Get ready for intriguing figures, roles and noisy budget making

Treasury Cabinet Secretary Njuguna Ndungu. [File, Standard] On Thursday, Treasury Cabinet Secretary Njuguna Ndungu will read out the Budget Statement to Kenyans. For those with long memories, we know this is not the Budget Speech of yore. Indeed, our Constitution does not require any such address, since Parliament "makes" the Budget from information collated and shared by the three arms of Government. Actually, each arm of government separately submits its own budget to the National Assembly. The Executive (via National Treasury), Judiciary (Judiciary Fund as Judiciary plus Judicial Service Commission) and Parliament (through a Parliamentary Service Commission which now has four budget votes). The simple way to put this is that the Treasury CS does not present "his/her budget speech", but simply communicates "a statement" on the budget made by Parliament. One of the administrative reasons given for why we still need this statement is to "harmonise, align and coordinate" with our East African Community neighbours on largely simultaneous budget readings, especially given that their laws still envisage proper, briefcase-style budget speeches. We don't need a briefcase. And that's the constitutional beauty in our setting. Spending estimates are known in advance, and the budget takes effect when the self-same Parliament approves the Appropriations Bill which the President hopefully signs into law. Revenue-raising measures are known in advance (witness our ongoing public debate) and they take effect when Parliament approves the Finance Bill which, again, the President hopefully signs into law. I use the term Parliament here although this budget-making effort resides in the National Assembly, while the Senate is largely a bystander. Without getting into the long story of Presidential versus Parliamentary systems, ours is a US-style approach by constitutional design which, in truth, the National Treasury, by practice, appears keen to resist. Our separate Executive-Judiciary-Parliament submissions are supposed to mirror, in practice as well as on paper, the US-style President's Budget plus Judiciary and Congress budgets. This picture is often lost to most in understanding the budget process that our Constitution demands. Take the spending side which ends up as appropriations. Kenya Kwanza's baseline was Jubilee's original 2022/23 budget estimates of around Sh4 trillion (Sh3.3 trillion after excluding Sh700 billion in debt redemption). This stayed at about the same total (including Sh685 trillion in debt redemption) in the 2022/23 supplementary budget estimates currently being executed. Now, let's take the 2023/24 budget. In December 2022, the National Treasury laid out a budget frame of Sh4.44 trillion (including Sh800 billion in debt redemption) in its Budget Review and Outlook Paper (BROP). Parliament doesn't really look at BROP. This later shot up, in the February 2023 Budget Policy Statement (BPS) approved by Parliament, to Sh4.51 trillion (Sh850 billion in debt redemptions). Budget estimates submitted to Parliament totalled Sh4.37 trillion, but the National Assembly's Budget and Appropriations Committee re-upped this to Sh4.45 trillion. Both figures include Sh850 billion in debt redemptions, including the infamous Eurobond. That budget picture from the spending side is the closest one gets to seeing public resources as monopoly money. By the time we get to the Budget Statement text, we have removed redemptions, so the budget "officially" rises from Sh3.3 trillion in 2022/23 to Sh3.7 trillion in 2023/24! Let me leave these figures here with a double-edged question - where is the promised fiscal restraint from Kenya Kwanza, but more to the point, what role does Parliament play in driving a better, not bigger, spending agenda if it simply rubber-stamps, then also pads, the numbers? Here's the interesting part. The Budget Committee's report was tabled on Tuesday. I followed the discussions on a Thursday characterised by chaos in the National Assembly over Azimio's fruitless whipping of its Deputy Chief Whip. So we had Azimio doing battle with the Speaker while Kenya Kwanza discussed the Committee report, which was reportedly passed. Now here's the twist. If the report was passed, does this technically (if not procedurally) mean we already have an approved spending programme; an appropriations Bill (real or virtual) - before we get the Budget Statement - already prepped for Presidential assent? Wild speculation? Well, that evening, Kenya Kwanza's National Assembly Whip suggested on Citizen TV that the appropriations Bill was, for all intents and purposes, done and dusted despite Azimio's high-jinks. Is Kenya Kwanza pursuing a smart interpretation and implementation of the Constitution? Remember, technically the budget statement