Fixing fiscal laws to have fair elections
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Fixing fiscal laws to have fair elections

As the election campaign heats up, political parties are fiercely competing to win votes by offering generous cash handouts, raising concerns about their impact on the country's fiscal discipline for the incoming administration.

Such concerns are warranted. Yet the focus on the post-election financial burden should not overshadow the outgoing administration's last-minute budget spending for political gain, which also endangers fiscal discipline.

The 2018 State Fiscal and Financial Act mandates that the government exercise strict fiscal restraint and forbids it from pursuing political gain at the expense of the nation's long-term interests. This law also establishes fiscal rules and regulations on how the government must manage state income and expenditure while imposing a limit on the accumulation of public debt.

Yet, legal loopholes can be exploited during an election period. In order to advance their political agenda, departing administrations may decide to forgo transparency by going on a spending binge right before leaving office, which is a blatant breach of fiscal responsibility.

Such spending for political gain includes the government's approval towards the end of its rule to increase the salaries of certain groups of officials to win their support at the polls.

Just one week before parliament was dissolved on March 20, the cabinet approved raising the annual salaries of 5,300 sub-district administrative organization workers, or Or Bor Tor, across the nation to 13.7 billion baht, a 44% increase on the previous salary rate.

The very same day, the cabinet approved a salary increase for sub-district heads, or kamnans, from 10,000 to 12,000 baht, village heads from 8,000 to 10,000 baht, and sub-district health officials from 6,000 to 7,000 baht.

A week earlier, the cabinet approved more monthly financial support for village health volunteers across the country from 1,000 to 2,000 baht. Notably, their pay was increased by the previous administration from 600 to 1,000 baht, also just before an election.

In addition to salary increases for groups of officials who could act as voting bases, another strategy is to approve projects to garner public support through quasi-fiscal channels.

This is accomplished through the cabinet's approval for state loans from the government's specialised financial institutions like the Government Savings Bank or the Bank for Agricultural and Agricultural Cooperatives (BAAC). According to the loan agreements, these banks will finance specific government initiatives, and the succeeding administration will repay the loans from the national coffers.

A recent example is the Prayut administration's approval of the One Million Cows Project, which is being managed by the National Village and Urban Community Fund Office through loans from BAAC. Under this four-year project, the village fund office will lend money to farming families so they can each purchase two cows, and the following administration will repay the bank for the loans.

The outgoing government may have the best of intentions, but these policies are tied to future national budget spending. The government must, therefore, uphold fiscal responsibility and transparency by outlining the expenditure in detail and indicating how it will affect the budget of the administration that follows. In addition, using the budget in this manner gives an advantage over rival parties not in the coalition.

The problem is the law on fiscal discipline does not provide clear rules on how the outgoing and caretaking government spends the state budget during an election period.

To close these legal loopholes, oversight of the final budgetary expenditures of a departing government is needed.

Such a budgetary oversight system to guarantee fiscal discipline and fair elections is not uncommon in other countries.

In Australia, the Charter of Budget Honesty Act mandates that the government publish an economic and financial report within ten days after the election date is set, and the outgoing government has a responsibility to inform the populace of the economic and financial situation before an election.

The report includes the amount of public debt, long-term fiscal liabilities, and budgetary spending. The report's objective is to provide information to assist voters in their voting decisions.

Meanwhile, in Brazil, raising the pay of public employees during the president's or parliament's final year in office is regarded as a fiscal crime.

In my opinion, Thailand should consider Australia's model. The economic and financial report on the country's situation is important for government transparency and credibility. Public access to information also strengthens the democratic process.

While the Brazil model seems relevant to the situation in Thailand, the model is complicated, and it is difficult to find solid legal proof, which ultimately renders legal efforts futile.

At present, Thailand does not have a strong and independent state agency to monitor the repercussions of the government's fiscal policies like the Congressional Budget Office in the United States. Given the widespread criticism of so-called "independent" constitutional organisations, it is not a smart idea to create yet another independent state organisation to carry out this oversight function.

Instead, a viable alternative is to support civil society and academia in monitoring and evaluating government spending. However, to effectively close the legal loopholes in the fiscal discipline law, an elected government should set up a legislative budget office once it assumes office.

Otherwise, any administration will be able to continue using taxpayers' money improperly by going on last-minute spending sprees to sway voters.

Fiscal discipline is not the only issue at hand. A free and fair election is crucial to democracy. To safeguard the country's fiscal integrity and democratic values, this political abuse of the national coffers must end.

Khemmapat Trisadikoon is a Senior Researcher at the Thailand Development Research Institute (TDRI). Policy analyses from the TDRI appear in the Bangkok Post on alternate Wednesdays.

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