Budget Brief No. 33 – Parliament and National Treasury

A NEW BUDGET PROCESS?
The Role of Parliament and the National Treasury in Developing
the 2015/16 Budget
The 2010 constitution and the 2012 Public Finance Management (PFM) Act fundamentally altered the Kenyan budget
process. The new rules expanded Parliament’s role in the budget process and shifted the National Treasury’s role from
one of command to one of persuasion. How well are these players adjusting to the new game? We looked at the 2015/16
national budget to answer this question. Here is what we found.
Parliament’s Role in the 2015/16 Budget
Figure 2 shows which sectors received the main increases.
Parliament itself was a big recipient of the increased spending,
as were constituency funds associated with Parliament (such
as the Constituency Development Fund, CDF). More than 80
percent of the changes are due to these increases. However,
Parliament also made smaller increases to the budgets of
other oversight institutions, including the Auditor General and
the Controller of Budget.
The tabling of the Budget Policy Statement (BPS) in February
is Parliament’s first big opportunity to influence the national
budget. Parliament has the power to decide on the total size
of the budget and how it is distributed across key sectors
when it amends and approves the BPS.
Parliament’s Budget and Appropriations Committee report on
the BPS sent mixed messages on their plans. Some parts of
the report emphasized reducing the total size of the budget
and controlling the deficit, while other parts suggested
increasing the budget by Ksh 48 billion.
Figure 2: Parliament’s increases to the Budget Policy
Statement by Ministry, Department and Agency
(Ksh billions)
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So what did Parliament actually do? As Figure 1 shows,
Parliament increased the budget for ministries, departments
and agencies (MDAs) by about Ksh 14 billion. Given that
Parliament did not identify any new revenues, this extra
spending added Ksh 14 billion to the deficit.
Figure 1: 2015/16 Budget for Ministries, Departments
and Agencies: Tabled versus Approved Budget Policy
Statements (Ksh Billions)
Ksh 1,396
TABLED BPS
Ksh 1,410
APPROVED BPS
6.6
6
5
4.1
4
3
2
1
1
1
0.8
0.5
0.2
0.1
0.1
Min of
Industralization
(Jua Kali)
Independent
Police Oversight
Authority
Controller of
Budget
0
State Department Parliamentary
Planning
Service
(Affirmative Action, Commission
CDF, Uwezo, ESP Centers Operations
Ethics and
Parliamentary
Auditor General
Anti- Corruption
Service
Commission
Commission
(County Operations)
Senate Monitoring
and Evaliuation
Judiciary
The next big opportunity for Parliament to stamp its authority
on the budget is when the budget estimates are tabled in the
National Assembly at the end of April. What did Parliament do
at this point?
The National Treasury, in violation of the PFM Act, tabled a
ministerial budget that was Ksh 97 billion larger than what
Parliament had approved in February. Taking into account
other changes, this meant a Ksh 74 billion increase in the
total budget deficit. Parliament did not take note of this, nor
did it act to reverse the increase in its review of the budget
estimates. Instead, it made minor cuts in the budget of just
over Ksh 1 billion.
Figure 3: Increases in Expenditure, Revenues, and Deficit between the Approved Budget Policy Statement and the
Tabled Budget Estimates (Ksh billions)
2200
2000
Approved Budget Policy Statement (March)
Tabled Budget Estimates (April)
229
1800
221
DEFICIT = 491
1600
262
1400
1200
DEFICIT = 565
261
74
54
1,410
1,358
1,507
1,348
1000
EXPENDITURE (BILLIONS)
REVENUE (BILLIONS)
MDA Expenditure
EXPENDITURE (BILLIONS)
County Share
Interest/Pensions
Expenditure (Billions)
Approved Budget
Items
Budget Estimates
Items
Policy Statement
MDA Expenditure
1,410
1,507 Local Revenue
County Share
262
261 Grants
Interest/Pensions
221
229
Total
1,893
1,997
Increase in Expenditure
104
Increase in Revenue
30
Increase in Deficit
74
Local Revenue
REVENUE (BILLIONS)
Grants
Revenue (Billions)
Approved Budget Policy
Budget Estimates
Statement
1,348
1,358
54
74
1,402
1,432
Parliament did, however, decide to continue to defend the budgets of some independent commissions and oversight agencies
(with the exception of the Salaries and Remuneration Commission). After the increases passed at the BPS stage, Treasury
proceeded to cut some of these budgets again. Parliament responded by increasing them again. This can be seen in
Table 1 below.
