' charters. I think we need a similar guarantee of taxpayers' rights in Japan. Do you agree?

KANEKO Tetsuo (Social Democratic Party)

(To Prof. KUBOTA)

>> In your paper, you say that policy evaluation should be used as a supplementary tool to analyze the present state of policies and recommend improvements accordingly, but in light of the public's desire for evaluation of specific policies, I think we should establish a body whose evaluations will influence policies at the decision-making and implementation stages. What is your view of this? Also, how do you think such a body should be composed?

>> How much progress has been made in policy evaluation by citizens?

(To Prof. SAKURAUCHI)

>> In answer to a previous question, you proposed that former prime ministers, among others, should be appointed to the House of Councillors as part of the reforms of that body. If the House of Councillors is to serve as a "spokesperson for future generations," I believe it should consist of elected representatives of the people. What is your response to this?

INOUE Kiichi (New Conservative Party)

(To Prof. KUBOTA)

>> There are three options available for a body to perform the function of auditing: (a) make it independent for the sake of neutrality; (b) establish it in the Cabinet; (c) establish it in the Diet. Which of these do you think would be the most efficient, and why?

(To Prof. SAKURAUCHI)

>> What auditing systems are there in the European nations?

>> You spoke of the importance of the perspective of "resource distribution along a time axis." In thinking about a system to link present and future generations, what must we do at a minimum?

ITO Kosuke (Liberal Democratic Party)

(To both informants)

>> In the past, the Diet has tended to exercise control over the administration of national affairs in advance, for example, by voting on the budget and passing laws, while paying little attention to exercising control after the fact, for example, by reviewing the final accounts. If we are to apply the lessons of hindsight in exercising prior control over future policies as we decide and implement them, should we review the existing system and improve its operation, or should we create a body attached to the Diet that would be responsible for control after the fact?

>> What is the role of the CBO, which is an auxiliary of the U.S. Congress?

SHIMA Satoshi (Democratic Party of Japan and Club of Independents)

(To both informants)

>> Article 20 of the Board of Audit Law stipulates that the Board shall carry out inspections from the viewpoints of economy, efficiency and effectiveness, in addition to inspections from the viewpoints of accuracy and legality. The Board is also supposed to conduct inspections of public corporations from the viewpoints of economy, efficiency and effectiveness, but in light of the present problematic state of these bodies' activities, they do not appear to be undergoing adequate inspection. What are your views on this point?

(To Prof. SAKURAUCHI)

>> What legislative measures do you think are needed to create a fiscal system that would serve the interests of future generations together with those of the present generation?

FUKUI Teru (Liberal Democratic Party)

(To Prof. SAKURAUCHI)

>> I believe that we should assign different weights to different areas of national affairs and policy proposals in accordance with our goals and values. What are your views on this point?

>> The Law for Normalization of Grants requires that, for example, if an elementary school is built with a subsidy and subsequently turned into an old people's home, the subsidy must be repaid because the building is not being used for the approved purpose, even though it is still performing a public service. I think that the rigidity of this system is a problem. What are your views on this point?

>> If a dual account system were introduced, would land costs be subsidized in cases where projects of the "box" type or similar public works are carried out?

(To Prof. KUBOTA)

>> In Britain, values have been ranked in order of priority through actual policy choices. In Japan, by contrast, there is a national reluctance to carry out this kind of "weighting." How do you view this difference between the U.K. and Japan?

Main points of comments by members of the Subcommittee (in order of presentation)

TANIKAWA Kazuo (Liberal Democratic Party)

>> Japan's local governments have conspicuous deficits compared with their counterparts in Europe and the United States, mainly because we have kept the prewar system of centralization. Under this system, large subsidies are currently being paid to local governments. It is the role of policy evaluation to break this cycle of "subsidy politics," which has no parallel in other countries, and to consider future needs from the taxpayer's viewpoint. However, Article 83 of the present Constitution is based on a centralized approach, so that even if local governments conduct thorough evaluations, these will not be enough by themselves. In light of this situation, now is the time to think about a proper evaluation system as we review the Constitution.


SENGOKU Yoshito, Deputy Chairman of the Commission

>> As a general principle, policy-making requires a foundation of public finances, but in the past neither the ruling parties, nor the opposition, nor local governments gave much thought to the fiscal element. In an era of low growth when tax revenues are no longer on the rise, this is the wrong approach: we must prioritize new projects and scrap whatever is unnecessary. This scrap-and-build approach requires a kind of evaluation, and fiscal and accounting numbers take on importance as materials for that evaluation. It is the role of the GAO in the United States and the National Audit Office (NAO) in Britain to supply those figures. This is an important issue that should be discussed in the Diet, including a review of the Constitution.


FURUKAWA Motohisa (Democratic Party of Japan and Club of Independents)

>> Japan is presently facing a situation in which its public finances could collapse at any time. When the state becomes financially exhausted, fiscal collapse will surely follow. To deal with this situation, we must simultaneously review both the nation's existing system of government and its existing fiscal system. In thinking about a new constitution and a new vision for the nation, we must also think about a new fiscal system, with new ideas, not old ones, in order to make efficient and effective use of the finite resources with which the people have entrusted us.


NAKAYAMA Taro, Chairman of the Commission

>> When I was a member of the House of Councillors, the members generally did not seem very interested in the final accounts; for example, sometimes accounts for up to two years were reviewed together. Today, however, the public is sensitive to wasteful spending of tax money and very concerned about the state of the nation's finances. The question of how to make the bicameral system work better in the future is therefore important to the public, and the House of Representatives should consider ways to make fuller use of the functions of the House of Councillors.


SUGIURA Seiken, Chairperson of the Subcommittee

>> Policy evaluation is essential to the deliberations of the Diet, and I urge all the parties to study this matter. In so doing, we should also consider the ideal form of the Diet's secretariats.