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Analysis of the fiscal management bill-2008

Analysis of the fiscal management bill-2008



The Fiscal Management Act was enacted by...

The Fiscal Management Act was enacted by
Parliament as a private bill. The Act is awaiting
Presidential assent pending revisions proposed
by the President. This paper discusses the
contents of the Bill, why the President has
declined to assent to the Bill, the proposed
changes to the Bill and the effect of
implementing these changes.



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    Analysis of the fiscal management bill-2008 Analysis of the fiscal management bill-2008 Document Transcript

    • Analysisthe FISCAL MANAGEMENT BILL, 2008 Analysis of of theFISCAL MANAGEMENT BILL, 2008 SUMMARY The Fiscal Management Act was enacted by CDF, which he seems to think needs to be Parliament as a private bill. The Act is awaiting curbed. Withholding his consent to the Bill may Presidential assent pending revisions proposed be his way of forcing a renegotiation with by the President. This paper discusses the Parliament of its role in budget implementation. contents of the Bill, why the President has It may be inadvisable to link these two issues as declined to assent to the Bill, the proposed doing so risks picking a futile political battle. changes to the Bill and the effect of Strictly speaking, it is inaccurate to say that implementing these changes. Parliament should be excluded from the The Bill establishes the parliamentary Budget management of public resources: all the stages Office as an office in the parliamentary service. of the budget process, and not just the The central functions of the office include implementation stage, constitute an attempt to providing the National Assembly with timely manage public resources, from which and objective information and analysis on the Parliament cannot be divorced. national budget. The Fiscal Management Bill, and the powers The Bill also proposes principles of prudent that it proposes for Parliament including that fiscal management which the government and the Budget Office be established, is critical to all public institutions must comply with as a bridging the information gap between the matter of policy. Executive and Parliament in the management of the budget. In declining to sign it into law, the President made a number of proposals on the Bill Some provisions of the Bill, such as budget including that it should not provide for impoundment, are not typical of the Parliament to assign unspecified powers relating Commonwealth parliamentary system which to the national budget and the economy to the Kenya’s Parliament applies, but they are relevant departmental committees, functions he desirable in principle. Budget impoundment is considers are within the realm of the Executive. an innovation which empowers Parliament to withhold the approval of line items of the vote However, it is the view of this study that of errant departments. Effective enforcement this clause is being used to contest the Bill will take time and general strengthening of on misleading advice. The inclusion or public financial management. exclusion of the clause is inconsequential for the Bill. Parliament should therefore In order to achieve the greater goal of assent to it. strengthening its oversight powers over the management of public finances, Parliament The President also appears to have concerns on would be well advised to assent to the what he sees as Parliament’s intrusion into the President’s proposals where they do not arena of budget implementation, e.g. through alter the import of the law. the management of devolved funds such as the Page 1 of 16
    • Analysis of the FISCAL MANAGEMENT BILL, 2008 A Review of the Fiscal Management Bill, 2008The Fiscal Management Act was enacted by National Assembly as a private bill. The Bill wassponsored by Mr. Elias Mbau, a Member of Parliament.The President has declined to assent to the Act, meaning it cannot come into force. Presidentialassent is pending awaiting implementation of revisions proposed by the President. The followingtherefore discusses the salient contents of the Bill and the foreseeable effect of implementing thePresident’s proposals for its amendment.THE BUDGET OFFICEThe Bill establishes the parliamentary Budget Office as an office in the parliamentary service.1The central functions of the office include: 1. Providing the National Assembly with timely and objective information and analysis relating to the national budget.2 2. Providing budget-related information to Parliament’s department committee in charge of economic and budgeting matters, and also to other departmental committees and select committees of Parliament. 3. Providing services to parliamentary committees within their budgetary jurisdictionsOther functions are to: 4. Prepare specialised analyses for example on the financial risks of new financial policies 5. Carry out budgetary projections, economic forecasts and identify options for reducing budget deficits 6. Advise on appropriate organisational structures for planning, managing and coordinating policies and activities related to budgeting 7. Sponsor national and international forums where necessary 8. Study budget proposals and trends and suggest appropriate changes where necessary 9. Propose alternative scenarios for economic items with a national impact in given financial years 10. Liaise with Treasury and other national and international institutions working in budgetary and economic matters, as necessary31 Clause 32 Clause 4 Page 2 of 16
