Budget focus

Monday, 19 November 2012 00:00 - - {{hitsCtrl.values.hits}}

PARLIAMENT uproar on the second reading of the Budget will pass under the radar as an expected result of a ruling party with a two-thirds majority in Parliament. However, the people’s dissatisfaction over the Budget has some serious resonance on the overall economic equitability.

The main point of contention highlighted is that the Budget makes way for cheaper sports cars due to increased registration costs that will see the poor man’s vehicles going up by as much as Rs. 250,000, while more expensive SUVs and luxury cars will continue to be available to the political powerful through duty free permits. To add insult to injury, the legal restriction of permit holders not being able to transfer ownership for three years has also lifted, opening the path for more wheeling and dealing among the lucky few.

Lack of salary hikes and other perks are understandable given the weak nature of the economy, but Verite Research, a media think tank, points out that the estimation and allocation weaknesses of the 2012 Budget are repeated.

It points out in a report that criticism of the Budget took many forms: political parties, especially the UNP and JVP, were strident in their negativity, but did not provide substantive analysis to justify their stance.

The TNA was alone in speaking about the political posture of the Budget, which presented the provincial council system as a problem rather than a solution in formulating economic policies that were in the best interest of the people. The LSSP, though a coalition partner, was critical of the Budget, showing that minor parties within the coalition are perhaps budging against the status quo.

Statements that had positive sentiments on the Budget did not exhibit clarity of analysis either. The Budget is reported as allocating 4.1% of GDP for education, when the actual amount, calculated by Verité Research, is 1.51% of GDP – the higher figure in the Budget speech being the amount spent by public and private means. Despite academics quoted as praising the increase in public sector salaries, without evaluating its adequacy, calculations show that inflation will more than offset the increase.

Opinion articles and civil society groups (especially trade unions) were more critical than positive: Several questioned the relatively low level of welfare spending, and the gap between the increase in prices (inflation) and the increase in public sector salaries.

Verité Research’s analytical report on Budget 2012 said that the 19% growth target for Government revenue was too optimistic. The actual was 13%. But that same 19% growth projection is repeated in Budget 2013.

Meanwhile, the defence budget has continued to balloon, with some of the largest increases going to the Air Force, where capital and recurrent expenditure increase hugely, by about 300% and 30% respectively.

Overall the Budget can be seen as a testimony to the skewed policies of the Government that has little regard for the needs of the public. Incentives for investment and the private sector were also lacking with few concessions made to empower industries. The “Government agenda as usual” stance is unlikely to gain it any fresh supporters, but will continue worries that long-term development goals will only be met by increased foreign loans.