While appearing before the Senate Committee on Finance and Budget on Friday last week, the Commission on Revenue Allocation (CRA) through its Director for Economic Affairs, impressed upon the Committee to push for reforms in the Public Finance Management Act, 2012 and delink the National Treasury from the National Government.
In its submission, the CRA delegation averred that as currently structured and positioned, it operates predominantly as an arm of the national government and not as a service provider for all levels of government. They averred that this has resulted in the National Treasury showing preference towards ministries, departments, and agencies, at the expense of county governments, during the allocation of national resources. To augment its contentions, CRA further stated that before the adoption of the 2010 Constitution, the National Treasury was a department under the Ministry of Finance, and this position changed in the advent of devolution.
Article 225(1) of the Constitution stipulates that an Act of Parliament should be enacted to establish the National Treasury, define its functions, and set out its responsibilities and that in actualizing this provision, CRA averred that Parliament erred by including Section 11 of the PFM Act, which establishes the National Treasury as an entity of the national government. In their view, this is contradictory to the Constitution’s edicts, as the National Treasury should be an office serving all levels of government, not just the national government.
In the midst of all these, the fundamental question is how feasible is this proposal, and is it justifiable?
Heralded as one of the most global transformative constitutions globally, the promulgation of the Constitution of Kenya in 2010, came about with many salient features that reshaped Kenya’s approach to some issues including governance and public finance management. At the core of the 2010 Constitution’s transformative agenda was devolution. With the introduction of devolution, Kenya aimed to tilt the shape and centre of power further downwards to the local level, closer to the mwananchi.
The above notwithstanding, Kenya’s structure does not mirror full or rather complete devolution but embodies a hybrid of aspects of both devolution and decentralization. This hybrid structure creates two levels of government that are distinct and separate but interdependent as opposed to independent. The implication is that both levels of government need to work alongside each other, in the cross-cutting goal of service delivery.
After the full implementation of the Constitution 2010, some functions were transferred to county governments. It is a fundamental principle, in devolution law, that funds follow functions. That being the ideal, Kenya’s situation has been far from ideal, and county governments have had to grapple with delayed remissions, causing several services at that level to be crippled, and even in some extreme circumstances stall.
The delay to transfer funds, then piggies back to whether the National Treasury as currently structured and domiciled as a ministry under the national government aligns with the system of governance that Kenyans overwhelmingly assented to, alongside the principles and aspirations of Kenya’s devolved structure as espoused in the grund norm.
A concise interpretation, from both textualist and purposive lenses, of the entire Article 225 paints a clear picture of the intention of the framers of the Constitution. The establishment of a National Treasury by an Act of Parliament to serve the interest of governments at both levels. More fundamentally, Article 225 (3) hints at the existence of a Cabinet Secretary responsible for finance, perhaps the clearest indicator that the National Treasury was and is supposed to be a distinct and separate entity from the Cabinet Secretary responsible for Finance. Taking a cue from the setup of the Kenya Revenue Authority (KRA), shows that while it is an agent of the Ministry of Finance, it is a separate and distinct entity from the Ministry, and to a greater extent that has allowed it to perform its functions effectively.
Furthermore, our devolved system does not envisage independent devolved units. As such, nationally collected revenue (collected from both levels of government) ought to be shared equitably, based on the sharing methodology under the Constitution and the Public Finance Management Act, 2012. This presupposes that the entity tasked with control of public money, as per Article 225, should not and cannot be an extension of either level of government.
Under the old structure, pre-devolution, the National Treasury was a department under the Ministry of Finance. It was anticipated therefore that under the new dispensation of devolution, this department would detach and be an agent of both levels of government, which has not been the case. By the creation of a Ministry of National Treasury and Planning, Section 11 of the Public Finance Management Act, 2012, is not in tandem with the constitutional provisions on the control of public money.
Consequently, an independent and autonomous National Treasury is not only feasible but also justifiable. History has shown that during the division of revenue processes, there have been instances of ‘push and pull’ between the national and county governments on what allocation county governments should take.
The national government has in most cases attempted to prevail upon the county governments, through the Inter-governmental Economic and Budget Council (IBEC), to align their proposals. This should not be the case though, as the IBEC serves as a platform for consultation and cooperation between the two levels of government on budgetary and economic policy issues. The allocation of funds is a process, which the Constitution anticipated should have been a preserve of independent organs (Parliament, National Treasury and the Commission on Revenue Allocation).
The role of the National Treasury being a shared component, it is only sensible and justifiable that it remains independent, devoid of control from any level of government. The Cabinet Secretary responsible for Finance and National Planning can therefore concentrate on policy direction, drawing from independent technical advice from an autonomous National Treasury as it does from the Kenya Revenue Authority. Moreover, now that the country chose the devolution path, that path needs to be followed to the latter, if we are to fully enjoy the benefits of devolution.