    • Analysis of the FISCAL MANAGEMENT BILL, 2008The parliamentary committee under which the Budget Office falls has a number of responsibilitiesincluding to: 1. Provide guidance and impetus for the Office to realise its objectives under the Bill 2. Study all economic and budgetary issues relevant to Parliament and make recommendations to the Assembly 3. Ensure adherence by the Minister and all public entities to the broad principles of prudent fiscal management. 4. Link the Budget Office and Parliament4The Bill proposes principles of prudent fiscal management which the government and all publicactivities must comply with in their policy objectives. These include: 1. A borrowing policy that ensures sustainable public debt 2. A fiscal policy that will adequately cushion the state’s total net worth and minimise risk on guaranteed loans, pensions and pending bills 3. A sustainable and attractive wage policy 4. A transparent national budgetary process 5. Preference of productive expenditure over consumptive expenditure in the allocation of resources5Where these principles are not adhered to, the Minister must make an explanation to Parliament.6THE BUDGET POLICY STATEMENTThe Minister is required to present to the Budget Policy Statement to Parliament not later than 21stMarch every year. This is a broad, strategic statement of budgetary issues for the coming year.The Policy Statement contains: An assessment of the current financial year and the projected state of the economy for the following three years Targets for overall revenues/expenditures and domestic/external borrowing for the following year A proposal for financing any deficits for the coming year3 Clause 4(2)4 Clause 55 Clause 6(1)6 Clause 6(2) Page 3 of 16
    • Analysis of the FISCAL MANAGEMENT BILL, 2008 Statements of specific fiscal risks and liabilities including guaranteed loans, pending bills, uninsured risks, promissory notes and other internationally accepted instruments, as at the day on which the forecast is published7The Budget Policy Statement is discussed by the relevant parliamentary committee after which ittables its own report to Parliament no later than 15th April.8THE MINISTER’S ESTIMATES OF REVENUE AND EXPENDITURE FOR THENEXT FINANCIAL YEARThe Minister is required to present annual estimates of revenue and expenditure for the followingyear to Parliament. Alongside this, the Minister must present a Treasury report stating measurestaken to implement audit recommendations of the previous year.The proposed estimates shall be referred to the relevant parliamentary committees for deliberation.The Minister is required to take into account the reports of the committees regarding the estimates.9ADDITIONAL REPORTING PROPOSED BY THE BILLThe Bill proposes additional reporting requirements as follows:- 1. Within 21 days after the end of each month the Minister must publish in the Gazette a statement of actual revenues collected by category and net exchequer issues by Ministry. 2. Also, three months after the budget is presented to Parliament, and every quarter after that, the Minister must present a compliance report in the required format. A compliance report must explain discrepancies between estimates and actual performance and also reveal action to deal with shortfalls.10The first compliance report falling between 180 and 120 days before general elections must be styled“The Pre-election Fiscal Report" and must propose how to fund the elections. These details mustinclude both the direct and indirect costs of the elections.117 Clause 78 Clause 89 Clause 910 Clause 1411 Clause 15 Page 4 of 16
    • Analysis of the FISCAL MANAGEMENT BILL, 2008PROPOSALS BY THE PRESIDENT ON For example: if a law refers to automobiles, THE FISCAL MANAGEMENT BILL trucks, tractors, motorcycles and other motor- powered vehicles, "vehicles" would not 1. Role of the Budget Office include airplanes, since the list only coveredIn declining to sign it into law, the President land-based means of transport.made a number of comments on the Fiscal The objection raised by the President wasManagement Bill including the following12: therefore unnecessary as this general clauseThat Clause 5(1) (h), which provides for the would have been interpreted in the context ofBudget Office to perform some functions the specific provisions preceding it. Whetherrelating to the national budget and economy the clause is included or not does not affectas may be assigned by Parliament, be deleted the substance of the law and it is difficult tofrom the Bill. understand why the President was misadvisedIn the view of the President, this provision to reject the Bill on such a flimsy andempowers Parliament to assign unspecified inconsequential clause. Given this, thepowers relating to the budget and economy to wishes of the President can and should bethe relevant departmental committee, which is met to ensure the Bill is signed into law.inappropriate as these functions are within therealm of the Executive. 