Colombo, Constitutional Reform, Economy, Politics and Governance

BUDGET OR NO BUDGET? IT IS A CONSTITUTIONAL QUESTION

There has been speculation this week that the government is planning to present a Vote on Account rather than a full and proper budget. The DNA/JVP has already announced its opposition to this, and perhaps more importantly, the IMF has indicated that the next tranche of the loan granted last year in order to avert the balance of payments crisis may be affected if there is no proper budget in which the deficit is brought down to the agreed 7% of GDP from the current 9.7%, fiscal reforms are introduced, and public spending is cut to a more sustainable level. Traditionally, the Sri Lankan electorate is not only uninterested in the way governments manage their money, but positively rewards fiscal and expenditure irresponsibility (that government is seen as the principal provider of free lunches is a legacy of democratisation in the hands of the Left, but that is another story). In the absence too of any notion of an effective Opposition, it falls to the global financial institutions to impose some semblance of discipline in our public finances.

There are several issues of constitutional significance that arise if the government decides to present a Vote on Account again. Firstly, such a measure would be unprecedented given that the government is already functioning on funds allocated by a Vote on Account. Consecutive Votes on Account have no precedent, and rightly so. The government did not present a budget last year mainly on the ground that it would do so after the scheduled presidential and parliamentary elections in 2010. Now that those elections have been held, and it is safe to say the result was never in much doubt, it is extraordinary that a continuing government should be unable to present a budget. Secondly, the Vote on Account is a device of public finance that is entirely governed by convention and parliamentary practice. There are no express constitutional or statutory provisions, nor Standing Orders of Parliament that regulate it. Therefore its use, and indeed abuse, is determined by the strength of commitment to parliamentary traditions and democratic values of all concerned, particularly of a government that enjoys such a strong majority and can do virtually anything it pleases.

The Vote on Account is in the nature of an exception to the general principle of democracies everywhere that every cent of public expenditure must have prior parliamentary approval. It is for the government to propose the objects, manner and form of expenditure and revenue, but it must gain the approval of Parliament before it can legally expend any moneys or raise any revenue. It is thus the most fundamental rule of public financial accountability. Parliament’s control over public finance is provided now in Article 148 of the Constitution, but it has been a fundamental constitutional principle ever since we have had a representative legislature, i.e., since 1931. By convention, Votes on Account are used when after an election a new government has been formed, and it has not had sufficient and reasonable time to prepare a full budget setting out full details of estimates and expenditure, and its proposals for borrowing and taxation. Votes on Account are therefore most commonly used during election years, to enable the government to carry out day-to-day administration until such time as it can present a comprehensive budget. The expenditures to be incurred by a Vote on Account would then be absorbed by the forthcoming budget and is generally projected for a period of not more than four months. Although this seems to suggest that a Vote on Account is something that is used by a new government coming into power after an election, practice has evolved in Sri Lanka that even a continuing government sometimes uses the device after an election to give itself time to present a full budget (e.g., 1999, 2000). The only other occasions in which its use is justified would be extraordinary situations like 1971, when a Vote on Account was passed to enable public administration to continue because the then legislature, the House of Representatives, was sitting as the Constituent Assembly drafting what became the First Republican Constitution of 1972 (and the country also experienced a violent upheaval with the JVP’s first insurrection in April 1971).

While it would seem, given that it is meant to be used as an exceptional and extraordinary procedure, that a Vote on Account should only contemplate recurrent expenditure, convention does not bar capital expenditure. However, any expenditure proposed under a Vote on Account must be referable to an existing head, programme, project or object of a Ministry or Department, approved in the preceding budget, in this case the appropriations approved in the 2009 budget.

The scenario presented by the government proposing to get a Vote on Account rather than a proper budget passed at this time has several consequences, some of which of a potentially serious constitutional salience. Firstly, as noted at the outset, the government has already set a precedent by the current Vote on Account on which it is running (by passing a Vote on Account ahead of rather than after an election), and since there has been no change of government, it could reasonably be expected of it to present a proper budget and seek parliamentary approval for its spending and taxation plans. A second successive Vote on Account, as a departure from convention, could have been justifiable if there had been a change of government in the general election of April 2010. There was not, and therefore such a departure cannot be defensible, and it is precisely because this is matter of an unwritten convention that we should be very circumspect about setting precedents.

Although as a strictly legal proposition the government can avail itself of the benefit of the doubt, politically there was no doubt at all of the outcome of the parliamentary election following the President’s re-election in January, which therefore means it had three months in which to prepare a budget for presentation after the general election in April. Moreover, the Minister of Finance is the President, who has not only continued in that office from the last Parliament and post-election Cabinet reshuffle, but also was in the best position to know who would be Minister of Finance after the election. Given also the size of the government’s parliamentary majority, there is no prospect whatever of any parliamentary resistance to its budget, and the government therefore has an incentive to respect the democratic principles and parliamentary conventions of submitting itself to legislative scrutiny with a full budget.

Secondly, the very nature of the procedure for the passage of a Vote on Account suggests strongly that it is not meant to be repeatedly frequently and certainly not consecutively. A Vote on Account can be passed by a simple majority in the House following a very cursory debate and without committee stage, and is not subject to the rigorous and exhaustive parliamentary procedure of debate, scrutiny and voting that must be followed with a proper budget. Given the gravity of the underlying constitutional principle, i.e., the financial accountability of the executive to the representatives of the people in Parliament, it is clear that governments are not expected to be given recourse to the convenience of successive Votes on Account easily or as of right.

In this context, that a government is allowed to escape full parliamentary scrutiny of its financial management for extended periods of time through presentation of Votes on Account would be undemocratic and inappropriate, because that amounts to the surrendering of Parliament’s control over public finance to the executive. It is thus the most fundamental form of violation of the principle that the executive is accountable for the use of public money to the people through Parliament, and more broadly, the principle sometimes demotically called ‘no taxation without representation.’

Such an eventuality is also arguably unconstitutional. Article 148 of the Constitution provides that ‘Parliament shall have full control over public finance.’ Article 4(a) declares that the sovereignty of the people in respect of legislative power shall be exercised by Parliament, and Article 76(1) states that ‘Parliament shall not abdicate or in any manner alienate its legislative power.’ From these constitutional provisions it thus becomes clear that evading the scrutiny of Parliament by not presenting a budget amounts potentially, to use phraseology fashionable nowadays, to a violation of the sovereignty of the people. The response of the many shrill defenders of sovereignty in the government benches in the face of such treachery from their own executive would be revealing, but I would not be surprised to be coldly told that the prevailing orthodoxy on patriotism does not extend to expecting such a wildly popular executive to conform to (foreign) values of constitutional democracy.