is irrelevant to approval of the appropriations Bill. You have your say in the budget by public participation starting in the previous August/September! Let's shift this train of thought to the revenue side of things. We stick with the big numbers. In 2021/22, Jubilee delivered a revenue collection of Sh2.2 trillion of which ordinary revenue was Sh1.92 trillion and Sh280 billion represented appropriations in aid (internal MDA revenues). The tax take in ordinary revenue was Sh1.77 trillion with the rest in investment and other income. The original revenue projection for the current 2022/23 fiscal year was set at Sh2.46 trillion (ordinary revenue Sh2.14 trillion of which the tax take was Sh2.02 trillion) but revised upwards to Sh2.53 trillion (ordinary revenue Sh2.19 trillion with the tax take at Sh2.03 trillion) in the supplementary budget. Sticking specifically with taxes, the latest published exchequer statement from Treasury covering the period to 28th April 2023 (ten months) inexplicably pushes these targets up from Sh2.07 trillion in the original estimates to Sh2.11 trillion in the revised estimates. In any event, the tax take was recorded at Sh1.57 trillion for this first ten months. Three points are evident. On a pro-rated basis at Sh157 billion a month, this works out at a total tax take of Sh1.88 trillion for 2022/23, or 6 per cent growth above 2021/22. Achieving the BPS target would require monthly collections in May and June to average Sh230 billion (46 per cent above the current rate), while hitting the higher exchequer target needs 72% growth to Sh270 billion in each month. We need a closing sprint similar to that which brings global respect to our long-distance runners. From the revenue side, think of this as the context for two things. First, the revenue plan (forecast) for 2023/24. Second, the Finance Bill (2023) that has recently engaged Kenyans so impressively. Following a similar pathway to spending, and sticking only with taxes for the sake of argument, the 2022 BROP projected the tax take at Sh2.43 trillion rising from anything between a pessimistic Sh1.88 trillion to an idealistic Sh2.11 trillion in 2022/23 based on the numbers described earlier. But we said Parliament doesn't look at BROP, right? So we jump to the BPS approved by Parliament at Sh2.43 trillion in taxes. Against the 2022/23 revised estimates (Sh2.03 trillion), a fairly uniform growth rate of 19-20 per cent is projected across the tax bands (VAT at 20 per cent, the rest at 19 per cent). Against the pessimistic Sh1.88 trillion projection for 2022/23 above, the growth rate required across the overall tax base is almost 30 per cent! The mind is boggled! So here is the picture before Parliament as our budget making institution, not political rubber stamp. A gross spending package of Sh4.45 trillion, pared down to Sh3.67 trillion after taking out debt redemptions. An ambitious tax target, before other revenues and any borrowing, of Sh2.43 trillion. As hustlers might put it, "the math is not mathing". Given that our revenue incorrectly always chases expenditure, the Finance Bill reads like a "moonshot" presented in broad daylight. In a proper working system respectful of the commands laid out in our Constitution, Parliament might have started by "mathing the math" before the "math mathed" them. As a stepping stone to building a Parliament-approved (not Treasury or KRA-driven) Revenue Plan sitting above the Finance Bill. In a budget-making role extending beyond spending, to revenue and debt approvals. What then for today's National Assembly's Finance and Planning Committee, now ensconced in a retreat working out how to capture over 1,000 written submissions and 100 oral presentations, as well as multiple discussion forums across mainstream and social media as well as other groups? The committee's report has been promised for Parliament next Tuesday, with debate expected to begin before Thursday's budget statement is read. At the time of writing, the media speculates that amendments have been pared down to seven contentious issues including the housing levy and fund, higher withholding tax on content creators and full VAT on petroleum products. So we should expect an interesting, and possibly noisy, coming budget week. My popcorn is ready. As many are reflecting, this noisier-than-usual budget season has offered Kenyans a civic education moment on "bread and butter issues" beyond complexities like the Constitution or BBI. Yet, as we head into budget week, the real point this article asks us to quietly ponder is how and when Parliament assumes its rightful role as the maker, not taker, of the budget from spending to revenue to debt. Treat this thought as your parliamentary reference point.

Get ready for intriguing figures, roles and noisy budget making

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