2. Role of Parliament in budget implementationComment: The President argues that the Bill empowers 13Clause 5(1) (h) is an omnibus clause Parliament to play an inappropriatelytypically inserted into laws to address significant role in budget implementation. Heunforeseen matters which fall within the proposes that an additional sub-clause begeneral scope of the law. included stipulating that the doctrine ofThere are rules of interpretation which govern separation of powers be observed by ensuring that Parliament does not get involved in thethe meaning to be assigned to omnibus management of public resources. This sub-clauses. One such rule is the ejusdem generis rule clause would be inserted under clause 6 at(Latin for ‘of the same kind’). Under this rule, paragraph h as an additional principle ofwhere a law lists specific classes of persons or prudent management:things and then refers to them in general, thegeneral statements only apply to the same “Observance of the doctrine of separationkind of persons or things specifically listed. of powers by ensuring that Parliament does not get involved in the management12 of public resources”. Fiscal Management Bill, 2008: Amendmentsrecommended by H.E. the President pursuant to Analysis of the President’s ProposalsSection 46(4) of the Constitution of Kenya13 5 (1) The relevant committee shall – (h) perform Promoting poor governance or preserving Parliament’ssuch other functions relating to the national budget oversight role?and economy as may be assigned to it by the NationalAssembly. Page 5 of 16
    • Analysis of the FISCAL MANAGEMENT BILL, 2008The President provides very little rationale for principle, because of the self-evidentthe proposals that he makes on how the Bill governance risks contained in the Kenyanshould be revised for signing into law leaving arrangements, the President’s position ishis intentions open to conjecture. A possible understandable.point of concern may be the current debateson grand corruption, lack of transparency andaccountability in the country. Specifically, the UNDERLYING POLICY OF THErole of Parliament in implementing the budget FISCAL MANAGEMENT BILLhas been raised most sharply in relation to the Since the 1980s, there has been a steadymanagement of the devolved funds, notably attempt to restore Parliament’s involvement inthe CDF, and the Local Authorities Transfer the national budget process. InternationalFund (LATF). The mechanisms for the financial institutions have been at the helm ofmanagement of the funds involve these efforts which are aimed at promotingparliamentarians and other elected personnel greater transparency in the management ofin expending the funds. This arrangement has public finances.14been criticised as allowing Parliament toparticipate in implementation, thus The renewed interest in increasingcompromising its independent oversight Parliament’s participation in financialfunction. management was triggered by the Asian financial crisis of the late 1990s - the wave ofStrictly speaking, the President is wrong reforms since then has focused on improvingin saying that Parliament should be governmental financial administration andexcluded from the management of public promoting greater transparency.15resources: all the stages of the budgetprocess, and not just the implementation The proposed reforms have however beenstage, constitute an attempt to manage controversial - there is a traditional viewpublic resources, from which Parliament which warns against legislative activism incannot be divorced. public budgeting and prefers the insulation of the policy making process in the executiveIt seems that what the President seeks to branch, and thus the establishment of whatachieve is an agreement in principle that are referred to as "hierarchical budgetParliament will withdraw from a further role institutions". According to this view, this isin the implementation of laws on devolvedfunds. This objective can be achieved byamending the CDF Act, for example, and 14Carlos Santiso and Artulo Garcia Belgrano,does not require a general principle of prudent Legislative Budget oversight I Presidential systems:management to be written into the Fiscal Governance of the Budget in Peru, Paper prepared forManagement Bill. the XVI Regional Seminar on Fiscal Policy organisedThe position of the President seems to be that by the Economic Commission on Latin America and the Caribbean (ECLAC), Santiago de Chile, 26-29Parliament should be excluded from the January 2004, p.3.actual implementation of the budget. In 15 Ibid. Page 6 of 16
