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Why Parliament could reject Budget

FINANCIAL STANDARD
By | June 14th 2011

By Kenneth Kwama

Parliament’s Budget Committee will on Thursday meet and open up a process that could see the House vote against several aspects of the Sh1.2 trillion Budget read last week by Finance Minister Uhuru Kenyatta, thus triggering a political crisis that could interfere with the country’s development plans and stall several Government projects.

The only way for the Government to forestall the looming crisis is by talking the budget committee out of the idea and persuading it to ratify the Budget unconditionally. If this option fails, the other two alternatives could be painstaking. One is for the Government to spend money without the approval of Parliament, which is illegal, or dissolution of the House to pave way for a General Election.

Political insiders warn that the committee could be spoilt for a fight after Uhuru had earlier ignored their pleas that he complies with provisions of Article 221 of the Constitution and table the budgetary estimates to allow public participation. It was only after the Speaker’s ruling that Uhuru had to comply with the new laws.

The Constitution grants Parliament strong powers to hold open hearings and to call Government officials and other experts to give evidence. In theory, the budget committee can recommend that the entire Budget (or specific votes) is rejected in total and which could lead to serious repercussions and send the Government back to the drawing board.

The budget committee had threatened to lobby the House to block the presentation of the 2011/2012 Budget and its implementation if Treasury failed to allocate money for county governments.

The impasse was only resolved after House Speaker Kenneth Marende directed Uhuru to read a ministerial statement in Parliament outlining the Government’s budget estimates.

Marende’s ruling on whether or not a budget speech would be read in Parliament came a few hours after the High Court dismissed a case filed by an NGO seeking to stop Uhuru from reading the budget.

Speaker’s ruling

While delivering his ruling, Marende castigated Uhuru for failing to abide by the provisions of the new Constitution regarding the process of presentation of the budget. Marende said the new laws regarding budget estimates and specifically Article 221 were in force and operational.

Marende said the controversy over the relevance of the new law could have been avoided, as the Constitution is supreme over other laws.

Given the bullish feelings of the committee after winning the first round, one can hardly rule out that it would be keen to make full use of the historic moment accorded to them by the new Constitution by making crucial amendment to the Budget. The new budget making process demands detailed engagements as opposed to the former system where budget formulation was an intrinsically closed process.

The figures outlined by Uhuru in this year’s budget could be reduced, based on certain realities and other speculative financial conclusions made by Treasury. The committee’s deliberations anchored mainly by priorities outlined in the Vision 2030 could also dampen the colourful reviews accorded to this year’s budget.

In an interview with the Financial Journal, the committee says it wants to "cut costs, streamline programmes, consolidate facilities and eliminate waste. All these add up to a significantly smaller bill than the Sh1.2 trillion budget that Uhuru proposed, and potentially about the same size as the 2010/2011 Budget.

Second budget

Budget committee chairman Elias Mbau told FJ that Parliament could revise certain provisions in the budget to align it with the country’s development objectives and shelve money allocated to ministries that did not fully utilise resources they were allocated in the last budget.

This could force Treasury to submit another draft budget before the end of the year.

Most significant, though, is the budget committee’s refusal to go along with the Government’s full-tilt embrace of high levels of investment without a plan to pay for them.

The move, which is also bound to render Uhuru’s 2011/2012 Budget irrelevant, could also stall Government business and throw into confusion important national engagements like free primary and secondary education. The massive infrastructural development projects outlined for the ministry of Roads will also be affected.

In this likely scenario, ministries of Education and Roads will be on the spotlight because they did not use Sh23.5 billion and Sh7.8 billion cash they were allocated in the 2010/2011 Budget. Mbau says the committee will recommend that projects that were initiated in the previous budget be completed before fresh money is assigned and that money apportioned to ministries that did not fully utilise their allocations be slashed.

"Each departmental committee will hold public hearings and collect views from members of the public, civil society and groups on the budget. A final report on the budget will be compiled by August 31 and presented to Parliament, which will then decide on the way forward," says Mbau.

Parliament will then take a vote based on the final submission of the budget committee. A negative vote could delay financing of some programmes and would be a blow to the Coalition Government. The new Constitution has given legislators immense powers over the annual budget processes, consequently Parliament is on an equal footing with the Treasury, as far as influencing the entire budget is concerned.

"Some of the money used to fund this budget is borrowed and any ministry that will not be able to live up to the absorption capacity for its allocation will have its funding slashed," says Mbau. The Budget committee will meet departmental heads of various House committees on Thursday to kick-start the process that will also draw out guidelines to be used by each committee to scrutinise the budgetary allocations to their line ministries and also vet how past allocations were utilised.

Tough times

The assertions by the Maragua MP is another sign of the tough road ahead for the fiscal programmes outlined by the administration because the resultant financial entanglement could have serious consequences in terms of investor confidence.

A staggering Sh142.5 billion of monies allocated to various Government departments in last year’s budget was returned to Treasury after Government agencies and line ministries failed to spend them in the last financial year, as had been budgeted.

Other ministries that returned unspent money and whose budgetary allocations in this year’s budget could be cut include the Ministry of Provincial Administration and Internal Security that returned Sh11.3 billion, the Department of Defence Sh10.7 billion, and the Ministry of Higher Education, Science and Technology, Sh8.2 billion.

Then there is the Water and Irrigation Ministry that returns money to Treasury perennially despite many taps running dry across the country. The ministry returned Sh6.3 billion to Treasury.

Over-spenders

Over-spenders of last year’s budgetary provisions include the Kenya Anti-Corruption Commission, Ministry of Industrialisation, and the Cabinet office.

The budget committee and Treasury disagreed over this year’s budget making process with the former accusing Treasury of trying to sabotage the idea of county governments by denying them funding in the 2011/2012 budget.

Although experts are wary about the cost of implementation of this form of governance, there is consensus that it will be key to better facilitation of the achievement of objectives outlined in Vision 2030.

Mugo Kibati, Director General Kenya Vision 2030 Delivery Secretariat says that devolved funds and the equalisation fund, which are both provided for under the new Constitution, will encourage investment across the country.

"But there is need to encourage counties to develop the necessary legislation to facilitate regions to develop economic development policies, which develops entrepreneurship," says Mugo.

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