Way over budget

The Portuguese Government’s 2014 budget is being discussed in the so-called “specialised” committees in parliament. The budget approval process consists of 3 steps: first, a “big picture” version of the budget is approved by Parliament- this was done at the end of October. Second, representatives of parties with a seat in the National Assembly discuss the budget in more detail. The representatives are organised in various committees (the so-called commissions) which are mandated to discuss specific themes. This is underway. This coming week, the National Assembly will again cast its vote on the budget, following its review by the parliamentary commissions. This last step is largely pro forma.

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In practice, this means that the true political decisions are made at this stage, within the various parliamentary commissions. The process is relatively opaque, which gives politicians some leeway to do their job. Negotiations are often disguised as technical arguments, with each party using an army of lawyers to bring some credibility to what is largely a political debate.

PS, the main opposition party, has put forward several proposals which are small and have no real economic impact on investors or economic growth. Sentiment seems to be that PS does not really have any alternatives to the austerity measures which are being put forward by Government.

Yet there are alternatives. While the 2013 budget was largely about raising taxes and getting more income to service debt, this one is about cuts in expenditure. The cuts are being carried out essentially via reductions in wages and pension obligations. Very little is being done to improve the efficiency of Government’s consumption. Specifically, Government could use electronic procurement platforms to optimise public spending. The gains in efficiency could be real. Various proposals have been put forward in this direction, none of which seem to have been taken into account.

This budget represents another lost opportunity to improve the State’s efficiency. The Portuguese State is like a huge tanker which follows its course. Trying to steer it takes extremely long and the only way to reduce costs seems to be via cuts in wages and pensions. Any attempt to improve its efficiency seems to be futile.