    • Analysis of the FISCAL MANAGEMENT BILL, 2008the only way in which fiscal discipline can be It is therefore widely accepted that for themaintained. As Santiso writes: efficient and prudent management of public finances, the Executive must maintain a key The prevailing orthodoxy warns against role in the budget process, thus creating a the dysfunctional fiscal effects of hierarchical budgeting processes. unrestrained legislative budgetary powers and consequently favours the insulation of Hierarchical budgeting processes – executive discretion economic policymaking within the in budgeting executive branch. It posits that excessive However, hierarchical budgeting processes legislative prerogatives in public budgeting have inherent dangers. For one, they tend to tend to lead to fiscal disequilibria, greater generate excessive executive discretion in budget deficits and public debt; public budgeting while the legislative is overspending and under-taxation are likely reduced to a mere rubberstamp. Excessive results.16 dominance by the Executive overwhelmsContrary to this orthodox view however, is existing mechanisms for self-restraint inthe realisation that without checks and budget policy making and harms or neutralisesbalances against executive discretion in public existing controls.budgeting, abuse and misuse of budget Secondly, excessive executive dominanceactivity is likely to occur. The challenge then undermines the credibility of the budget as abecomes the establishment of a budgeting policy instrument, and hampers theprocess that combines political accountability development and consolidation of budgetaryand fiscal prudence.17 institutions and fiscal rules. In countries withIt is argued that there is a relationship unstable political systems, this problem isbetween budgeting processes and fiscal more pronounced. Unstable budgetperformance. Budgeting processes that allow procedures undermine the development offor greater legislative activism are more prone reliable budget institutions.to fiscal dysfunction, evidenced by greater Thirdly, centralised budgeting tends to lackbudget deficits and higher public debt. In transparency. Lack of transparency itselfcountries where budgeting power is undermines fiscal discipline and the control ofconcentrated in ministries of finance, instead expenditure.of being dispersed across governmentministries, there are stronger incentives for Fourthly parliamentary participation improvespromoting fiscal discipline and economic the credibility of the budgetary process. Theprudence. lack of parliamentary participation therefore removes the credibility and legitimacy from the budgetary process16 Carlos Santiso, Budget Institutions and FiscalResponsibility: Parliaments and the Political Economyof Budgets in Latin America, The World BankInstitute,(2005) Washington D.C. p.9.17 Ibid Page 7 of 16
    • Analysis of the FISCAL MANAGEMENT BILL, 2008The rise of legislatures in the budgetary (ii) High technical capacityprocess (iii) Requisite political incentivesThe rise of legislatures in the budgetary (iv) Favourable governance environmentprocess must be understood as an attempt toprovide a balance between fiscal discipline,and political accountability in the budgetary Legal Arguments for Legislativeprocess. Santiso again: Oversight of Budgeting More fundamentally, the key challenge of The purpose of Parliament’s oversight role is the governance of the budget in emerging to ensure that public policy is properly economies is how to retain the advantages administered. This goes beyond enacting laws of strong executive authority required to and extends to monitoring the ensure fiscal discipline while providing the implementation process to uncover any institutional checks and balances that defects and check misrepresentation and guarantee effective accountability. Finding errors in administration. Oversight is, the most adequate balance between therefore, viewed as a corollary to the law- executive prerogatives and legislative making process.19 influence in the budget process represents Historically, the development of legislative an intricate dilemma for consolidating oversight over the budgeting process in democracies seeking to strengthen traceable to developments in the United political accountability while enhancing Kingdom. As the expenditure of the fiscal responsibility.18 monarchy increased, so did the need toBy increasing the scrutiny of the budget, increase the level of taxation to cover thoselegislative oversight help address the costs. Parliament began to demand a right toinformation gaps between the state and scrutinise the purposes for which thesociety, opening up the budget to public monarchy levied taxes and also to verify thatdebate and social control. Legislative scrutiny money raised through taxes was usedof the budget promotes greater debate on the according for the intended purposes.facts and analysis underlying policy choices President Wilson of the United Statesand budgetary allocations. emphasised the importance of legislativeHow can Parliament effectively engage in the budget oversight as a tool of maintaining governmentprocess? activities in 1885:Four conditions determine whether "There is some scandal and discomfort,parliaments can effectively engage with the but infinite advantage, in having everybudget process: 19Commonwealth Parliamentary Association, (i) Legal empowerment to intervene in “Parliamentary Oversight of the of Finance and the budgeting Budget process”, The Report of a Commonwealth Parliamentary Association meeting held in Nairobi,18 Ibid. p.2 Kenya, 10-14 December 2001, p 1. Page 8 of 16
