Fiscal Policy Committee

This was announced yesterday at the 2014 Budget Consultation Session:

2014 Budget To Be Tabled In Parliament On Oct 25

PUTRAJAYA, June 18 (Bernama) -- The 2014 Budget will be tabled in Parliament on Oct 25, Prime Minister Datuk Seri Najib Tun Razak, announced here Tuesday.

Najib also announced the setting up of a Fiscal Policy Committee aimed at reducing fiscal deficit, strengthening public finances and ensuring nation's long-term fiscal sustainability.

Najib, who is also Finance Minister, said he would chair the committee which would include selected Cabinet ministers and heads of departments.

"This committee will be served by a fiscal policy office at the Treasury. This is to underline the seriousness in terms of managing our fiscal position and reducing our fiscal deficit," he said in his opening speech at the 2014 Budget Consultation sessions.

The government is on track in reducing the fiscal deficit further, from 4.5 per cent of the Gross Domestic Product (GDP) last year to four per cent this year.

"Our aim is to meet the medium-term fiscal target of around three per cent of GDP by 2015 without jeopardising the growth momentum of the domestic economy and on-going fiscal support for transformation initiatives.

"This will be achieved through a judicious mix of prudent but productive spending, and strengthening revenue enhancement measures that include better tax returns and enforcement by the Inland Revenue Board," he said...

The announcement of the new Fiscal Policy Committee was completely unexpected and a pleasant surprise. It’s about time there was a dedicated working body looking beyond the dollars and cents towards fiscal sustainability and fiscal policy as a distinct policy tool in itself.

Having said that, it does not go nearly far enough or is transparent enough in my view. I’ve been advocating for an independent budget office for some time now, for a few of reasons. First is raising the awareness of fiscal policy as a demand management tool on its own – the fiscal equivalent of Bank Negara’s Monetary Policy Committee. As it stands, the Treasury can’t see the forest for the trees, what with 96 memorandums (this year’s submissions) to deal with. Insofar as the FPC is concerned, I’d consider this mission accomplished.

A second reason was to provide reasonably independent forecasts and assessments of government revenue, expenditure and changes to tax policies. In this sense, the FPC may or may not fulfil this function. The fact that a separate unit is being set up augurs well – the fact that it’s subsumed under the Treasury does not.

A third reason was to provide some clarity and objectivity to public discourse and debate over fiscal policy and policy proposals touching on taxes, duties and government expenditure. I don’t have any hopes that the FPC will be of any help on this score.

So, you win some you lose some, and since I’m basically an optimistic sort of person, I’m hoping for the best and see the glass as half full.

I would have still have loved to see a more independent body being set up, but progress is progress.

[H/T The Mole]