Putting some sense in the 2009 Budget

Introduction

The National Assembly has the most unenviable task of making sense of the 2009 Budget presented last Monday in the National Assembly. The Minister of Finance apparently saw its greatest virtue as being the “biggest budget ever.” Not only is a boast on size from a Minister of Dr Singh’s stature interesting, but if size is the only thing that commends this budget, then there must be serious concern about its wisdom. Size only tells us how much of our money the government will be spending and where the money is coming from. It does not tell us how well the money is being spent and surely that is at least as important.

I understand that MPs, constituted as the Committee of Supply for purposes of Budget consideration, can at this stage, raise “any question relating to the line item being considered and all others relevant to the provided profile for capital items, description provided for each line item, etc.” They need to use that right to the hilt. In terms of ideas and direction, this Budget is by far the worst ever constructed under the Economic Recovery Programme, and even before. It perhaps reflects the involuntary departure from the Ministry of Finance of Mr Winston Jordan who long held the position of Budget Advisor and who was replaced by Ms Sonia Roopnauth, parachuted into the ministry, along with a Deputy Minister of Finance whose role and utility is hardly well communicated.

More resources for
the Audit Office

Expenditure has been climbing inexorably over the years which Dr Singh sees, incredibly, as a virtue. The perpetual late availability of the annual report of the Audit Office on the annual public accounts is often of little more than curiosity interest. That adds to the responsibility on the committee to thoroughly review the entire Budget, even at the risk of being accused of stalling. They owe it to the nation.

By the time the year is over, with accurate accounting, we will likely see the highest deficit ever recorded by this country. If all goes to form we can expect that the audit report on the finances allocated in the 2009 Budget will not be available until some time in 2011, the year of the next general election. We can expect as well that the report will be subject to the usual defects expected from an office short of critical resources and accustomed to failure to meet statutory obligations. One of the urgent and most significant recommendations of the committee therefore is the provision of increased sums to finance a functioning Audit Office.

As usual, most of the big players know that because of weak supervisory oversight on spending, they have tremendous latitude on how they account and spend. There is still lots of money outside there that is not properly accounted for on the income or expenditure side of the accounts. That is the case with the Lotto funds and now NICIL headed by Mr Winston Brassington, involving over the years billions of dollars. Those are unconstitutional and unlawful acts. The committee must come down on this. Since a Budget deals with available resources and their application, the estimates (budget) as presented are not correct in that they leave out substantial resources. They should be referred to the Minister for amendment.

There is no known case in recent memory where any Budget figure was changed after debate. Additionally, a significant part of the Budget is based largely on the system of incremental budgeting − take last year and add x %. That is not budgeting but arithmetic. In other words if we spent $100 dollars last year we look at inflation and then do a top-up to arrive at the current year. If we assume even a modest 10% in fat, wastage and inefficiencies, a clinical surgery of that fat without going yet into “lean and clean” could cut the budget by $12 billion – allowing a reduction of several forms of taxation including the VAT.

Zero-based budgeting

No change will come about without a new approach and nothing ever will. But blame me for being an optimist. I think it can be done, even beginning in 2009. Dr Singh was keen to tell us again about his government’s plans for the constitutionally independent Office of the Auditor General. What he should be telling us is how he intends to improve and modernise the system of budgeting of government finances. As an academic and accountant the Minister would be very familiar with the system of zero-based budgeting (ZBB).

He would know that properly applied, zero-based budgeting is particularly useful in the public sector and that the UK government in its 2007 Comprehensive Spending Review carried out a set of zero-based reviews of baseline expenditure in government departments to assess the effectiveness of government spending and its long-term objectives. ZBB starts from the premise that no costs or activities should be factored into the plans for the coming budget period, just because they figured in the costs or activities for the current or previous periods. Rather, everything that is to be included in the budget must be considered and justified. In effect, start by saying the budget is zero and then add the cost of those things considered necessary.

The key benefit of ZBB is that it focuses attention on the actual resources that are required in order to produce an output or outcome, rather than the percentage increase or decrease compared to the previous year. Under ZBB, budgeting is no longer a number-crunching process of spreadsheets, but an exercise involving the budget agency and the spenders in an analytical and decision-making process. The stupidity of the government’s rhetorical question, where is the money going to come from if this or that tax is cut, is based on a lack of appreciation of ZBB and the whole budget matrix, a criticism I never thought I would make under this Minister’s stewardship.

Bloated government

ZBB is not rocket science. Admittedly our budget is distorted by political considerations like having to find ministries and placements for all those party loyalists and those willing to go on the elections slate, hardly a relevant factor for ZBB. Do we really need a Ministry of Sport with a Minister and a Parliamentary Secretary, when we have a Director of Sport and a National Sports Commission? Do we need two former ministers to advise the current Minister of Local Government which cannot deliver local government elections? And does the President need and use all those advisers in the Office of the President?

The committee looking at the line items in the Budget should ask for full particulars of the terms of employment of all advisers to the President and his ministers. Under ZBB there would have had to be good reasons to for their continuation.

Think what happens when you cut a ministry: savings on ministerial salaries and perks including chauffeur, guards, duty concessions, allowances, secretaries, public relations persons and property expenses. Even with the smallest ministry this can easily add up to hundreds of millions.

ZBB particularly lends itself to discretionary spending such as this and that activity, and showing overseas travel, etc. The committee should ask for details of the 2008 expenditure and 2009 projected expenditure on local and overseas travel by the President, ministers and other public officials. Almost on every occasion I travel I see some politician or other travelling first class. The committee should not be prepared to accept glib answers but only hard evidence on the amount and details of money spent for the President and his ministers’ overseas travel in 2008 and their specific spending plans for 2009.

Too many dollars,
too little sense

The committee should ask about the $2.5 billion being spent on GECOM in 2009 – more than the amount spent on agriculture – and consider whether we are getting value for money. The Ministry of Foreign Affairs is getting $3.2 billion and cannot put a representative in the UK where even a government supporter has lamented we do not have a representative and miss many, many meetings. What contribution does former Home Affairs Minister Mr Gajraj’s presence in India bring us that cannot be achieved by contacts between our Ministry of Foreign Affairs and the Indian High Commission?

We need to know why with all this overseas representation the President has to go out of the country sometimes three times per month. Are our representatives not functioning and do the things the President goes to really require the presence of our head of state?

The committee should find out about the money allocated in 2008 for airstrips in Leguan and Wakenaam, for which no work was done. It should ask for information on the Hope Canal on which $3 billion is being spent this year – all from borrowings and on the basis of technical advice of which the public knows nothing. Should the committee not want to ensure that it acts before the money is spent and the problem remains? The committee should scrutinize the capital budget with the greatest of care – some $46 billion dollars are involved.

It should request the audited financial statements of the National Drainage and Irrigation Authority since it came into being in 2006. To give money to people who are derelict in their statutory duty to account is irresponsible. That of course applies to all the Budget agencies and those to whom public monies are given.

Conclusion

I do not expect that everything can be done immediately. But it is time that we move to serious budgeting and not indulge in politics and arithmetic as the 2009 Budget does. The Committee of Supply should request the presence of the Budget Director as it wades through the 2009 Budget. The accounting officer from the relevant ministry or department should be present to answer questions and if Minister Singh is too busy then his apparently under-worked deputy should be present at all the sessions.

Business Page would also like, respectfully of course, to recommend that we move to a system of zero-based budgeting and that we begin by identifying three or four ministries for the exercise in phase one, to begin in 2009. And to recommend as well that all positions paid from the public purse be listed in the Estimates, and not only those which have come through the Public Service Commission. Too much is being hidden.