    • Analysis of the FISCAL MANAGEMENT BILL, 2008 affair of administration subjected to the comparative purposes. There are four stages test of constant examination on the part in the budget making process: of the assembly which represents the 1. The budget drafting phase nation ... Quite as important as legislation 2. The budget legislation phase is the vigilance of administration." 20 3. The budget implementation phase 4. The audit A CRITIQUE OF THE FISCAL This is illustrated in the figure below. MANAGEMENT BILL The role of legislatures in these various stages provides a useful basis for understanding theThe budget-making process: four key stages Fiscal Management Bill.As described above there is a move towardsinvolving legislative bodies more in the Common practices around the world in the four stagesbudget-making process. In order to appreciate of budget makingthe measures in the Bill, it is important to The framework for the budgetary process isunderstand the roles that legislatures play in normally provided for under the basic law of athe budgetary process around the world for country with varying levels of detail. Usually,20 Cited in ibid. p. 1Source: The Citizen’s Handbook on the Budget 2nd Ed Institute of Economic Affairs, Nairobi-Kenya Page 9 of 16
    • Analysis of the FISCAL MANAGEMENT BILL, 2008the basic law of a country only provides an 1. Drafting the budgetoutline of the rules that govern the budgetary The Constitution of Kenya assigns to theprocess - detailed provisions on the process Minister for Finance the duty of drafting theare contained in secondary legislation. national budget. The Constitution requires theIn Kenya, for example, the Constitution Minister for Finance to “cause to be preparedmakes provision for central issues relating to and laid before the National Assembly in eachthe budgetary process including the financial year estimates of the revenues andestablishment of the Consolidated Fund into expenditure of the Government of Kenya forwhich all public revenue must be paid; the the next following financial year.” Someresponsibility of the Finance Minister in constitutions, like that of Nigeria, confer thispreparing the budget; provisions for raising role on the President.revenue through taxes; auditing the The provisions of the Kenyan Constitutionexpenditure of public funds, among others. follow a Westminster tradition which hasThe Fiscal Management Bill is an example of influenced most Anglophone countries inan attempt to provide details as to the Africa where the government (and notbudgetary process, beyond those contained in Parliament) is responsible for the actualthe Constitution as the basic law. For drafting of the budget.secondary legislation such as the Fiscal By contrast, a notable exception is the UnitedManagement Bill to deal with matters that the States whose Constitution empowersConstitution already governs, requires that Congress to tax, spend and borrow. Untildoes so in a manner that does not subtract 1921, the provisions were interpreted literallyfrom the provisions of the Constitution on with the effect that Congress itself drafted thethe same matter. However, it is legally budget through a decentralised committee. Inpermissible for secondary legislation to deal that year, in acceptance of the growingwith matters on which there is no complexity of the process of preparing theconstitutional provision in place and to do so national budget, Congress ceded this authoritywould not be unconstitutional. to the President who now assumed the role ofIt is proposed that the Fiscal Management Bill coordinating the preparation of the budget.be reviewed against the phases of the The contemporary process in the Unitedbudgetary process as outlined above. As part States is that the budget is prepared by theof the review it is proposed that the President but this is treated as a draft whichprovisions of the Act be compared with those Congress is free to amend. As a result, it isof the Constitution of Kenya governing the considered the US Congress exercises farconduct of matters relating to public finance. more power over the budgetary process thanWhere possible, and with a view to providing that exercised by any other legislature in thecomparative examples, the provisions of other world.countries in relation to public finance are alsoreviewed. The Fiscal Management Bill is modelled on the United States practice in the sense that it Page 10 of 16
