Economy, Featured, General, Govt, Politics

The Budget Speech Is NOT The Budget (Part One)

From my column in Penang Monthly: Oddly Enough

Parliament must appear very strange for the uninitiated. After all, the Westminster system that Malaysia models itself after is an old and quaint one. There are many weird practices involved, such as the thumping of tables, addressing MPs by their constituencies instead of their actual names and the party whip system (to name just a few).

The first thing I did after becoming a Member of Parliament was to buy and attempt to read Erskine May. And of course I didn’t manage to finish the 1,000-page book.1 But I did get a gist of the so-called “parliamentary practices”. The English parliament is even weirder than I initially thought. For example, one is not allowed to bring articles to be shown during speeches, persons in the visitors’ gallery – called “strangers” – shall not be addressed at all, military uniforms are not banned, and the Monarch is not allowed into the House of Commons. These practices accumulated over centuries of parliament business.

Hence it is not a surprise that those outside of parliament are unfamiliar with what transpires inside. Indeed, even those of us who are inside are sometimes baffled by what goes on in there. So again, unsurprisingly, most of us just wave off Parliament as a monkey show.However, there is at least one day each year when Malaysians take interest in what goes on in Parliament. That day is Budget Day.

The Budget Day

Many eagerly await budget goodies like tax deductions or incentives or bonuses or, under the current administration, cash handouts.

So on October 21, Malaysians were glued to their TVs or Internet-streamed videos or whatever platform social media may offer, anticipating the Finance Minister’s Budget Speech.

What makes today’s situation odder is that the Prime Minister and the Finance Minister are the same person. In corporate terms, the CEO is also the CFO – the one who spends money and the one who controls spending is the same person.

So here in Malaysian Parliament, it is the Prime Minister himself who tables the Budget. And he did it in style: pastel-hued baju melayu, with transparent teleprompters so that those who watch it on TV will think he was speaking unscripted, a lot of anecdotes – there were even mentions of Nasi Vanggey and Nasi Lemak Anak Dara. And this time around, there were even two really really huge screens placed on both sides of the visitors’ gallery on the first floor above the Chamber. As Datuk Seri Najib Razak delivered his speech, related images were flashed on those screens.A performance par excellence. I’ll definitely give points for that.

The federal Budget – like the Parliament itself – is not easy to understand. Luckily, we do have the Finance Minister’s Budget Speech. This traditionally outlines the budgetary policy for the coming year, and provides an overview of the economic climate and highlights key items from the Budget. Understandably, it contains “good news” or “goodies”. That is not a problem in itself.

But as Najib was eloquently delivering his speech that evening, I realised that something is amiss. Some of the announcements he made in the Speech were missing from the Budget documents. I mean, most of us already know about off-budget items, which are constantly highlighted by more experienced colleagues such as Tony Pua and Rafizi Ramli. Those are usually in the form of government liabilities such as guarantees for government-linked corporations and concessionaires. Since these are not included in the Budget documents, we cannot see the true picture of government’s fiscal commitment.

However, I realised that this time it wasn’t debt-guarantees but actual direct spending items missing.You see, as the Finance Minister delivers his Budget Speech, placed on the desk of each MP are volumes of Budget documents, namely, the Federal Expenditure Estimates, Estimates of Federal Government Revenue, the Economic Report and a piece of legislation called the Supply Bill. The federal government Financial Statement comes later.

There is no guarantee that the “good news” and “goodies” will be executed – simply because the Budget Speech is NOT the Budget. Hence, the Budget Speech is not binding to the government.

The Federal Expenditure Estimates, let’s call it Estimates from now on, is the main document listing all government spending for the coming year, supported by a piggy bank officially called the Consolidated Fund.

All these documents will eventually be enacted into the Supply Act, Finance Act and etc. Government spending and revenue-raising activities for the next financial year will then be bound by the limits set by these legislations. Technically, this is the Budget.

