By ONG KIAN MING (Serdang Member of
Parliament)
To the layman, the budget can be a very confusing thing.
There are a slew of programmes and expenditure items announced, many of which
cost millions and some of which costs billions of ringgit. Sometimes even the
financially literate among us may be confused by the large number of items
announced in the budget speech and also listed in the budget estimates (which
is over 700 pages long).
It is often necessary to dig deep into the budget in
order to understand the financial and policy implications of some of these
items. I call this ‘reading between the lines’ of the budget. To make this
exercise easier to understand, I have divided these spending items into
different categories.
For each of the items listed below, I will also explain
their impact on the target groups.
Category 1: Existing expenditure items with very little
change in allocation
Given the size of the budget (RM261 billion for 2017), it
is not surprising that there are thousands of expenditure items that are listed
in the budget estimates document that accompanies the budget speech.
But the majority of these items, even if the amount is
big, they are usually items that were already in existence in previous budgets.
For example, line 225 of the budget speech outlines a
number of assistance programmes to poor children in primary and secondary
schools such as RM1.1 billion for the Hostel Meal Assistance Program and RM300
million for the 1Malaysia Supplementary Food Programme for primary school
students (Figure 1 below).
The budget expenditure estimates for the Minister of
Education show that all of these are pre-existing programmes and that the 2017
budget allocation is not significantly different from the 2016 allocation.
The Hostel Meal Assistance Programme’s budget has been
reduced by RM15 million, the 1Malaysia Supplementary Food Programme’s budget
has been increased by RM50 million, the transport subsidy for students in
hostels has been reduced by RM3.6m while the text book budget has been
increased by RM25 million.
The food subsidy and the per capita grant for pre-school
remains at the 2016 level (Figure 2 below):
Category 2: Items with significant budget cuts
The prime minister also announced an allocation of RM7.4
billion for the 20 public universities and RM1.4 billion for the four teaching
hospitals. While this allocation may seem like very large figures, the budget
expenditure estimates tell a very different story.
The operating expenditure of the public universities has
been reduced by more than RM1.4 billion from RM7.6 billion in 2016 and RM6.2
billion in 2017. At the same time, the budget allocation for the three teaching
hospitals of PPUM, PPUKM and HUSM has been reduced by more than RM150 million
from RM1.18 billion in 2016 to RM1.02 billion in 2017.
The expenditure cuts to the public universities are just
one of the many line items which have experienced significant allocation
reductions. A more thorough analysis of the budget estimates will reveal more
of such items.
This clearly shows the underlying situation of a
government under tremendous financial strain.
Category 3: Allocations that are no longer in the budget
While many people will pay attention to the items that
were announced by the prime minister, perhaps as much care needs to be given to
items that were NOT announced and have been taken off the budget entirely.
For example, in the 2016 budget, a ‘one-off’ payment of
RM593 million was allocated to compensate the toll concessionaires for deferred
toll hikes under the works minister.
However, this item has totally disappeared from the 2017
Budget!
This can be seen in the significant drop in the fixed charges
and payments expenditure from RM603 million in 2016 to a mere RM385,000 in
2017. This means that there will almost certainly be more toll hikes including
on the Plus-owned North-South Expressway in 2017, a contravention of BN’s GE13
manifesto promise.
Another item that has disappeared from the budget
estimates is the cooking oil
subsidy. The Cooking Oil Stabilisation Scheme (COSS) subsidy is
under the Commodities and Plantations Ministry but there is no such line item
for this programme in the 2017 budget.
So contrary to the promise of the Second Finance
Minister, Johari Abdul Ghani, there is no indication that this subsidy programme
will continue under the 2017 Budget.1
It is almost certain that there are other items that have
been taken out of the budget entirely which will have a direct impact on the
cost of living of voters.
Category 4: New allocations which are ‘dubious’ in nature
There was much speculation that our healthcare budget
would be cut in the 2017 budget. I was pleasantly surprised when I saw that the
operational expenditure for the health minister was actually increased from
RM21.4 billion in 2016 to RM 23.4 billion in 2017, an increase of RM2 billion.
But when I examined the budget estimates for the Health
Ministry, I was shocked to find a special programme called 'Privatisation of
Hospital Support Services' costing RM2.01 billion for 2017!
As far as I know, the ministry has not made any
announcements on the privatisation of support services (much of which is
sub-contracted out now anyway). And the prime minister did not make any mention
of this new item in his budget speech.
How can such a large expenditure item make its way into
the budget without any further clarification? How many other such items will we
find in the budget estimates?
Category 5: Announced expenditure which are not in the
2017 budget
Many of the big ticket expenditure items announced in the
budget speech are actually not found in the budget estimates. For example, the
proposed 600km East Coast Rail Line from Tumpat to Kuala Lumpur, which is
estimated to cost RM55 billion, is not listed as an expenditure item.
Just like the expenditure on the MRT Line 1 and the LRT
Extension, these infrastructure projects will be funded by special purpose
vehicles (SPVs) that will borrow money under their own balance sheet.
The problem with such a model of financing is that it
hides the true burden of expenditure on the government. Many of these projects
will not be able to pay for the capital expenditure and the related interest
expenses. Which means the government will eventually have to step in to service
the debt of these SPVs.
When that happens, the squeeze on the government will
likely result in a steep increase in the GST rate in order to help the
government ‘bail-out’ these SPVs.
An initial reading between the lines of the 2017 Budget
has already raised many questions regarding items that are present as well as
those which are absent from the budget estimates.
I am sure that other items
will be discovered as more MPs analyse and investigate the details of the 2017
‘stealth’ budget.
No comments:
Post a Comment