    • Analysis of the FISCAL MANAGEMENT BILL, 2008seeks to allow a greater role to the legislature into one draft legislation, with a view toin the drafting of the budget. However, the defeating the rejectionist stance of the Lords.formal responsibility for drafting the budget This practice has prevailed ever since. Withremains with the Minister for Finance and, regard to the spending of money, this isalthough the Bill seeks to give a role to the authorised by the Appropriations Act.National Assembly, this role is already In the Westminster tradition, failure or delayconferred on the Minister under the to pass the budget is anticipated under theConstitution, a higher law. The Minister basic law and some provision on how this cancould, arguably, refuse the Assembly’s advice be addressed is included. As an exception, inin drafting the Budget. However, this course the United States, there are no interimcould occasion a refusal by Parliament to measures to fund the operations of theendorse his budget proposals. government and unless Congress makes2. Legislating the Budget provision for this in a specific situation, there will be a shut down of government. In theThe principle of legislative authority for the Westminster tradition, delay in approving thebudget is also referred to as “the rule of law” budget was a tactical manoeuvre by thein finance. In popular terms, it is understood legislature, aimed at forcing the monarch toas requiring that the government “cannot raise disgorge a measure of private resources tomoney through taxes or borrowing, or spend finance his own operations. In themoney already raised, unless there has been Westminster model, therefore, delay inapproval by the legislature. passing the budget is seen as the norm ratherThis principle has had a long historical than the exception and the interim fundingdevelopment. Today, it is represented in the measures are used from year to year.budgetary process, by the enactment of twotypes of legislation which have implications In practice, the authority of the legislature with regard to the raising of money has beenfor the budget. These are the Finance Actand the Appropriation Act. provided for under permanent legislation. This significantly took away from the need forDelaying tactics in passing budgets the legislature to give specific approval of all the taxation measures year in year out.The Finance Act is the authority by whichParliament raises, through taxation, money Secondly, a mechanism has been establishedthat is to form the resources of the budget. In whereby draft legislation that proposes newthe United Kingdom, before 1860, tax taxes is treated as having the force of law,measures were contained in individual bills. In even if the legislation has not been passed,that year, a quarrel between the House of thus enabling the executive to commenceCommons and the House of Lords, arising implementation while it awaits legislativefrom the failure of the former to enact bills approval.bringing into force a number of tax measures, The Provisional Collection of Taxes andforced the Commons to bring an omnibus Duties Act in Kenya empowers thebill, which consolidated all the tax measures Government to collect taxes on the basis of Page 11 of 16
    • Analysis of the FISCAL MANAGEMENT BILL, 2008draft legislation, on the condition that if the Government on an interim basis and the factdraft legislation is eventually not enacted, the that the budget does not have to be approvedtaxes must be refunded. However, if the before the commencement of the financiallegislation is eventually passed this has the year to which it related has the potential ofeffect of ratifying the conduct of the undermining this provision.Executive. The chance of budget impoundment inThirdly, in many countries the basic law Kenya’s context exists but is very weakauthorises the withdrawal and expenditure of because:money “on account” for the needs of the a) the Government may spend money onforthcoming financial year if it is foreseen that account before parliamentary approvalthe approval of the budget will be delayed. is eventually obtainedIn Kenya, for example, the Constitution b) the budget drafting process is formally aauthorises that an amount equivalent to half function of the Executive and not ofof the previous year’s budget may be Parliamentwithdrawn from the Consolidated Fund to c) supplementary expenditure does notmeet the next financial year’s budget if a delay need the approval of Parliament andin approving the budget is expected. may be approved even after the expenditure has occurredBudget impoundmentThe Fiscal Management Bill authorisesParliament to withhold approval for line items 3. Implementing the Budgetof the vote of a department which has not In most jurisdictions, the implementation ofmet the wishes of Parliament on any the budget is seen as the exclusive domain ofbudgetary matter. This is referred to as budget the Executive. In Kenya, this was the caseimpoundment in other jurisdictions. The until legislation which establishes specificpractice of disallowing expenditure lines in the funds, the administration of which involvesbudget is not a well developed practice in the actors outside of the Executive, was passed.Westminster tradition and is more a The CDF, the LATF and the Constituencyparliamentary practice of the United States, as AIDS Fund are all mechanisms for thepart of the congressional power to raise taxes, implementation of the budget in which,borrow money and approve its expenditure. contrary to the tradition, Parliament isWhile it promises to sharply raise Parliament’s involved in the actual administration of thecapacity to sanction fiscal misbehaviour, the funds.implementation of this provision will needcareful consideration. Supplementary estimates One important issue in budgetChallenges facing impoundment implementation is how to address shortfalls inAlthough the provision can, in principle be the budgeted amounts or aligning the budgetenforced, the mechanisms for funding the to deal with new developments. In most Page 12 of 16
