Njuguna Ndung'u

 Treasury Cabinet Secretary Prof Njuguna Ndung'u displays the Budget briefcase ahead of his speech in parliament in Nairobi, Kenya on June 15, 2023. 

| Sila Kiplagat | Nation Media Group

Government spending needs to be pro-people

That government is best that governs least "— Henry David Thoreau, 1849 (Resistance to civil government).

Once upon a time, the Bible records the people of Israel had an “informal” government. It comprised judges, akin to African societies that were ruled by a council of elders.

Such societies tended to be more "egalitarian and democratic". The costs of running such governments were low.

But the Israelites demanded that Prophet Samuel establish a more expansive government headed by a "king," like other societies. Samuel consulted God and warned the people of the dangers inherent in the proposal.

He warned that a king will take "your sons and appoint them to his chariot and to be his horsemen to run before his chariot, and appoint himself commander of fifties and commander of thousands, and some to plough his ground and reap his harvest; make his implements of war and equipment of his chariot. He will take your daughters to be performers and cooks and bakers. He will take the best of your fields and vineyards and give to his courtiers ... the king will be so rapacious that the people will cry to God for rescue".

The above story captures the common impulses of governments generally. The inclination of governmental institutions toward flaunting power and wastage tends to be great.

Government expenditure

Jesus repeated this theme when he told his disciples, "You know the rulers of this world lord it over their people, and officials flaunt their authority over those under them. Not so with you. Whoever wants to become great among you, must be your servant." Mathew 20: 25- 26.

This is usually so when it comes to government expenditure. Once the government levies various forms of taxes (income tax, import duties, VAT), the monies are collected into a basket. How to spend that money depends on any government’s economic and political philosophical choices.

Government expenditure is connected directly to the level of taxation: the more a government spends, the higher the likelihood of high taxes and vice versa.

Once public money is collected, expenditure must be thought of keenly.

We shall analyse three self-made categories of expenditure: infrastructural, social safety nets and investment developmental expenditure.

Infrastructural expenditure refers to money spent by the government on public goods like roads, dams and energy projects. Such projects tend to be expensive but they render good social outcomes in the long run. A road, for instance, will reduce the cost of doing business and attract investments.

But they cause huge sums of public money to be locked into a single project. Such expenditure also attracts corrupt people due to possible huge "cuts" and hence they can exacerbate social divisions and widen income gaps. Those who win such tenders will definitely be better off in comparison to the general population.

This problem also tends to create "crony capitalism" where those who succeed are only those connected to the government.

 Future generations will benefit due to such an investment but at times this can be offset by the costs, particularly if public loans were taken to pay for the projects.

There is also the dilemma of equity – where will a certain road, worth billions, be located notwithstanding it was funded by every taxpayer in Kenya?

Social safety nets include investments in things that tend to benefit the poor disproportionately – like health, education and money transfer to the elderly. Such expenditure gives the poor a leg up in life and creates a more equal society. The main negative is usually the "addictiveness" of such interventions. Rarely do governments withdraw such support systems even in instances where there is fiscal necessity.

They are also easier to manage. For example, money transfer to the elderly entails simple deposits into bank accounts – of course, there are instances of fraud.

Public investment refers to expenditure that entails the government attempting to render goods and services that can be rendered privately. Various reasons are used to justify such investments including security concerns and the need to expend in crucial but unprofitable enterprises, like public broadcasting.

This is usually the worst form of government expenditure because most public investments are handled by unelected bureaucrats whose sole competence is political connection. Secondly, public investment cannot compete effectively with private investments in an open market due to government inefficiencies.

It is, therefore, always wise to cut public investments and take the savings towards social safety nets and infrastructural projects. Or to even justify a reduction of taxes. Why should anyone be taxed to fund an unprofitable public investment?

Public good

Some public investments are superfluous. Take for instance regional developmental authorities like the Lakin Basin. Do they render any public good within a devolved system of government? For the Mombasa port, whereas Kenya Ports Authority makes money, the port’s full potential has never been realised. It has the potential to quadruple, and create wealth and jobs if government does a divestiture.

The same logic applies to sugar companies. More than Sh50 billion has been sunk in public sugar companies to no avail. Assume such sums were given instead directly to farmers in the form of social safety nets. All western region sugar belt children can be educated for free for 30 years using similar amounts of resources.

Yours truly served in the National Assembly Public Investment Committee from 2013 to 2017. The theft in public investment is mind-boggling. If these 300-plus governmental investments are unbundled, Kenya can afford daily free meals in all public schools plus free education at public universities. And money would be left for free NHIF cards to every Kenyan household.

The writer is the governor, of Murang’a County. Email: [email protected]