So what happens when the Budget Speech announces “goodies” which are not found in the Federal Expenditure Estimates or the Estimates of Federal Government Revenue? This was the question I asked myself when I realised, aghast, what was happening; even as Najib delivered his colourful Budget speech.

A Grin without the Cat!

I realised something was amiss when the Prime Minister-cum-Finance Minister proudly announced that RM30mil would be allocated to two critical women’s health programmes – mammogram screenings and HPV vaccinations. However, when I checked against the Estimates, these items were not recorded there.

I have followed these two programmes for a few years now. In 2014 RM20mil was allocated to implement both programmes under the Women, Family and Community Development Ministry. The amount was reduced by 90% to RM2mil by 2015. Last year, these items were set to zero although they were still reflected in the Estimates under the same Ministry. After my colleagues and I protested, the federal government reinstated the programmes during the 2016 Budget committee stage debate.

This year, both items were totally removed from the Estimates. I searched under Health Ministry – not there; under Prime Minister’s Department – not there either. Yet the Finance Minister announced them.What is happening here?

As I explored the Budget book further, I realised those were not the only problematic items.

In Line 116, Najib said that the government would allocate RM1.3bil for various paddyrelated subsidies, and he specifically listed them as subsidies for paddy price, seeds and fertiliser including hill paddy. When checked against the Estimates, under the Agricultural and Agro-based Industry Ministry, I found that for all the subsidies listed by the Prime Minister the total budget allocated was only RM690mil. That is a shortfall of RM610mil!

In Line 207 of the Budget Speech, Najib said that the Malaysian Communication and Multimedia Commission (MCMC) will spend RM1bil to improve the coverage and quality of broadband in the whole country. In the Estimates for Communication and Multimedia Ministry, the parent ministry of MCMC, only RM57.5mil is being allocated under “development expenditure” for “Broadband Project”. An even bigger shortfall of more than RM940mil!

In Line 224, Najib announced another piece of “good news” where MCMC will be allocating RM340mil to provide free tablets for 430,000 teachers nationwide as a teaching aid. This “good news” is actually another missing item: it is nowhere to be found in the Estimates. In fact, allocations for services and supplies to primary schools and secondary schools are cut by 82% and 64% respectively compared to 2016! Schools will be lucky to get basics such as blackboards and desks and pens.

This is the curious case of a Cheshire Cat grin without the cat!Should we be concerned? After all, the Budget Speech already mentioned all these “goodies”, so what if they are not in the Estimates or the amounts in the Speech and the Estimates differ?

The Budget Speech Is NOT The Budget

In the Supreme Court of India’s judgement in Amin Merchant v Chairman, Central Board of Excise & Revenue & Ors, the Court decided that “the speech of the Finance Minister and the financial/budget proposals duly passed by Parliament are two separate and distinct documents; the law as enacted is what is contained in the Finance Act after it is legislated upon by the Parliament.” The Court went on to assert that, “The Finance Minister’s speech only highlights the more important proposals of the budget. Those are not the enactments by Parliament. The law as enacted is what is contained in the Finance Act.”To put it plainly, the Finance Minister’s Budget Speech is NOT the Budget.

In that case, there is no guarantee that the “good news” and “goodies” will be executed – simply because the Budget Speech is NOT the Budget. Hence, the Budget Speech is not binding to the government.

As such, Najib’s 2017 Budget Speech was not only highly political, taking cheap potshots at opposition and dissidents, but also highly unprofessional and lacking in quality. We must remember that he was essentially asking Parliament for permission to spend RM260bil. Surely more effort can be made to ensure the integrity of the accounting.

Yes, there were a lot of entertaining sideshows with PowerPoint presentations and comical antics by the Finance Minister, but instead of highlighting key points of the (real) Budget, he chose to deliver an entertaining political ceramah with dubious budgetary announcements of “goodies” that are not found in the actual Budget.

Even if these missing items are actually in the Budget, either subsumed or recategorised – which is what the government will eventually argue to be the case – it only goes to show how confusing our Budget documents are. This will make the scrutiny of the Budget very difficult even for experts.

December 2016

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