    • Analysis of the FISCAL MANAGEMENT BILL, 2008countries, the Constitution requires that relating to the financing of elections besupplementary estimates be presented introduced.before the legislature to deal with theseshortfalls. In other countries, there is ADDITIONAL REPORTING UNDERprovision for the Minister for Finance to THE PROPOSED BILLpresent to the legislature condonation The proposal for additional reporting to thelegislation which, if enacted, will have the National Assembly should be supported, as iteffect of correcting the situation. allows for early warning on any slippages onIn Zambia, the Minister can retrospectively the expenditure of the budget. However, it isintroduce legislation for Parliament to endorse not clear in the Bill, how the reports of thean expenditure that occurred without its Minister are to be processed by the Nationalapproval. Assembly. Are they to be referred to the Public Accounts Committee or to the AuditorIn theory, there is the possibility that General for example? Will there beexpenditure of the kind that the Fiscal opportunity for a debate on the contents ofManagement Bill views as wasteful and which the reports, especially given their frequency?it proposes to punish, can be approved by the Unless there is a procedure that ensures thatlegislature and if this is done, the official the National Assembly engages with theconcerned would be reprieved and not reports meaningfully, it will be difficult to seepunished as proposed. what additional improvement they can effect. However, it is easy to see that self-reporting by the Government will probably induce4. Audit restraint on the part of officials who mightIn the Westminster tradition, the audit of have been bent on misconduct.public funds has traditionally been theresponsibility of the Comptroller and Auditor QUARTERLY REPORTS:General. The review of the reports of the A BURDENSOME NECESSITY?auditor is carried out by the Public Accounts Another issue of concern is that the proposedCommittee. Whereas the Fiscal Management quarterly reports impose a relatively onerousBill does not seek to change the audit function burden on government departments, if theyof the Auditor General, it seeks to introduce are to comply with the Bill. The questionadditional monitoring of the budget by the which remains to be answered is whether it isNational Assembly. Whereas currently, there justified to have these reports or whether itis an audit at the end of the financial year, the would not be more prudent to reduce theBill seeks to introduce periodic (quarterly) regularity and make the reporting, say, halfreporting to the National Assembly on the yearly.performance of the budget, withoutinterfering with the constitutional audit by the Increased accountabilityAuditor-General. In addition to these reports, The Fiscal Management Bill very considerablyit is proposed that reporting requirements raises the bar of accountability in relation to Page 13 of 16
    • Analysis of the FISCAL MANAGEMENT BILL, 2008the budgetary process. There would be more remarkable due to the number ofgenuine concerns as to whether this bar can additional checks that it seeks to impose onbe met, or how its desirable goals can be the Government in the management of themade more feasible. For example is it feasible national budget. The establishment of afor the Minister to lay before the House Budget Office, as a bureaucracy that advisesquarterly reports on the performance of the Parliament on an ongoing basis as to its rolebudget? There would also be genuine in the budgetary process is long overdue andconcerns as to the necessity for reporting to is one of the greatest achievements of the Act.the House on such a regular basis, especially The establishment of such an office is ingiven the fact that the Bill does not establish a keeping with best practices in moremechanism for processing the reports so progressive Parliaments and responds to themade. In that case, what would be the end realisation that Parliament cannot effectivelythat such reporting meets? check the Executive in budgetary matters unless the information and skills gap betweenBUDGET OFFICE LONG OVERDUE the two institutions is addressed. A budgetThe Fiscal Management Bill is a remarkable office provides opportunity for the gathering,piece of legislation, and not just because it is within the control of the legislature, of a set ofone of the few successful legislating skills with which it might be better able toendeavours by private members. It is the interrogate the budget process. THE POTENTIAL FOR POLITICAL MISCHIEF There is, of course considerable