Why This Secrecy?

Of India’s many colonial legacies, the fetish about budget secrecy is one of the most absurd and anachronistic. A British Chancellor of the Exchequer once had to resign after dropping a hint that the tax on cigarettes might go up in his budget proposals. And for some reason we in India have come to believe this is appropriate behaviour. Of course, no minister resigns when corruption in his department is rampant, or officials are callous to public needs or the quality of service they provide. Those are seen as minor matters, but budgetary secrecy is seen as paramount.

Actually, such secrecy goes against the principle of transparency in politics. Secrecy is understandable for security reasons. But the budget is an annual statement of revenue and spending. It does not affect the nations security. It cannot cause communal riots or law and order problems. In short, it has no characteristic that justifies secrecy.

There is no budget secrecy in the USA. There, the President typically talks of his key budget proposals for months before the event, to canvass public support. President George W. Bush has campaigned for a tax cut for over 18 months, and this is now the centre-piece of the budget proposals he has sent to Congress.

In the US, the legislature is under no obligation to accept the President’s proposals. Indeed, in many years the legislature pronounces the President’s proposals dead on arrival, and sets about crafting its own. The Senate comes out with its budgetary proposals. The House of Representatives comes out with its set of proposals. In effect, the country is offered three rival budgets.

Then comes the long and painful process of reaching a consensus. There is a lot of arm-twisting and bargaining, often on the basis of you scratch my back and I’ll scratch yours. Despite these frantic deal-making efforts, deadlock often occurs. Often the deadline for the passing the budget cannot be met, and the Congress resorts to a continuing resolution (the equivalent of an Indian vote on account) to enable salaries and other essential payments to be made temporarily. Finally, after months of exhausted bargaining, an agreement is reached and the budget is passed.

Obviously, there is no secrecy of proposals in such a system. The three rival budgets are spelled out in detail, for all to see. The differences are debated in public. When compromises are struck and changes made, these are in open view. You can scream that the compromises are opportunistic and cynical, but nobody screams that budgetary secrecy is being violated. The process may be very messy but is transparent.

Why do the British and Indian legislatures follow a policy of secrecy? Because of the fear that if tax changes are known in advance, then some traders can stockpile goods: they can buy goods pre-tax and sell post-tax, making a windfall profit. Legislators in the USA cannot understand why this is an issue. If advance notice is given that taxes on a product will go up in one month’s time, individuals can stock up no less than traders. Anyway, budget-time is hardly the only time of the year when prices rise or fall. Everybody knows that discount sales take place after Christmas, and yet that is not a Santa Claus secret. So what’s the problem in budgetary openness?

The real problem is that in India we are obsessed with the idea that the budget is mainly about niggling changes in the excise duty and customs duty on this item or the other. Few Indians think of the budget as a national decision on how taxpayers money is spent on different areas. Indeed, MPs are least interested in debating demands for grants for individual ministries, and would rather stage walk-outs and dharnas, which they believe is the main purpose of Parliament.

Now, if you are a paan-wala or bidi-wala, your main concern may indeed be whether the tax on cigarettes and paan masala is going to go up or down a few paise. For such people, the prospect of making some money by stockpiling goods may indeed be a major one. Those with a similar approach may regard budget secrecy as vital to stop the practice. But if you see the budget as an altogether larger issue of how the people’s money is to be raised and spent, you will wonder what the fuss is about.

Let us abandon this silly colonial legacy. The government should come out with a set of budgetary projections and tax proposals in early January. Opposition parties should come out with rival budgetary proposals within the next month. They can be assisted by an independent Parliamentary Budget Office, akin to the Congressional Budget Office in the USA. Then the various parties proposals can be debated in the budget session and a decision reached.

This will rid the budget of not only secrecy but much of the unwarranted hoopla that now surrounds it. Paan-walas will not understand the change in approach, but should we only have paan-wala budgets?

What do you think?