House questions Sh32.7bn increase in public wage bill

Parliament has questioned a Sh32.7 billion increase in public wages and benefits despite devolution of several functions and shifting of personnel to counties.

The Budget and Appropriation Committee has asked the Treasury to explain its projection that the wage bill will rise from Sh263 billion to Sh295.7 billion in the financial year starting July 2013, a 12.4 per cent rise.

“This is an indicator of upward movement of wages at the national level, despite the devolving of several functions to the counties and the movement of personnel,” said chair Mbeere South MP Mutava Musyimi in the committee’s report on the Budget Policy Statement (BPS) for the 2014/15 financial year.

The statement is prepared by the National Treasury setting out broad outlines of the national budget in the coming financial year and over the medium term. The policy document contains an overview of government revenues, expenditures and borrowing, proposed expenditure ceilings for the Executive, Parliament and Judiciary and the total resources to be allocated to projects.

The committee says the increase in the bill goes against the pronouncement of the House and the Executive’s promise ahead of the national dialogue on cutting the costs.

Parliament allocated Sh80 million in the supplementary budget to the Parliamentary Service Commission for a taskforce that will audit the cost of implementing structures created under the Constitution.

The Salaries and Remuneration Commission chaired by Sarah Serem has since tendered for experts to audit salaries of 700,000 civil servants.

The commission has also launched national dialogue to find ways of reducing the ballooning wage bill — which shot up to Sh448 billion or almost half of the national budget in 2012/13, representing 12 per cent of the country’s total wealth.

READ: Treasury proposes pay freeze to tame runaway wage bill

The commission has attributed the sharp rise in the overall wage bill to the existence of three sets of staff: those seconded to the 47 counties by the national government, former local authority employees and new workers employed by the devolved governments.

In the report set to be debated for approval tomorrow, MPs observed the country faces twin problems of rising expenditure pressure at the national and county levels and misalignment of resources through duplication of roles and expenditure.

The committee called for significant reduction in compensation of employees. The Treasury is preparing to retrench a significant number of employees.

The committee cast doubt at the extent to which revenue raising strategies presented by the Treasury are going to be implemented. “Indeed, any increase in taxation may weaken near-term domestic demand,” said Mr Musyimi.

The government projects to collect Sh982.9 billion in tax revenue and Sh186.2 billion in non-tax revenue such as appropriations in aid.

Grants from donor countries will decline from the forecast Sh78.4 billion to Sh75.5 billion but will rise to Sh92.7 billion in 2015/16, according to the document.

“With a total expenditure of Sh1,536.1 billion and the said revenue, the country will face a budget deficit of Sh291.5 billion in 2014/15, which is a large reduction from Sh372.3 billion. The large budget deficit reflects substantial debt redemptions,” the report says.

To meet the targeted revenue collection, the MPs want Treasury to fast track tax reforms including splitting the Kenya Revenue Authority into two — the Inland Revenue Agency and the Customs and Border Control Agency.

Other reforms Treasury is proposing include expanding the tax base by capturing the informal sector, rationalising tax incentives/exemptions and increasing VAT share to four per cent of the GDP on account of the new VAT Act.

The committee proposed a total of Sh808.4 billion be allocated to national government out of the estimated shareable revenues amounting to Sh1 trillion while counties receive Sh217.9 billion.