Budget offices and line ministries

1. The evolving relationship between the budget office and line ministries

The relationship between the budget office and line ministries has changed substantially in many OECD countries. While traditionally focused on detailed control of individual spending items, budget offices are now expected to guide the overall shape of the budget while enabling better policy outcomes across government. At the same time, line ministries are expected to take on greater responsibility in allocating and reallocating resources and budget execution, and to be ready to be held accountable for the results delivered with public funds.

While many OECD countries have strengthened and streamlined the dialogue between the budget office and line ministries, in some administrations – particularly outside the OECD area – the budget office continues to interact directly with numerous sub-entities rather than a single line-ministry counterpart (Pot and Šušteršič, 2024[1]). Such arrangements can complicate co-ordination and weaken strategic dialogue between the Ministry of Finance and the relevant ministry.

This requires a cultural shift within both budget offices and line ministries, focusing on co-ordination, dialogue, and mutual trust. For this partnership to thrive, budget offices must be prepared to delegate greater flexibility within a disciplined fiscal framework. In return, line ministries must take on a more proactive role in public financial management, as they are often best placed to assess policy trade-offs, design policy interventions, and ensure value for money. Without this shift, budgeting risks remaining a compliance exercise rather than a tool for managing public resources effectively.

To balance top-down fiscal constraints with bottom-up contributions, the budget office must work closely with line ministries to ensure alignment and accountability. In some countries, mechanisms such as multi-year frameworks and spending reviews have helped create more structured and transparent interactions between the budget office and ministries, though results vary.

However, moving away from the traditional "command and control" role of budget offices has not been easy. While budgeting has always involved centralised processes, periods of fiscal consolidation often prompt a re-centralisation of decision-making authority with budget offices tightening control. This reflects concerns about fiscal risk but can also limit the flexibility and initiative of line ministries. This ongoing evolution underscores the importance of adaptability, balancing fiscal challenges with the need for collaboration and shared responsibility.

1.1. Drivers of this changing relationship

The shift in the relationship between budget offices and line ministries has not happened by chance. It reflects the combined effects of economic shocks, fiscal constraints, institutional reforms, and rising public expectations for how governments manage money and deliver results.

1.1.1. Economic and fiscal pressures

Until the 1970s, increased public spending in most OECD countries was largely sustained by strong economic growth. In the decades that followed, many governments relied more heavily on deficits and debt to finance expanding budgets. Over the past twenty years, a series of major fiscal challenges has intensified spending pressures. Crises such as the global financial downturn and the COVID-19 pandemic have been layered onto longer-term drivers of expenditure, including demographic ageing, rising healthcare costs, climate and defence related spending needs.

These pressures have placed sustained strain on public finances. Fiscal space is now more limited, and governments face more difficult choices. In many cases, they have sought to meet new priorities not by increasing overall expenditure, but by reallocating existing resources, finding efficiency gains, and in some cases pursuing structural reforms in areas such as pensions, labour markets, and healthcare systems. These reforms are aimed at containing costs, and also at improving the resilience and responsiveness of public services in the face of long-term challenges. In response, budget offices tightened their focus on overall spending limits. Many have introduced or reinforced expenditure ceilings, applied stricter fiscal rules, and used tools such as spending reviews to examine whether existing programmes still justify their funding. They have become more focused on ensuring that total spending stays within limits, while trying to guide choices about how that spending is used.

In context of constrained public finances, line ministries are expected to set priorities within fixed budgets, explain how their spending supports their policy responsibilities, and find lower-value activities that can be reduced or phased out. This has increased the need for better internal financial management, stronger oversight and clearer cost estimates. Some ministries have strengthened these functions in response, but the capacity to do so varies widely across countries and sectors.

These developments have changed the procedures and the working relationships across government. Budget offices cannot manage these pressures alone. Whether resources are used well depends on whether line ministries can take on these responsibilities, and whether they are supported to do so. In response to these pressures, many governments have introduced reforms to the structure and process of budgeting, aimed at supporting more disciplined planning, better resource allocation, and stronger engagement between budget offices and line ministries.

1.1.2. Budgetary reforms

Faced with sustained fiscal pressures, many OECD countries have made deliberate changes to how budgets are planned and managed. These reforms have aimed to strengthen fiscal discipline while also improving how public funds are allocated and used. One major shift has been the widespread adoption of top-down budgeting. Rather than negotiating budgets from the bottom up, governments increasingly set overall expenditure limits at the start of the process, leaving line ministries to make decisions within fixed ceilings. This approach reinforces the budget office’s role in maintaining aggregate control, while placing more responsibility on line ministries to plan, prioritise, and reallocate within their envelopes.

