Wed, Dec 24, 2014 page8

• New leaders face fiscal challenge

  • By Lin Chia-Cheng 林嘉誠
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  At a meeting of the Democratic Progressive Party’s (DPP) local government leaders on Saturday last week, Greater Tainan Mayor William Lai (賴清德) expressed concern about how everyone would go about implementing their election promises given that the central government is out of money.

  He told the new leaders that they should not issue debt during their first term just because they are eager for achievements, and that local governments must focus on fiscal policy. Despite Lai’s warning, the DPP’s 13 county commissioners and mayors signed a declaration to join forces to obtain funds from the central government.

  The problem is that the central government lacks resources and can hardly fend for itself, much less help local governments. In this struggle over power and money, newly elected local leaders are eager to achieve progress, and political parties are engaged in competition with each other. It is all about national development and public welfare, and this makes it absolutely necessary to pay attention to fiscal records.

  Fiscal revenue differs at the central and local government level, and by now people are used to hearing about governments overstretching budgets and failing to balance income with expenditures. The final defense for the fiscal record is to cut expenses at every level.

  The public needs to understand that there is no such thing as a free lunch, and that, although businesses will sometimes pick up the tab, any check issued by the government would in the end have to be paid for by taxpayers.

  The central government has gradually managed to gain control over expenditure in recent years, and there are a few outstanding examples of local governments that have managed to increase debt payments and decrease overall debt.

  Greater Kaohsiung and Taipei are big debtors, although the capital has abundant fiscal resources. Every year, the city collects and pays substantial business taxes to the central government, so fiscal revenue should not be a problem.

  Greater Kaohsiung has passively announced that its debt, which stands at more than NT$220 billion (US$6.931 billion), remains within the limits set by the Public Debt Act (公共債務法), but it should take a more active approach to giving residents information about its fiscal plans.

  New Taipei City has issued debt in the form of Treasury bills, and fiscal authorities are allocating capital from the city treasury every day. Running a city government is similar to running a business, and “entrepreneurial government” has long been an administrative model.

  Counties with fiscal problems on the east coast and on outlying islands lack the guarantees of the special municipalities, so they have to engage in a free-for-all over the remaining resources, and they should therefore take more active measures.

  The DPP should be praised for initiating regional cooperation and setting up a coordination team and a joint governance think tank. All that is left to do is to wait and see how the party will go about its business.

  While the public was skeptical about the new premier, the expectation of new policies from the new leaders is normal. They cannot rely on spokespeople to repeat old cliches: the pie will not get bigger, and zero-based budgeting should be used to allocate the government budget, while the central government’s tax revenue allotments should be reviewed.

  The central government is also responsible for evaluating the results of state-owned enterprises, all kinds of government funds, the cost efficiency of public projects and economic planning, science and technology budgets, as well as studies commissioned by departments and agencies, all of which can run into the tens or hundreds of millions of New Taiwan dollars, and then deciding which should be cut.

  Politicians’ empty promises, legislators’ attitudes during budget reviews and additions to legal bills all result in big increases to legally regulated government expenditure. It is all a matter of whether the accounting, fiscal and research departments meet their internal control responsibilities and if the auditory authorities and the Control Yuan fulfill their external control responsibilities.

  When it is difficult to increase revenue, it is necessary to begin cutting expenditure. Debtor countries in Europe are a good example of this. This is absolutely not alarmist talk, but the central government is responsible for coming up with concrete measures to implement fiscal discipline and finding ways to avoid following in the footsteps of debtor countries. The government has no right to complain that it has no money, and although not even a resourceful person can make bricks without straw, every local government leader should pledge to do all in their power to get things done.

  As with the DPP’s expanding cooperation between counties and cities, the Chinese Nationalist Party (KMT) should push for cooperation between the central and local governments. As far as the public is concerned, there is only one government. In addition to constitutional reform, it is of the utmost urgency that the government and the opposition cooperate to solve the increasingly difficult fiscal situation.

  Lin Chia-cheng is a former minister of examinations.

  Translated by Perry Svensson
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