News Features

Vote on account is a prudent course

By a Special Correspondent
The General Election is due after April since the term of office of the present Parliament is due to end. Technically it is possible for the Government to pass a full budget for next year. There is enough time to do so. There is also provision in our Constitution for the President to authorise expenditure for a limited period when Parliament is dissolved. Paragraphs (3) and (4) of Article 150 provide for a situation in which Parliament has been dissolved before it has allocated funds through the budget. The President is then empowered to authorise expenditure for the maintenance of Public Services for a period of 3 months from the date on which the new Parliament is scheduled to meet. So technically there is no urgency for a Vote on Account.

But if the government were to do so it would be tempted to engage in populist expenditure. That would make a mockery of the budget which is a serious plan of expenditure for the year which takes into account the macro-economic imbalances in the economy. The Government has agreed with the IMF to cut down the budget deficit to 7% of the GDP. This, even the IMF has agreed is a difficult exercise. We would say that it is a mission impossible given the need to maintain our welfare state which includes free education and free healthcare which even the richest economies like the USA have not undertaken. Economists would say we made the wrong choices in the past when we opted for such expenditures instead of promoting direct production oriented expenditures like infrastructure as China and the East Asian NICs did. Be that as it may, there is certainly no scope for more of such economic populism to win elections. Any attempt to do so would risk losing the next tranche of the IMF loan.

The Opposition would say that the government is dodging the issue of telling the people about the austerity that is due in the coming year and its inability to meet the targets set by the IMF. But in the larger interest of the country it is no doubt better to have a Vote on Account rather than a populist budget.

Apart from this, the Minister of Finance will have to disclose the actual expenditure and revenue figures of the current year. They will also show the revised estimates of the expenditure incurred by the government during the financial year that is coming to an end. These estimates provide an assessment of how efficiently the government spent its resources. There are also the revised estimates of the government revenue from different sources. The public can then see how effective has been the macro-economic management of the economy. So, a vote-on-account gives one an idea of the effectiveness of the policies to mobilise tax and non-tax revenues. A vote-on-account also gives an idea of the tax compliance, tax buoyancy in different segments of the economy and of the effectiveness of the policies to mobilise tax as well as non-tax revenues.

Most importantly, the Finance Minister also makes a speech before seeking Parliamentís approval of the vote-on-account. That speech must contain the Finance Ministerís intentions on the economic policy front. True, he cannot announce the governmentís decisions in a vote-on-account speech. But he can surely give enough indications of what he would like to do if given an opportunity to return to Parliament as Finance Minister after the elections.

A vote-on-account, on the other hand, is a safe option. Politically also, it can be very useful. What is a vote-on-account? This is primarily a finance ministerís statement to seek Parliamentís approval of the obligatory expenditure that the government has to incur for the first three or four months of a financial year. A greater opportunity would be to present a full Budget after the elections. Whichever political party comes to power, the new finance minister can be much more bold in view of a clear five-year tenure of the government.

There is also the view that if general elections are to be held in a few month this parliament should have no moral authority to bind or restrict the right of a new government to present its own budget since it is theoretically possible for a different political party to come into power.

The hesitating policy reforms of the past few years should then give way to a more determined thrust towards faster economic policy changes like introducing greater flexibility in the labour laws, re-thinking the anti-privatisation policy, and introducing tax reforms including the removal of the unjustifiable exemptions from tax now given to politicians and public servants.