by Tony Pua
MP for PJ Utara
Oct 25, 2013
MP SPEAKS Stripping the 2014 Budget of its cosmetic makeup, taking away the glossy distractions and analysing the bare bones will provide an extremely clear indication that nothing much will change in Najib Abdul Razak’s second term as prime minister and finance minister .
The Economic Report 2013/14 gave the good news that the expected revenue collection for the current year 2013 is RM224.1 billion, or RM14.4 billion higher than the original budget projection of RM208.7 billion.
By right, the RM14.4 billion increase in revenue should have resulted in a lowered projected budget deficit of four percent to a market-euphoric 2.6 percent. The budget deficit for 2013 should have shrunk from RM39.9 billion to only RM25.6 billion.
However, it didn’t. Despite collecting the significantly higher-than-expected revenue, the deficit for 2013 remained at RM39.3 billion. It means that almost every single sen of extra revenue collected by the government is immediately expended, instead of contributing towards reducing our debt.
What is interesting when you comb through the expenditure figures is that despite the increase in revenue, the actual development expenditure of the government was RM2.7 billion lower than the budgeted RM47.8 billion.
The development expenditure has the larger economic multiplier effect because it represents investments by the government for future higher returns. Development expenditure includes building schools, hospitals and other public infrastructures.
The lower-than-budgeted development expenditure, the higher than expected government revenue means that the government’s operating expenditure exceeded the budget massively. The government overspent in operating expenditure by RM14.3 billion more the original budget of RM201.9 billion.
A forlorn picture…
The above paints a forlorn picture for the government’s public finances because the BN administration has consistently and significantly overspent the budget annually for the past 15 years. It is completely impotent in enforcing financial discipline in government expenditure.
A review of the 2014 Budget will show that it is primed for the same inevitable outcome as those of the past. Najib is asking Parliament to increase the operating expenditure further to RM217.7 billion, despite a massive RM7.3 billion cut in the subsidies budget from RM46.7 billion in 2013 to RM39.4 billion in 2014.
Effectively, that means whatever that is saved from the subsidies reduction goes entirely towards other government operating expenditure.
The biggest beneficiary is the government’s expenditure on “Supplies and Services”, which will enjoy a RM2 billion increase in allocation to RM36.6 billion for 2014.
It is shocking that the government needs to further increase the budget for “Supplies and Services”, especially since the budget for it in 2010 was only RM23.8 billion. That is a 53.8 percent increase in spending for “Supplies and Services” in just four years.
Why is the government asking ordinary Malaysians to tighten their belts and suffer higher prices, but the government itself chooses to continue with its big spending ways with “Supplies and Services”?
The subsidy cuts aren’t going toward reducing our debts or deficits. Instead, it is just providing more funds for the government to go shopping. It should be noted that the annual scandals uncovered by the auditor-general on purchases of ordinary products at outrageous prices are all part of this “Supplies and Services” budget.
One can easily tell that this government has its priorities all wrong in increasing operating expenditure and at the same time reducing development expenditure. From a RM47.8 billion budget in 2013, Najib is proposing a steep cut to only RM44.5 billion in 2014.
This means that the 2014 Budget has the lowest proportion of development expenditure in Malaysian history, of only 17 percent. In 2003, more than 30 percent of the national budget was allocated to development expenditure.
The 2014 Budget paints an obvious picture of a government failing to reform despite a “brave” goods and services tax (GST) proposal. Without any attempt to instil financial spending discipline in the government, as exposed above, it does not matter how much additional revenue, budgeted or otherwise, the government is going to receive.
The money will be spent, not saved or invested. Worse still, the tax ringgit will be spent on the wrong priorities.
Hence, given the above context, the proposed and much-hyped GST isn’t a policy of reform. Instead, it is a measure of desperation to continue filling the coffers of the government so as to reduce the need for the BN adminsitration to cut down on its excesses.
Using the Petronas earnings, the government has created and cultivated a bloated bureaucratic monster that has grown so big over the past decade, Najibnomics takes the easy way out by cutting subsidies and raising taxes to satisfy its out-of-control operating expenditure.