HOW TO RUN A BUDGET
ARE WE GETTING APPROPRIATE FEEDBACK?
WE’RE back to the feverish annual lead-up to the delivery of the national budget. Most of us have other things on our minds – specifically how we will survive COVID-19 with a health system in collapse, escalating virus numbers and no idea about when things will improve.
Our political leaders appear sporadically (from whatever planet they have decided they will inhabit during the crisis) to lecture us on why the spread of the virus is our fault.
Then of course we have the “budget consultations” of the Economy Minister.
In past years around this time he is generally photographed at high schools. He is apparently consulting with teenagers on how the Government should tax and spend for the coming year.
Naturally, the hero-worshipping Fiji Sun has something to say about this. “It has been encouraging to see stakeholders from various groups take part in these virtual consultations”, it said breathlessly last week.
“Prior to the Fiji First Party initiative, there weren’t many consultations held, and it was unheard of, for students to give in their feedback of submissions”.
Not so. In fact, the national budget used to be the subject of much more consultation and feedback than it is now. Business people and others close to government even used to criticise budget measures from time to time (perish the thought!).
But why are these “budget consultations” happening only a few weeks before the actual budget itself?
The budget is worth billions. It’s the Government’s biggest annual economic policy initiative.
Doesn’t it take months of planning?
What do these last-minute “consultations” mean? That three weeks out from the budget the Government still doesn’t know what it’s doing?
Or is it that the Government already knows what it’s doing but it’s just “consulting” to look like it’s listening?
Perhaps, it’s time to pause and re-think the whole process and how we could make it useful.
What’s the budget for?
Legally, the budget is an “Appropriations Bill”. It’s Parliament approving how much the Government will tax and spend for the coming (August to July) financial year.
But “the reality of the matter” (as we all say now) is that the budget is about much more than this. It’s an important direction-setter for the national economy.
The Government can use fiscal measures (taxes and tax breaks) not just to collect money but to nudge people in a particular direction (for example, giving a tax break to a particular type of activity it wants to encourage).
The Government is also a big part of the economy (for better or worse) because it spends a lot. So what it spends and where it spends it is influential.
Knowing that, it surely makes sense that we work together to use the process well.
Why is it always a big surprise?
Every year, the Budget promotes worried speculation. Will taxes go up? Will excise duty go down? Will tax breaks stay in place or will they suddenly change?
And suddenly, one night, everything changes. Duty on breakfast cereals up. Next year down. Duty on imported fruit up. Next year down. Tourism taxes up. Then they’re down.
Suddenly, we’re going to slash alcohol taxes to support tourism through the coronavirus (even if there are no tourists). Suddenly stamp duty is abolished. Suddenly data collection agencies are wiped off the map.
This is no way to support an economy.
No one in business does this. Shareholders are not sitting at their annual general meetings worrying about whether the chief financial officer will say “We’re changing direction. Prices are up on our biscuits and down on our garments”.
Businesses plan ahead – sometimes in five or ten-year blocks. They try to keep their environments simple and predictable. There’s already enough out there beyond their control (think viruses).
Why can’t the Government do the same thing? Why can’t it work with everyone off a 10-year plan, and keep things stable, predictable and clear?
And we are not just talking business people here. NGOs contribute in important policy areas – domestic violence, people with disabilities, the poor.
Workers are a big part of the economy. And they and their representatives ought to know, for example, what is needed for Government to raise the minimum wage.
The Government attitude is “we can’t share budget secrets. People will abuse the information”.
Really? What are they going to do? Buy a carton of extra cigarettes in June because we’ve announced we’ll raise the taxes on them every July? Well, that will be good for June sales, won’t it?
The whole secrecy mindset needs to change. Instead, we need transparency and predictability. To plan for ourselves we all need to know the bigger plan – in fact we need to be part of its design.
So how do we do that?
Rule No 1 – it’s not your economy
A few years ago, the modestly-titled Ministry of Finance became the more grandiose “Ministry of Economy”. This seemed to signal that from now on the ministry wasn’t just going to control Government finances; it was going to control – well, everything.
Which means the Government doesn’t even have its basic mindset right.
How can we put it simply? “It’s not your economy”.
It’s the same as it is for education or social welfare or housing or tourism (or now, vaccinations). It’s not the Government’s job to run it by “command and control”. It’s the Government’s job to support the people who participate.
This simple notion shouldn’t be hard. But if this is not at the front of Government’s mind, it loses its way very quickly. So how to put that idea into action?
Year-round consultation
Let’s take our cue from “past governments” (of course in today’s political rhetoric “past governments” were all bad and light only dawned on Fiji after 2006, but I will persevere).
Past governments used to stage, once a year, a two-day National Economic Summit (NES).
This was a bit of a talking shop but it got everyone – businesses, unions, academics, religious and community leaders – into one place to talk about Fiji’s economic direction.
The NES had its own secretariat. So after the big talking shop was over, everybody kept talking, in smaller committees and sectoral groups, about how they should put the talk into action.
Sometimes, the process worked well, not always - but it’s a good model to start with.
Why couldn’t everyone get together at a summit and share ideas, say, in September or October? At that point some Budget measures are having their impact. So people can say “this seems to be working” or “this isn’t working”.
Based on that feedback, we can spend the following months working together to get things right. There is time to plan and consult. There is time to check: “are we following the bigger plan”?
And then, when new challenges arrive (like viruses) we already know how we to work together, share problems and find solutions. We know where we’re going.
Sharing on the detail
Budgets and economic policies are complex things. So are the ways policies are put into action.
Generally, budget ideas have to be thought through carefully. A new tax or duty reduction on imports could affect whole sectors of the economy such as tourism or manufacturing. We need to know, ahead of time, what will happen. We can’t just make it up as we go along.
Budget measures also mean drafting laws. They too have consequences we can’t always see at first sight. The wrong word in the wrong place can add to the problems the law was supposed to fix.
Maddeningly, the Government never shares its legal drafting with anyone.
We know what happens with Bills presented to Parliament. They suddenly appear, three days before they are debated, when Government just votes them through under urgency.
Now a lot of economic policy is made by minister-made laws – regulations. These don’t go through Parliament (even though the regulations setting tax rates should go through Parliament). So we get no warning at all. The laws just turn up. And, time after time, they miss important points needed to make them work.
Wouldn’t it be simpler if those the laws were intended for got a proper chance to see them first. Then they could say “that part won’t work” or “why don’t you improve things by saying this?”.
Instead we have a business community, for example that sits by helplessly and says “well this is what we asked for, we hope we get it but we don’t really know what we’re going to get”.
It’s a leadership test
Finally – like everything governments do – the budget process is a test of leadership. How does our Government lead?
Does it respect the views of others? Does it understand that it is there to serve the people, and not the other way round?
Does it also understand that the Government is rarely the smartest person in the room - and those who work in their particular areas know more than it does?
Does it understand that working with others in an open, sensible and predictable way is how you get the best result?