Table 1: Changes Made by National Treasury and Parliament’s Response in the 2015/16 Budget Estimates
National Treasury
1
2
3
4
5
% Change between Approved BPS Ceilings and Tabled Gross
Estimates 2015/16
Recurrent
Development
Total
-32%
-32%
20%
-20%
19%
-1%
-1%
-8%
-8%
94%
94%
Vote
Commission for the Implementation of the Constitution
Independent Electoral and Boundaries Commission
Independent Police Oversight Authority
Kenya National Commission on Human Rights
Salaries and Remuneration Commission
Parliament
1
2
3
4
5
Vote
Commission for the Implementation of the Constitution
Independent Electoral and Boundaries Commission
Independent Police Oversight Authority
Kenya National Commission on Human Rights
Salaries and Remuneration Commission
% Change between Tabled and Approved Gross Estimates
Recurrent
Development
Total
47%
47%
14%
44%
14%
24%
24%
28%
28%
-22%
-22%
Some additional small changes in the budget were made by Parliament, although the rationale for these changes is unclear. To the
extent possible, Table 2 captures the reasons that were provided by Parliament for the biggest increases and decreases in absolute
allocations at the MDA level.
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Parliament’s Role in the 2015/16 Budget
Table 2: Largest Increases and Decreases at Ministries, Departments and Agencies Level Between Tabled and Approved
Estimates (Ksh)
Absolute Change between Tabled and
Approved Gross Estimates
Vote
Program
State Department for Water
and Regional Authorities
Water Resources
Management
Recurrent
Development
Total
Reasons for changes in allocation
Largest Increase in Program Allocation
1
2
Ministry of Industrialization
and Enterprise Development
3
State Department for Science
and Technology
University Education
4
Independent Electoral and
Boundaries Commission
Management of Electoral
Processes
5
State Department for Science
and Technology
6
-
Industrial Development and
Investments
-
1,100,000,000
1,057,862,658
1,100,000,000
Capital allocation increase to the Water Services Boards
1,057,862,658
An increase in allocation to Kenya Industrial Training
Institute - KITI (Ksh 120 million), New Kenya Cooperative
Creameries- KCC (Ksh 400 million), Kenya Industrial
Property Institute - KIPI (Ksh 300 million), and Kenya
Industrial Research and Development - KIRDI (Ksh 638
million)
A recurrent allocation increase of Ksh 500 million to the
University of Nairobi Collective Bargaining Agreement
and Ksh 507.7 million for University of Nairobi for
Operations and Maintenance
1,007,676,286
-
1,007,676,286
500,000,000
30,000,000
530,000,000
Additional funds were to cater for voter registration
Technical Vocational
Education and Training
-
500,000,000
500,000,000
Increase capital allocation to TIVETS by Ksh 500 million
State Department of Transport
Road Safety
-
300,000,000
300,000,000
Upgrading the motor vehicle inspection centers and
purchase of safety enforcement vehicles
7
Office of the Director of Public
Prosecutions
Public Prosecution Services
178,000,000
-
178,000,000
To recruit new prosecutors and pay for their health cover
In addition an allocation for witnesses and victims
8
National Police Service
Commission
National Police Service
Human Resource
Management
121,000,000
-
121,000,000
For development of a scheme of service for police
officers, recruitment of police officers and the Police
Vetting Program
9
Commission for the
Implementation of the
Constitution
Commission for the
Implementation of the
Constitution
100,000,000
-
100,000,000
Completion of mandated programs and winding up
10
Kenya National Commission on
Human Rights
Protection and Promotion of
Human Rights
100,000,000
-
100,000,000
10
State Department for Science
and Technology
General Administration,
Planning and Support
Services
-200,000,000
-
-200,000,000
9
Salaries and Remuneration
Commission
Salaries and Remuneration
Management
-200,000,000
-
-200,000,000
8
State Department of Transport
Air Transport
-
-300,000,000
-300,000,000
The reduction was re-allocated to the Road Safety
Program
7
State Department for
Commerce and Tourism
Tourism Development and
Promotion
-
-300,000,000
-300,000,000
Re-allocated to Ronald Ngala Utalii College
6
State Department for
Education
General Administration,
Planning and Support
Services
-300,000,000
-
-300,000,000
A reduction in allocation for goods and services
5
The National Treasury
Public Financial Management
-
-325,000,000
-325,000,000
Reduced allocation for IFMIS re-engineering
4
State Department for Science
and Technology
Youth Training and
Development
-76,710,513
-430,965,773
-507,676,286
The Ksh 507.7 million was moved to the University of
Nairobi for Operations and Maintenance
3
State Department for
Environment And Natural
Resources
Environment and Natural
Resources Management and
Protection
-1,000,000,000
-100,000,000
-1,100,000,000
2
The National Treasury
General Administration
Planning and Support
Services
-1,700,000,000
-
-1,700,000,000
1
The Judiciary
Dispensation of Justice
-200,198,073
-1,612,101,927
-1,812,300,000
-237,835
-14,451,181
Largest Decrease in Program Allocation
Average Absolute Change in Individual Programs
-14,213,346
A reduction in allocation for goods and services under
the General Administration Program
Reduction from Human Resource Reforms and Defined
Contributory Scheme
National Treasury’s Role in the 2015/16 Budget
Treasury initially proposed a budget of nearly 1.4 trillion for MDAs in the BPS tabled in February. Infrastructure/energy, education,
and security accounted for 65 percent of sector allocations in the proposed budget. Figure 4 below shows the changes in sector
distribution between 2014/15 and 2015/16.