Multi-year frameworks have been another important development. Setting spending plans over multiple years rather than one year at a time provides a more stable basis for planning and help ministries align their policy and budget decisions with fiscal realities. They also aim to shift the focus away from annual budget battles toward longer-term trade-offs.

Programme and performance budgeting has further built on this foundation. By linking spending to specific objectives and expected results, these approaches seek to improve the quality of budget decisions and ensure that money is directed toward effective policies. They rely heavily on the ability of line ministries to define clear goals, measure progress, and adjust spending based on performance—not just maintain spending levels.

Spending reviews have been introduced in many countries as a tool to support reallocation. Rather than simply reviewing new proposals, spending reviews provide a structured way to examine existing programmes, identify savings, and free up resources for higher priorities.

All of these reforms have strengthened the role of line ministries in managing public money. They are expected to deliver policy, but also to assess what is working, manage costs, and make room for new initiatives without breaching fiscal limits. This represents a fundamental change in the relationship with the budget office. While the budget office remains responsible for setting boundaries and ensuring discipline, effective budgeting now depends heavily on the ability of line ministries to manage within those boundaries.

This raises a critical question: are line ministries ready to meet these expectations? Without a strong internal financial management function, the ability to make difficult trade-offs and prioritise will not be there and the benefits of reform risk being lost. Building this capacity, and building trust between line ministries and the budget office, has become central to the success of modern budgeting.

1.1.3. Demand for transparency and data-driven budgeting

There is a growing demand for greater transparency. Public expectations around the use of public funds have evolved, with citizens, parliaments, and oversight institutions increasingly seeking clearer and more credible explanations of what governments are spending, and what they are achieving. In response, many countries have started introducing digital tools that track budgets, monitor implementation, and report on results in a more accessible and timely way.

These systems allow both budget offices and line ministries to access shared data, follow spending in real time, and adjust plans as needed. They have improved transparency and made it easier to compare spending with performance. But the availability of data is not enough. Using it well depends on whether line ministries have the skills to interpret it, understand risks, and make informed decisions.

Budget offices cannot do this alone. They are well placed to manage the overall framework, but it is line ministries that understand the details of policy and service delivery. Their ability to use data to plan, adjust, and explain spending choices is critical to ensuring that budgeting supports both fiscal control and effective policy. Without strong line ministries as partners, the full value of data systems, and of transparency itself, cannot be realised.

1.2. Key changes in roles and responsibilities

Line ministries are now expected to take on a broader set of responsibilities; not just delivering policy but making informed decisions about how limited funds are used within fixed budgets. In this model, the budget office sets the overall limits based on macroeconomic and fiscal policy goals. Line ministries are then expected to develop budget proposals within those limits. This requires more than technical compliance. It demands that ministries prioritise their policy goals, weigh trade-offs, and manage their allocations to support delivery over the medium term.

While this logic is clear in many reform frameworks, implementation has been uneven. In some countries, line ministries continue to focus on marginal increases and rely on historical baselines, rather than planning within hard constraints. But where the model has taken hold, it has led to earlier, more focused discussions, shifting greater responsibility for budget outcomes from the budget office to line ministries.

To meet these expectations, line ministries need strong internal finance functions that do more than manage procedures. These functions must be able to integrate policy and budget planning, assess costs and risks, and monitor performance over time. Equally, they must be able to communicate effectively across the ministry and serve as the single point of contact with the budget office during budget preparation and execution. This requires investment in staff, systems, and analytical capacity, something that remains a work in progress in many countries.

Equally important is the working relationship between the budget office and line ministries. Trust is not created through formal rules alone. It depends on regular communication, transparency in how decisions are made, and consistent follow-through. Desk officers and policy analysts can play a key role in this process, not just as reviewers, but as contact points who help explain rules, test proposals, and support more informed negotiation.

In short, line ministries are not just implementers of budget decisions, they are central to making the system work. Without their capacity and co-operation, efforts to strengthen budgeting will remain limited, no matter how well-designed the tools or frameworks may be.

Table 1 summarises how the roles and expectations of line ministries have shifted in many OECD countries, and what these changes require in practice.

