Budget 2020: What influences where the money goes


  • Vital Signs
  • Wednesday, 18 Sep 2019

In recent weeks, the Ministries of Health (MOH) and Finance (MOF) have announced that they have convened multiple meetings involving many stakeholders, to create a more thoughtful, more inclusive and more bottoms-up Budget 2020.

This consultation process is a welcome one, although of course there will never be an end to the number of stakeholders who want to be consulted.

Our Government has proclaimed their intention to fight corruption, maintain hospitals and ambulances, and improve procurement of medicines.

The best way to achieve these promises is by allocating enough resources into the relevant agencies.

In short, the resource allocation exercise must match their rhetoric and demonstrate their priorities.

Over the past few weeks, we have extensively discussed money, from proposing a predictable mechanism for MOH budgets to suggesting increased stewardship for those funds and providing ideas for specific allocations.

I’ve also suggested specific ways to control the costs of hospital bills or drug prices.

This focus on money is necessary because in a modern democracy, the allocation of resources are the real determinants of our democratic and social priorities.

Of course, there are many other important aspects of a democracy, not just the act of spending money.

For example, democracies must protect human rights, ensure equitable creation and distribution of wealth, and protect the most vulnerable parts of a society.

However, the front-line delivery of any democratic ideals or political promises requires financial resources.

In the end, whether we like it or not, it always comes back to money.

Checks and balances

Since 1959, American economist Richard A. Musgrave’s public finance theory wants to believe that federal budgets should be motivated by three principles: efficient resource allocations, equal distribution of wealth and promotion of stable growth over time.

In reality however, federal budgets are captured by politics.

Malaysia’s Federal Budget exercises are resource allocation exercises performed on a grand scale.

Society confers legitimacy on this process by selecting a new Government every five years through General Elections.

In other words, our democracy allows us to choose who makes resource allocation decisions for us; this is a form of check and balance.

There are additional “real-time” checks and balances inside the government, because five years is a long time to ensure accountability.

Zero-based budgeting and outcomes-based budgeting are commonly-used accounting tools to ensure responsible allocation decisions.

The Auditor-General will also retrospectively ensure the quality of allocation decisions.

Checks and balances also exist outside the Government, in the form of a responsible media, a vibrant civil society, citizens performing their public duty to appropriately challenge their government, and the presence of a mature and thoughtful Opposition coalition.

In short, every citizen and organization should behave like mature adults and fulfil their civic duties.

Despite these checks and balances, there are multiple reasons why any resource allocation exercise in any organisation will always be difficult and imperfect.

Let’s start with three obvious reasons, as we consider the parallels between a government’s Federal Budget or a family’s monthly budget.

One, there are always finite sources of income (taxes for the government or salaries for families), but infinite competing needs (24 ministries or the multiple purchases of a typical family).

Two, short-term and unexpected urgencies (a massive flood or a personal health emergency) must be balanced against long-term and predictably important needs (multi-year reform of health systems or saving for our children’s education).

Three, while economic decisions should be rational, it’s much more likely to be irrational or emotional.

This week, we’ll examine four other mega-reasons why the Government’s Budget 2020 exercise can be captured by unfair decisions.

Next week, we’ll explore ways to prevent these risks to increase budgetary justice in our society.

Improving justice

There are four mega-reasons that can reduce the justice of resource allocation decisions, other than the obvious challenges discussed above.

We’ll describe them neutrally, because we must accept these mega-reasons as facts of life and then find ways to mitigate them. Although it may be desirable to eliminate the following mega-reasons, the real world simply wouldn’t allow it.

The first mega-reason that can create injustice in any Budget exercise is the presence of vested interests and lobby groups.

Lobbyists exist as part of any society, and is a legitimate activity (PDF) in any democracy. It’s distinct from corruption, an obvious and unacceptable threat to any democracy.

In some countries, lobbyists must be registered and must declare their affiliations and paymasters.

This is not the case in Malaysia, so we can’t know the extent of commercial lobby groups and vested interests. But make no mistake, they are present within our system and exert their influence in unseen (and potentially unfair) ways.

The second mega-reason is the dynamics of the Pakatan Harapan ruling coalition.

The rakyat may not see this, but it’s possible to imagine that restless or dissatisfied component parties or individual leaders can be placated with increased allocations to their ministries, whether or not their ministries deserve it.

We may think this is not ideal, but then again coalition politics inevitably require some compromise in allocation of financial or political capital to preserve its harmony and stability.

Such is the reality of coalition politics all around the world. Even if Malaysia moves from two-coalition to two-party politics, that reality also has its own advantages and disadvantages.

The third mega-reason that reduces the justice of allocations is inappropriate citizen pressure.

This happens when more money is allocated to those who shout the loudest, not to those who deserve it the most.

Another frequent scenario is that more funds are allocated to a specific cause only because there’s a famous actor, singer or wife of a senior politician who suffers from this problem or has taken this up – let’s call this the Angelina Jolie Cambodian Adoption Scenario.

Yet another frequent scenario is that any decision-maker who comes into power will be influenced by the emotional baggage and biases of their friends or advisers, even if there is absolutely no corruption or cronyism.

The final mega-reason that reduces the justice of allocations is our biological and political instinct for short-termist behaviour.

Human beings are generally distracted by short-term gratification, and we’re just not good at long-term planning.

We can see how the rapid-fire nature of social media can influence public policy, with the news cycle dominated by the outrage-of-the-day by those who are screaming the loudest.

Such short attention spans result in resource allocation exercises being dominated by perceived magically convenient and politically expedient overnight solutions.

Each of these mega-reasons separately reduce the justice and fairness of budget allocations. Their simultaneous existence means that they magnify each other’s effects in a vicious circle.

We’ll explore some concrete solutions next week. Right now, it will be a fantastic start if we simply recognise the mega-reasons behind the possible injustices when deciding on our Federal Budget.

Dr Khor Swee Kheng has postgraduate degrees in internal medicine and public health, and has worked in five health sectors across three continents. He is currently specialising in health systems and policy in a public university and a local think tank.


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