Legality of the Budget: Citizen’s power over the public purse

Finance Minister Ravi Karunanayake presenting Budget 2016 in Parliament last week

Introduction – Theory behind spending “public money” in a democracy? 

Given that one-in-every-10 words we hear these days have something to do with “The Budget,” I thought of posting a few related thoughts, purely from a politico-legal perspective, for public dialogue and debate; with the primary intention of invoking a thought process in the all-powerful Sri Lankan citizenry, who are at least in theory and in Law, supposedly the supreme authority over public expenditure, fiscal policy and management of the State’s resources. 

As man’s unlimited wants grew out of proportion with the limited resources available, the same constraints on time spent in governing a country, such as the decision making process of allocating its limited resources to meet these demands also automatically evolved; from “direct-democracy” as practiced in the historical nation-states like Athens or Sparta where the citizens themselves directly participated in decision making to what we have now, which is “representative-democracy”, where we elect a few chaps periodically and pay them a salary (and in my opinion excessive perks) to do this job for us. A primary annual task of these elected representatives is to debate and arrive at the best possible manner of allocating our limited resources to meet our unlimited requirements, by approval or dissent of the Appropriation Bill; in popular parlance referred to simply as “The Budget”. 

 

Legal/Constitutional basis for public expenditure

As we know the absolute sovereign of this Republic (at least in theory) is us, the Citizen, in terms of Article 3 of the Constitution; not for instance some king or queen as in a monarchy and therefore any governmental action including public expenditure must be sanctioned by us. So how does this scheme work in terms of the law? 

• Expenditure planning by the Executive – by Article 4(b) read with Article 43 we have authorised our representatives holding our Executive Power, the President and Cabinet to analyse our competing interests with the resources available for this year (not how much they get to spend and put up shows for us on TV) and plan out the various allocations to ministries, which is then presented as the Budget through the Finance Minister; 
• Debate and approval or disproval by the Legislature – by Article 4(a) we have vested our Legislative Power in a Parliament and the checks and balances work in two principal ways:

to debate whether the Budget that has been presented is indeed the right way to manage our monies (not agree simply because they get some gratification thrown their way by the Executive) and if not, to defeat it; 

Their job doesn’t end there, as once those monies are allocated they are supposed to monitor its actual expenditure via parliamentary oversight committees, etc. and ensure that our intended purposes have been met 

• Judicial Review – By Article 4(c) we have sanctified for our punitive powers in public trust in a system of Courts, Tribunals and a judicial system, which is meant to ensure that those who violate our laws and thereby harm us are dealt with and disciplined

This is how the Sri Lankan Citizen expects to exercise his/her absolute power over public expenditure, which looks very promising indeed in theory; but how is it practiced? 

An important correction – Misnomer over the Budget speech

I heard it said recently over the media that no sooner the Budget speech was read in Parliament, that gave sanctity to act upon its proposals; so basically traders could run and paint the town pink (if they so wished), increase prices of goods and services based on Budget proposals – this is wrong law! 

What then is the “legal basis” for acting upon the Budget? Erskine May argues that a constitutional principle operates, that it must be “authorised by law” which on this occasion comes in the form of parliamentary assent for the “Appropriation Bill” (which upon such assent becomes “Law”). Dicey too follows, that “the power over the purse” (by Parliament) provides the legal basis for the constitutional subordination of the Executive to Parliament and therefore by implication to the People; who in Sri Lanka are the absolute repositories of this power. 

Speaking in political scientific theory there is also a “quantitative” and a “qualitative” distinction of this power of the People. The votes (in favour or opposed) represent our choice of priorities amongst competing interests for resources this year. This is why the Appropriation Bill must be won in a vote to become law and only then will it acquire a legal binding; this is why a government must return to the House and obtain another vote if they were to change any proposals and a government can fall if the vote is continuously defeated. The Bill alone does not attribute legality; it only sets out the quantitative parameters for spending and it is only permanent legislation (such as Acts passed for separate projects thereafter or existing Acts under which subsequent expenditure is incurred) that provides the qualitative legal basis for that authorisation of spending.

Therefore it is good to stand corrected, perhaps for the media too not to encourage traders or dealers to breach this important public law; proposals do not attract legality until they are approved by the People through this vote! 

 

Accountability – Checks on public expenditure

This is once again an area which I feel we lose out on as a democracy, because whilst everyone including the buffalo tied to the coconut tree in the yard is spellbound to hear what “they will get from the budget” on the day of the speech; everyone including that same buffalo and the so called Opposition (it is not clear if we have one or more or none in the present Parliament) forget it altogether and we await for another speech the following year. 

So how important is budgetary monitoring? How many civil society groups do we have, perhaps with dedicated economists who will engage the public through regular discourse on what had been assured and what had been delivered/not delivered? I will let you be the judge! There are several ways in which we the people may question public expenditure: 

• Via the office of the Auditor General – which is meant to carry out an annual audit on the various ministerial allocations of monies and how they have been spent 

It is hoped that we will have the proposed National Audit Legislation coming out soon. We are made to understand that provision has been made for VFM audits (Value for Money) rather than the age-old expenditure accounting, which is simply to see whether there is a bill in the file for the monies spent. We all know how easy it is to get such a “bill in the file” whether or not you have spent the money 

VFM Audit in contrast will permit the Officers of the Auditor General’s Dept. to dig deep into the various heads of expenditure and actually question officials on how much “value for the money” was achieved. A VFM audit must ensure that monies were spent:

• Economically – what efforts have been taken to minimise the costs involved in that particular project 
• Efficiently – has the spending in question achieved or obtained maximum results achievable or in other words, has it performed to capacity, 
• Effectively – what is the extent to which the policy objectives of the government in authorising that spending had been achieved? 
• Public Accounts Committee/COPE – These are creatures of parliament itself, ideally to be under a Chairmanship of an opposition MP so that there will be a transparent process 
• Judicial Review by Courts – Article 4(c) is a constitutional right that it is the “People’s Judicial Power” that is exercised through Courts and Tribunals and if the People’s Executive is not attending to public expenditure as it ought to, it is a constitutional safeguard or a checking mechanism available to the citizen to challenge it before Courts 

How will our Courts respond to this challenge?

Traditionally Courts have exercised restraint in stepping into what is generally considered a “no-go area” for judges (of public policy) which is regarded as best left to elected people’s representatives in Parliament. However consistent breaches of the People’s Public Trust by them left Courts with no alternative but to answer several public spirited citizens that came before it during the early 2001-2004 era with valid grievances of corruption and abuse of public funds, thus creating a wealth of legal authority in Public Interest Litigation (PIL) such as those cases involving P-TOMs, Waters Edge, SLIC. Unfortunately we do not see similar public applications to Court over several recent issues, such as Avant-Garde or Dubai money affairs, as perhaps those citizens are no more or they are no longer interested. 

Why Courts have generally left such spending to the checks by the system itself, via institutions such as the Treasury, Public Accounts Committees or the Auditor General was principally predicated on the assumption that these mechanisms were strong enough to regulate the system. However by the political paradox of the previously independent “Public/Civil Servant”, some of whom at times in our golden history had the will to question even the Head of the Executive being rendered nothing but a simple “Government Servant” or a “Yes-Man” for any party of the day, the people must now find other avenues of checking on how our monies are spent and how best we can assure ourselves the “good governance” and the “rule of law” that was promised to us; which some of us rallied the people to demand, which they answered with a resounding “YES” both on 8 January and 17 August this year.

Power to the People!