WHY DEBATE AND OVERSIGHT ARE IMPORTANT FOR GOVERNMENT SPENDING (BFM)
Q: Could you walk us through the process of approving supplementary funds for the government?
Does the law require the government to always pass a bill before spending additional funds?
CH: First, we have to understand certain important provisions stipulated in our Federal Constitution.
Article 96 says that: No tax or rate shall be levied by or for the purposes of the Federation except by or under the authority of federal law. Article 97 says all revenues and monies raised or received (except Zakat, or other similar Islamic religious revenue), to be paid into and form one fund known as the Consolidated Fund. And most importantly Article 104 says that: no monies, except specified charged expenditure, shall be withdrawn from the Consolidated Fund unless they are appropriated or otherwise authorised by Parliament.
This should certainly apply to the Federal Budget (also known as supply bill) as well as the supplementary budget (known as supplementary supply bill). As recent as August 12th last year in the Dewan Rakyat, the Supplementary supply bill amounted close to RM12 billion was passed. The procedure is very much like the Budget, albeit shorter in process. The Finance Minister has to first propose the motion to table the bill to the Dewan Rakyat. As this is important government business, the speaker would arrange the bill in such a way to give the priority. First reading, second reading is a policy stage, debate would ensue and a committee would be formed. Third reading would be at committee level. If passed, that would be the new Act. That is the standard procedure.
Not only the Federal Constitution, we also have several financial laws governing the matters such as Government Funding Act 1983 and Treasury Bills (Local) Act 1946, these relate to procedures for application of moneys raised or received. For the latter, even if the Finance Minister wants to borrow money by issuing Treasury Bills in Malaysia, the government also need to go through the usual procedure requiring the Dewan Rakyat’s approval, before the government could channel money into the Federal Government’s Development Fund.
However, now according to the new Emergency Ordinance amendment, all these usual procedures would be suspended during the Emergency.
Q: Do any specific situations warrant this move?
Even in normal times, it seems as if the government does, by tradition, request for a supplementary budget. Why does that happen?
CH: Supplementary budget would be required for the situations when the amount allocated in the approved federal government’s Budget via the Supply Act is insufficient or when the money spent is more than allocated in the Budget or when a need has arisen for spending for a purpose which had not been allocated for in the Budget.
Several situations might arise warranting the supplementary expenditure: 1) when the revenue collection performs far below initial expectation and estimation – this could happen when the international crude oil price plunges or prices for major raw material exports, for example, palm oil, falls, or there is a drastic change in the domestic taxation policy such as abolition of GST last time. The shortfall of the revenue must be met.
Given that in the last Budget 2021 tabled, some economists and observers including myself feeling that the government’s estimate of the revenue looks too optimistic banking in the hope that the pandemic would get under control in the second half of this year, the global trade and supplies would bounce back significantly, hence overestimation of the GDP growth (in between 8.6 – 9.6% in current prices).
Secondly, the government might want to spend more for certain programmes which are not currently allocated sufficiently for. Many are still speculating what the new actual supplementary supply bill looks like, if the allocations for fighting pandemic was severely underestimated last November because the government did not expect the third wave of the pandemic loomed so big. There are quarters also found that the allocations for the Election Commission does not look like the government is prepared for a general election. So you know what that could potentially mean.
Q: How does this compare to the practice in other countries?
CH: For commonwealth countries, I would expect the financial procedures would be similar during the normal times. I do not know when it is under the Emergency, if other mature democratic countries would allow such important acts and laws being bypassed, especially when they could have their parliament in session.
Q: What kinds of processes will the new law bypass?
CH: According to the new law with the new provision titled ‘Temporary financial provisions’, not only the Treasury, but Menteri Besar and chief ministers of states in Malaysia could also approve additional spending in their respective government funds beyond the initial budget without having to get approval of their state legislative assemblies. Under Section 10A of the new law, the Treasury can approve any supplementary expenditure or withdrawals from the Federal Consolidated Fund without requiring the usual scrutiny by Parliament.
Q: Even in normal times, do we have strong enough mechanisms to oversee budget revisions, or the allocation of additional resources?
CH: Not really, currently there is no mid-term budget oversight mechanism in Malaysia, unless it is voluntarily done by the government of the day. Though MPs and ADUNs could raise questions to ask the Finance Minister or Chief Minister when parliament and state assemblies are in session.
Q: Overall, how could the fund-seeking process for the government be improved?
is it ok if we focus on improving the process during unique/urgent situations like the current pandemic?
CH: Given that now we are just stepping in the 2nd quarter of the year, I wonder why there is a rush to have the supplementary budget so early on. It would be difficult to comprehend too if the fund is already running out in such early stages.
Thus, it would be much better for the government to reconvene the parliament sittings for the Finance Minister to propose and clarify the matters in the Parliament. Supplementary Supply Bill is an important bill for the MPs and rakyat to scrutinize openly. How a democratically elected government uses the public monies for what public policies and programmes, and in what magnitude, is fundamental for our democracy, as well as our trust and confidence in the government handling our monies.
Therefore, this fund-seeking process, even if it is now unique or urgent situations like the current pandemic, should be transparent and open for public discussion. The era of the government knows best and know all is over, especially if the government still believes in ‘a whole-society’ approach.
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