Parliament’s Role in the 2015/16 Budget
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Figure 4: Sector Allocation Changes between 2014/15 and 2015/16, Budget Policy Statement 2015
30%
Share of the Total 2015/16
Share of the Total 2014/15
27%
26%
25%
22%
22%
20%
16%
15%
15%
10%
8%
8%
6.4% 6.2%
5.2%
5%
0%
Infrastructure +
Energy
Education
Security
State
Administration
Planning and
Devolution
4.6%
4.1% 4%
Parliament, AG,
Judiciary and
Constitutional
Commissions
As Figure 4 shows, sector allocations have shifted significantly
between 2014/15 and 2015/16, with the infrastructure sector
claiming a larger share of the budget as education and
security fell. There was limited narrative explanation of these
changes. The BPS stated that the bulk of budgetary resources
would go to “social” sectors, defined as education and health.
However, as Figure 4 shows, the share of the budget allocated
to education has fallen and health has remained more or less
the same. The budget for security, despite being mentioned
as a priority sector, has also fallen. The one explanation
Water and
Regional
Development
4%
3.9%
Health
3.1% 3.1%
Agriculture
2.6% 2.5%
International
Relations and
Commerce
1.8% 2.1%
Land and
Housing
0.3% 0.4%
Gender, Youth
and Culture
given that was consistent with budget changes was for the
infrastructure sector, where increases were framed in terms of
a greater focus on energy, roads, and rail.
Treasury significantly increased the total budget between
the BPS and the tabled estimates, which increased the deficit.
As can be seen in Table 3, which summarizes the five largest
increases and decreases at program level during this period,
Treasury also made significant changes to programs.
Table 3: Major changes by Treasury between the Tabled Budget Policy Statement and Tabled Budget Estimates
Vote
Program
% Change between the Tabled BPS Ceilings
and Tabled Gross Estimates 2015/16
Recurrent Development
Total
Largest Increase in Program Allocations
Cabinet Affairs
National Statistical Information Services
272%
133%
957%
1,410%
427%
274%
General Administration, Planning and Support Services
176%
-
219%
Tourism Development and Promotion
General Administration Planning and Support Services
Largest Decrease in Program Allocations
State Department for Planning
Public Service Transformation
Ministry of Land Housing and Urban Development Government Buildings
State Department of Transport
Air Transport
State Department of Transport
Government Clearing Services
State Department for Science and Technology
Youth Training and Development
Total Voted Expenditure
12%
132%
351%
519%
212%
205%
-43%
-77%
-2%
-51%
-90%
2%
-37%
-11%
-67%
-100%
-62%
15%
-43%
-43%
-46%
-58%
-76%
8%
The Presidency
State Department for Planning
State Department for Coordination of National
Government
State Department for Commerce and Tourism
Ministry of Information, Communications and Tech
Treasury has not given an explanation of these changes. This is inconsistent with the fact that Treasury must now sell its proposals
to Parliament and the public. Treasury also changed the names and location of programs in the budget between the BPS and the
tabled estimates, suggesting ongoing challenges in adopting the program budget format.
Conclusion
Both Parliament and National Treasury are still adapting to their new roles in the budget process. The “budget-making” Parliament
is still largely following Treasury’s lead without challenging key choices, such as the sector distribution of the budget, the growth
in the deficit, and the ongoing confusion in defining the programs (and therefore objectives) of key ministries. The National
Treasury is failing to follow the PFM Act and is yet to embrace the need for full explanations to persuade Parliament of its budget
priorities.
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Parliament’s Role in the 2015/16 Budget