ISSN: 1391 - 0531
Sunday September 16, 2007
Vol. 42 - No 16
Columns - The Sunday Times Economic Analysis  

The urgent need to return to public accountability of funds

By the Economist

The recent passage of five finance acts in Parliament raises far more important issues than the questionability of the voting technology used or parliamentary procedure. These are issues that Parliament itself must resolve. As pointed out in the Editorial of this paper last Sunday, the all important issue of Parliament's accountability in finance is the serious concern.

Finance is the pivot on which democratic parliaments control and ensure accountability of a government for the collection of revenue and its expenditure. Parliamentary control of finance strikes at the very roots of parliamentary democracy. That is why the control of finance is always vested with parliament and never with the executive in a democracy.

The Presidential system of government introduced in 1978 made the President all but powerful in finance. The president can rule for six uninterrupted years, but parliament controls the purse. This is made clear in section 148 of the constitution that states, "Parliament shall have full control over public finance. No tax, rate or any other levy shall be imposed by any local authority or any other public authority, except by or under the authority of a law passed by Parliament or of any existing law." This and other sections of the constitution that follow it ensure parliamentary control of finance.

However, a government that commands a majority in parliament is able to comply with the law but flout the spirit of the provisions. In spite of constitutional provisions, governments have eroded this fundamental principle of parliamentary control of finance in devious ways, if not in law in spirit. This is not new. Ways of weakening parliamentary control of finance have been subtle at times, blatant at other times. Even in the "good old days" of parliamentary democracy, the executive used funds for unintended purposes and what the Public Accounts Committee did was, in the words of Pieter Keunemen, "at best a post mortem". It was merely a report to Parliament after the horses had bolted. Nevertheless there was an acceptance of the principle of parliamentary control of finance and strict rules that the votes of ministries voted for one purpose could not be transferred to another without parliamentary approval was generally adhered to. Now the transferability of expenditures is often permitted.

There have been many ways by which parliamentary control of finance has been eroded. Two glaring cases are the establishment of autonomous funds, the most notable being the President's Fund. There are also other less important and less conspicuous funds such as the funds of lotteries. These funds permit governments to by-pass parliamentary control. No doubt they provide flexibility to government finances and many a good deed has been made possible by the use of these funds. Nevertheless they provide a means for corrupt and wasteful use of public funds at the discretion of the powers that be.

Another means by which parliamentary control has been eroded is resorting to the use of supplementary estimates for substantial government overruns in expenditure and taxation through gazette notifications. By the use of these methods governments are able to not subject votes to a serious scrutiny of funds and their uses. Often these supplementary votes are passed in a hurry together with other business of the house without adequate attention to a discussion of their merits. What happened last week was surely the most classic example of this.

The annual Budget of a government is the cornerstone of its economic policies with implications to all its other policies as well. A government's economic and financial policies are articulated in the Budget speech and given substance in the taxation measures and the expenditure votes. When a significant amount of tax revenue is derived through gazette notifications, these have effectively denied parliament its right to taxation. Besides this, resort to taxation through such measures gives a government the means of not providing parliament a true account of public finances. Increasingly governments have tended to use this method of taxation as a means whereby unpopular measures are avoided in the Budget.

Instead, the Budget becomes an exercise to court popularity and gives the impression that it is not heaping burdens on the people. For this reason Budgets have been often described as "Sunshine Budgets" as the unpopular measures are left for gazette notification later or before the Budget. When supplementary estimates fund government expenditure the original budgetary estimates and the macro economic conditions portrayed in the Budget are distorted. In fact budgets for quite some time have been characterised as pieces of fiction. The figures presented in the budget and the final outturns are different. The government's expenditure is a huge overrun, while the original taxation yields less than expected revenue. The new tax measures outside of the budget tend to be significant and people face the real costs of the government through these ad hoc taxes imposed on them from time to time.

Public accountability does not end with parliamentary control of finances. Public accountability is a much broader concept. It extends to the use of public funds at all levels of government activity. Recent disclosures of COPE and the general knowledge of waste in government departments are other instances. Often the misuse of funds is also connected with bribery and corruption as well. Accountability in the broadest sense implies the obligation to explain publicly, fully and fairly, how public funds are being used and how public administration is being carried out. It includes the use of funds, but is not confined to it, as the quality of public expenditure is as important. "Public answering for responsibilities" it is said "cannot be rejected or evaded". Holding to account imposes a self-regulating influence on those asked to account. This has been lacking in government and public services as well as in public corporations. Public officials must report publicly and must be subject to scrutiny and professional thorough audit. Explaining publicly, fully and fairly how public funds are used and how responsibilities are being carried out means that authorities would have to report the reasons and intentions that would affect the public in important ways.

For example, a government adequately accounting for its responsibilities can reasonably be expected to meet the standards of public reporting. Conversely, a government not wanting to take responsibility for adequate and cost-effective services such as health care, for example, can be expected to publicly explain its intentions and reasoning, using the same answering standards.

Recent disclosures of huge amounts of money spent or intended to be spent on large numbers of officials accompanying the President on foreign trips is a clear violation of public accountability of funds. The enormous waste of funds in such travel at a time of fiscal stringency is difficult to comprehend. Such vast expenditure does not even make political sense at a time when heavy tax burdens are being cast on people who witness their elected officers spending in such a conspicuous manner.

A return to the principles of public accountability of funds would ensure responsible government, less wastage and more cost-effective expenditure of funds. However what we are witnessing is an unprecedented use of funds without effective controls and accountability.

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