Table 1. Traditional and emerging roles and behaviours of line ministries

Traditional roles and behaviours	Emerging roles and behaviours
Strong focus on inputs and activities	Focus on policy outcomes and results of spending
Emphasis on annual, incremental budget changes	Medium-term planning aligned with government priorities and value for money
Strict compliance with budget execution rules, limited flexibility	Greater decision-making within expenditure ceilings, including during execution
Limited transparency and accountability	Greater transparency and clearer accountability for results
Budget units focused on financial control, limited co-ordination with policy teams	Closer co-ordination between finance and policy units to develop integrated proposals
Passive compliance to centrally defined limits	Active engagement with the budget office during planning and negotiation
Siloed operations; task duplication across ministries	Increased co-ordination across ministries on shared and cross-cutting issues
Resistance to change and reform	Active participation in implementing budget reforms (e.g. performance budgeting, spending reviews)
Limited centralised efforts in capacity building	Focus on building internal capacity and professional development
Ministry-specific IT systems, with limited interoperability	Systems integrated with government-wide platforms (e.g. IFMIS) for better reporting

1.2.1. Budget offices: Managing aggregates and shaping incentives

OECD countries have introduced a range of budget reforms and are enforcing firmer top-down limits on public expenditure. As a result, spending control is increasingly focused on managing multi-year expenditure baselines and ensuring these remain consistent with the government’s fiscal objectives.

The shift towards aggregate fiscal controls has changed the work of the budget office. It has required stronger teams for budget policy co-ordination, which are responsible for enforcing expenditure ceilings and shaping the incentives created by the fiscal framework. Budget analysts are expected to be more forward-looking and policy-oriented, identifying potential problems before they materially impact public finances. These changes have influenced how the budget office and line ministries interact, moving from detailed control of line items toward managing budget totals across sectors.

However, maintaining a focus on aggregates does not mean ignoring programme or sector-specific risks. Budget offices must still understand the structure, drivers, and emerging pressures within different spending areas. Without sufficient insight into policy and operational realities, there is a risk that ceilings will be set unrealistically, savings targets will be poorly designed, or fiscal risks will accumulate unnoticed. The challenge is to strike the right balance: to focus daily work and decisions on maintaining fiscal discipline at the aggregate level, while maintaining enough sectoral knowledge to assess proposals critically, identify early warning signals, and support informed dialogue with line ministries.

As the roles of line ministries evolve, budget offices must also be willing and able to support that transition. This includes building and maintaining the expertise to engage effectively with finance functions in line ministries, and to act as a credible partner throughout the budget cycle, not only as an enforcer of rules. It also means rethinking the skills required within the budget office itself. This shift requires moving beyond a narrow focus on transactional control toward a more policy-informed role, one that upholds fiscal discipline while enabling more deliberate and informed budget decisions across government. Austria’s example shows how budget offices can take a more strategic role in their engagement with line ministries – a model increasingly relevant across OECD countries (Box 1).

Box 1. Reforming the Budget Office role in Austria: From control to co-ordination

Austria’s multi-year budget reform, implemented between 2009 and 2013, fundamentally reshaped the role of the Budget Office within the Ministry of Finance. The reforms introduced a top-down budgeting approach, integrated performance budgeting, and embedded a medium-term expenditure framework in the constitution.

A key ambition of the reform was to make the Budget Office more agile, shifting from a highly centralised, line-item approval role to one focused on steering aggregates, supporting programme-level planning, and facilitating more informed decision-making. This required rethinking internal processes and analyst roles.

Budget analysts were reorganised into “mirror units” aligned with line ministries, creating clear institutional interfaces. Their responsibilities expanded beyond monitoring compliance to include assessing spending proposals in light of priorities, fiscal ceilings, and performance targets. Analysts also became key contact points for dialogue throughout the budget cycle, contributing to more continuous and policy-informed engagement.

The reform placed emphasis on strengthening the Budget Office’s analytical capacity, including the introduction of standardised performance indicators and enhanced costing practices. At the same time, it relied on line ministries gradually taking more ownership of planning.

While implementation has faced certain challenges, Austria’s reform experience remains a reference point for how budget offices can evolve to support more forward-looking, outcome-aware budgeting while safeguarding fiscal discipline.

Source: Steger (2012[2]), Budget Reform in Austria: From traditional to modern budgeting.

Where budget offices adopt this broader role, they strengthen the overall functioning of the budget system. By reinforcing shared responsibility and enabling more capable partners across government, they create the conditions for a more credible, transparent, and outcome-focused approach to managing public resources.

1.2.2. Line ministries: Greater autonomy and responsibility

Greater autonomy has come with greater responsibility for line ministries to ensure that spending is controlled and delivers value for money. Budgets are now negotiated using fewer, larger budget lines — often through the implementation of programme budgeting. While line ministries will continue to seek additional resources, the budget office increasingly expects them to first explore options for reallocating existing funds to meet new spending pressures. Requests for additional funding are considered more carefully and are typically expected to be supported by evidence that internal reprioritisation has been assessed and, where possible, undertaken.

