What we should see in Budget 2023
Published on: Thursday, January 26, 2023
By:
Geoffrey Williams, FMT
The views expressed are those of the writer and do not necessarily reflect those of FMT.
Budget 2023 will certainly focus on cost of living issues but what else should be included?
With debt and liabilities at RM1.5 trillion and debt servicing at RM45 billion, the first priority should be to rebalance spending and revenue. This involves more efficient spending, removing unnecessary expenses and improving accountability across all government departments.
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Budget 2022 was already a record at RM332 billion and should only rise in line with core inflation to around RM345 billion. If revenues remain similar to 2022 at around RM285 billion the deficit would be only RM60 billion, or less than 4% of gross domestic product.
This is still accommodative but allows scope for extra spending if necessary.
The focus of Budget 2023 should be to reform the business environment, reduce government involvement and make it easier to do business with less regulation, making it easier and cheaper.
A clear shift in government policy to reduce business tax, promote competition, remove monopolies and cartels and reduce the role of GLCs through responsible privatisation would be very impressive.
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Most of the hand-out schemes for businesses should be removed. Sadly, we are already hearing noises promoting virtue-signalling, boy-toy projects in green economy and high-technology. Hopefully, proper value-added assessments will be done before, not after, money is wasted.
To assist the general public, hand-outs should be reformed. They are expensive, benefit the rich, miss out many in need, distort the market and are open to corruption. Removing subsidies and price controls must be a priority, and shifting to a better way of looking after welfare and cost of living issues should be introduced.
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“Wow” factors for Budget 2023 would be a universal basic income scheme to replace welfare hand-outs and eradicate hardcore poverty. The M40 could be covered at a cost of only RM20 billion.
Pension reform should remove the upper limit on voluntary contributions and give generous tax benefits for savers. A universal basic pension scheme funded by a new Malaysian superfund should be introduced.
Existing student loans and training funding should be reviewed to replace PTPTN and HRDF with a new sustainable funding system. Both the PH and BN manifestos were pointing in the same direction on this issue and it would be a very good unity policy.
The health budget should not be increased until the egregious problems of procurement, delivery quality, treatment of staff and patients and, above all, governance and corruption have been addressed.
On the revenue side, a full reform of taxation and other revenue sources should be introduced to lower taxes and create a more efficient tax collection system.
Tax reform was not covered in the manifestos, so this is a blank sheet that can be started to help solidify revenue options. This requires a full review, not just ad hoc issues around GST because international tax changes such as the Global Minimum Tax will begin to have an effect soon.
Incentives to encourage flexible working hours, raising wages and allowing more scope for secondary incomes by reducing tax on second jobs should be priorities. We need to free up the labour market for employees and employers alike moving to a 21st Century income model from multiple sources, not just wages.
There must be policy review councils for pensions and social protection, higher education funding, economic development, health financing and governance, SME and business development, investment competitiveness, tax reform and, of course, the parliamentary budget office. In more general terms, there should be funding for independent forecasts and analyses of the economic outlook and impact of policy scenarios.
If Budget 2023 is a responsible budget like this, we would be well-placed for the rest of the year and beyond.
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