Treasury Minister Njuguna Ndongo on Thursday sparked a storm in Parliament over his warning of Sh200 billion in budget cuts if MPs scrapped a handful of tax increases proposed in the Finance Bill, with lawmakers accusing him of blackmail.
The threat of budget cuts came before the Finance Bill was discussed and one day protest marches against the proposed taxes spread across Kenya.
The government plans to collect Sh302 billion in additional taxes to reduce the budget deficit.
But the MPs, most of them from the opposition Azimio coalition, accused the Treasury of usurping Parliament's role in pushing lawmakers to approve the controversial bill.
In a letter to the Clerk of the National Assembly, Professor Ndongo revealed the dilemma facing his office, warning of deep cuts targeting, among others, teacher recruitment and constituency development funds if MPs reject the bill.
The Treasury was expected to respond to an earlier letter from the writer seeking views on how to align the budget with changes made by the National Assembly's Finance and Planning Committee to the Finance Bill, which removed some controversial taxes on items such as bread and cars while proposing to impose higher duties. On fuel.
But the Treasury Department appeared to provide information beyond what was requested, particularly budget cuts in the event lawmakers eliminate new taxes in the finance bill, angering lawmakers.
“With this letter, the CS (Cabinet Secretary), who was not elected by anyone in this country, claims to be directing this House and is therefore treading on very slippery and dangerous grounds. First by Claiming to dictate to the House of Representatives what it is supposed to do in its legislative role.”
“CS also expects discussion because as far as I know, we are still in the discussion phase of this bill. The letter is contrary to constitutional provisions and separation of powers.”
National Assembly Speaker Moses Wetangula has defended Professor Ndongo against blackmail accusations.
In his letter to the House, Mr Wetangula said the Constitutional Council consultation was a reminder to the House of its constitutional and legal obligations.
“I don’t view it as a directive in the way the minority leader argued,” Mr Wetangula said.
“In making its decisions, the Council is only bound by the Constitution and the law. The final decision rests with the House of Representatives.”
Notable budget cuts include Sh18.9 billion allocated to employ trainee middle school teachers on a permanent basis, Sh15 billion to the National Government Departments Development Fund (NG-CDF), and Sh21.77 billion to connect mostly poor households to national electricity. The network is under last mile connectivity.
Ongoing road projects could lose Sh15.1 billion, the Ministry of Defense Sh7.8 billion, and water projects Sh11.6 billion. The Treasury says scrapping a handful of tax increases proposed in the Finance Bill will result in a revenue shortfall of Sh200 billion in the 2024/25 budget, meaning similar spending cuts will have to be made.
On Thursday, lawmakers discussed the draft law in its second reading in the House of Representatives, where the proposed law received the support of 204 representatives compared to 115.
Kimani Echongwa, Majority Leader in the National Assembly, said that representatives will meet next Tuesday to vote on the proposed changes to the bill.
President William Ruto has a majority in Parliament, although some lawmakers allied with his Kenyan Kwanzaa coalition have expressed reservations about the bill.
The Finance Committee on Tuesday urged the government to scrap some of the new taxes proposed in the bill, including new taxes on car ownership, bread, cooking oil and financial transactions. It also recommended increasing the fuel tax on road maintenance.
Dr. Ruto was elected almost two years ago on a platform aimed at uplifting Kenya's working poor, but has faced repeated anti-tax protests. He defended the tax increases, saying the government needed to reduce its reliance on borrowing.
Protesters, who used tear gas and water cannons on Thursday, say the tax hikes will hurt the economy and raise the cost of living for Kenyans already struggling to make ends meet.
The International Monetary Fund urged the government to increase revenues in its 2024/25 budget to reduce borrowing.
The Treasury has proposed cutting Sh18.9 billion from the Teachers Service Commission (TSC), which could have been used to recruit middle school teachers.
The allocation of last mile connectivity to constituencies, which was allocated Sh14.5 billion, has been postponed. Another Sh4.57 billion, still under the Last Mile Connectivity Project, was also reduced, bringing the total reduction for the State Department of Energy to Sh21.77 billion.
Completion of ongoing road projects, which have now become a punching bag for the Ruto administration, will be further delayed if lawmakers approve changes proposed by the Kimani Kuria-led Finance Committee, with the Treasury cutting Sh15.1 billion.
Payment of outstanding bills has also been reduced by Sh5 billion while the Kenya Revenue Authority will lose Sh4.7 billion. The arrears of Kenya Airways, Civilian Employees Insurance Scheme and Equalization Fund will see their allocations reduced by Sh1 billion each.
Various water projects will lose Sh11.6 billion, irrigation projects Sh3.7 billion, and the Galana Kulalo food security project Sh1 billion.
Counties' share of shareable revenue will lose Sh5 billion, fertilizer subsidy Sh5 billion, and sugar reforms Sh1.7 billion.
The ICT Authority will lose Sh6.7 billion and the State Department of Medical Services Sh4.7 billion.
The Ministry of Defense will lose Sh7.8 billion, of which Sh5 billion was earmarked for modernization and Sh2.8 billion for security operations.
The Ministry of Foreign Affairs for Agriculture will forgo Sh6.7 billion which includes Sh5 billion for the fertilizer subsidy program and Sh1.7 billion for sugar reforms.