Changes to fiscal frameworks have also broadened the responsibilities of line ministries. They are now expected to set spending priorities, plan and execute their budgets, and ensure value for money across their portfolios. These changing expectations highlight the importance of building strong internal finance functions within line ministries. These units must co-ordinate with policy teams, oversee financial planning and execution, and ensure that budget holders manage resources effectively. They play a central role in linking policy objectives with financial realities and in supporting better prioritisation, control, and accountability. In practice, this requires systems and procedures, but also skilled professionals who can advise senior leaders, engage with the budget office, and guide internal decision-making.

A well-established example of such a model is found in the Netherlands (Box 2), where each ministry has a finance directorate that plays a central role in budget preparation, control, and engagement with the Ministry of Finance.

Like the budget office, line ministries need to become more strategic and less transactional - focused on managing the framework for budget management and the overall financial health of the ministry.

Box 2. Relationship between the Ministry of Finance and line ministries in the Netherlands

In the Netherlands, each line ministry has a strong financial directorate that functions as its “internal ministry of finance.” These directorates go well beyond routine financial administration and are responsible for three core functions:

• supervision of aggregate spending

• advising on priority setting and reallocation within the ministerial portfolio

• overseeing the efficiency and effectiveness of spending programmes

The finance director is also the main budget advisor to the minister and leads the relationship with the Budget Office.

Budget co-ordination between the Budget Office and finance directorate of line ministries is supported by a structured, institutionalised process of negotiation. Budget proposals and revisions are typically discussed directly between the Budget Office and the financial directorates of line ministries. According to finance directors, most issues (around 80% to 90%) are resolved at this working level, with only a small share requiring higher-level involvement.

Responsibility for the state budget is shared. The Minister of Finance submits the overall budget to Parliament and is accountable for macroeconomic assumptions, taxation, and key fiscal aggregates. However, line ministers are responsible for their own budget chapter and represents it during Parliamentary debate, reinforcing their ownership of spending decisions and outcomes.

A strong sense of professional community supports this system. Finance officials across government often rotate between the Budget Office and line ministry finance directorates over the course of their careers. Many finance directors have previously served as section heads or budget analysts in the Budget Office. This mobility fosters a shared set of values – focused on efficiency and aggregate fiscal discipline – which underpin co-operation and trust between institutions.

Source: Kraan (2021[3]), The finance function of line ministries in the Netherlands.

As core responsibilities, line ministries prepare their annual budget proposal, support its implementation and prepares the ministry’s financial reports. In 31 out of 34 OECD countries surveyed in 2023, the line ministry was also the principal interlocutor for the budget office (Figure 1). In this role, line ministries relay information between the budget office and the leadership in the line ministry, including the minister, accounting officer and policy leads.

Figure 1. Roles of line ministries in financial management

Number of OECD countries, 2023

Note: Results for 36 countries. Data for Lithuania and Mexico are not available.

Source: OECD (2023[4]), Senior Budget Officials Survey on Budget Frameworks.

1.2.3. Searching for the right balance between control and autonomy

Moving away from the traditional “command and control” role of the budget office is not always straightforward. Countries have fluctuated between granting greater flexibility to line ministries and reasserting central control, particularly during periods of fiscal consolidation, when governments often recentralise decision-making to contain spending.

The temptation to centralise typically stems from concerns that line ministries are not managing their budgets well or are unwilling to identify credible savings. However, imposing cuts without adequate information can also come at a political cost when services are impacted, as many countries have learned through experience. Centralisation can reduce the incentives for line ministries to take responsibility for their own budgets. It can also raise questions over who is accountable for the line ministry budget to parliament and the public.

While greater flexibility is often desirable, many budgeting systems operate within rules that restrict carryovers between years, impose tight execution controls, or limit how funds can be shifted across categories. These constraints reflect legitimate concerns about fiscal control and legal compliance, but they can also make it harder for line ministries to manage resources effectively in response to changing conditions. This makes it even more important for budget offices and line ministries to maintain a strong working partnership, one based on early engagement, mutual understanding, and shared responsibility for outcomes.

To support this, tools such as spending reviews, programme budgeting, and performance budgeting have played a key role in reducing the information gap between budget offices and line ministries. These instruments offer a stronger basis for dialogue, providing clearer evidence on how funds are used, what results are achieved, and where savings or reallocations may be possible.

Spending reviews can create the political space for a shared understanding of expenditure and reform options within a sector or programme. However, even well-designed reviews cannot cover all major spending areas each year. This has pushed budget offices in many countries to develop closer working relationships with line ministries — both through formal processes and by supporting the growth of the finance function as a partner in budget management and control.