political mischief that the Bill may represent. As a private member’s Bill it did not originate from the Government. For privately-originated legislation to provide such onerous responsibility on the Government presents a significant political challenge by one constitutional organ, the legislature, against another, the Executive. Historically, the relationship between the two, especially over the budget, has been unbalanced, with the Executive having the upper hand. This law challenges that traditional relationship in real terms and would for this reason meet considerable resentment on the part of the government. Need for an Accountable Parliament One assumption that must be maintained in a review of the legislation is that Parliament is itself consolidated in its approach to the budgetary process and would not be the arena for political mischief of its own. However, as experience has shown, especially with regard to the emoluments of MPs, Parliament is capable of the most parochial view of its own role in the budgetary process and is prepared to sacrifice the common good in order to protect the interests of individual members of parliament. In such an event, placing the authority that the Bill contains in a rogue Parliament is not an assurance that the budgetary process will be more transparent or fair. It may only result in giving parliamentarians a greater capacity to play a rent-seeking role in relation to the budget. These reforms must therefore be accompanied with a debate on the morality and accountability behind the positions that parliament represents in several national issues. Page 14 of 16
    • Analysis of the FISCAL MANAGEMENT BILL, 2008Secondly, there is also realisation that by the National Assembly including hisparliamentary scrutiny of the budget is recommendation for amendments.”21dependent on Parliament’s capacity to i) The National Assembly may approveestablish and maintain meaningful the President’s recommendations withrelationships with other institutions which are amendment and resubmit the Bill to thealso concerned with the budgetary process, President for assent22.including the Treasury, the Central Bank andinstitutions outside of parliament, such as civil ii) The National Assembly may approve thesociety. The establishment of a Budget Office President’s recommendations withoutprovides a focal point for these other amendment and resubmit the Bill to theinstitutions which might wish to relate with President for assent23.parliament on budgetary matters but have, so iii) The National Assembly may also “refusefar not had an obvious forum for doing so. to accept the recommendations [of theFor Parliament itself, the Budget Office President] and approve the Bill in itsprovides opportunity for conducting original form by a resolution in thatrelationships with the outside world and thus behalf supported by votes of not lessgives the House a capacity to be pro-active in than sixty-five per cent of all thethe manner in which these relationships are to Members of the National Assemblybe conducted. (excluding ex officio members) in which case the President shall assent to the Bill within fourteen days of the passing of POSSIBLE SCENARIOS: WHAT CAN the resolution.”24 BE EXPECTED NEXT?The demands by President that the omnibusclause 5(1) (h) be deleted can and should CONCLUSION ANDeasily be met. A legal opinion on the effect of RECOMMENDATIONthe clause may suffice to allay the fears of the In keeping with the option under scenario 1President as to its effects. above, an amendment has now been submitted to the President’s proposal onLEGAL OPTIONS Clause (6) sub-clause (2). It proposes to deleteThe legal aspects are set out under Section 46 the words “Parliament does not get involvedof the Constitution, which provides that in the management of public resources” and“where the President refuses to assent to the substitute the words “Parliament only getsBill he shall, within fourteen days of the involved in the management of publicrefusal, submit a memorandum to the Speaker resources in the instances set out by theindicating the specific provisions of the Billwhich in his opinion should be reconsidered 21 Section 46(4) 22 Section 46(5) (a) 23 Section 46(5) (a) 24 Section 46 (5) (b) Page 15 of 16
    • Analysis of the FISCAL MANAGEMENT BILL, 2008 Constitution and any other written law”. In order to achieve the greater goal of strengthening its oversight powers over It remains to be seen which of these scenarios the management of public finances, will unfold. Of the three above, the third one Parliament would be well advised to seems the most difficult to achieve given the assent to the President’s proposals where difficulty of marshalling the necessary they do not alter the import of the law. majority. ABOUT AfriCOGAfrica Centre for Open Governance (AfriCOG) is a civil society organisation dedicated to addressing the structural and institutional causes of corruption and bad governance in Kenya. Contact: P.O Box 18157-00100, Nairobi, Kenya | Tel: +254 20 2723031 | Fax: +254 20 2714675 | Page 16 of 16 email: admin@africog.org | Website: www.africog.org;