Are the interests of the counties being protected in the fiscal policy process without the Senate’s input?
Category: Fiscal Policy
By: Leo Kipkogei Kemboi,
Overview and Policy Issues
The National Assembly and the Senate comprise the Kenyan Parliament, established by Article 93(1). The roles of each house are explained in detail below.
The Senate serves to represent counties, protect their interests, and enact laws by debating and passing county-related bills defined from Articles 109 to 113. The Senate also participates in the oversight of State officers by debating and voting on any resolution to remove the President or Deputy President from office as provided in Article 145, exercising oversight over national revenue given to county governments, and allocating national revenue among counties as provided in Article 217.
The National Assembly represents the constituents and special interests of the people in the National Assembly and decides how much money should be appropriated for use by the national government and other national State organs. They oversee the nation’s finances and how they are spent, investigate the President, the Deputy President, and other state officials’ conduct while in office, and begin the process of having them removed. The National Assembly also gives its approval to war declarations and extensions of states of emergency.
Given that the National Assembly and the Senate do not have equal authority to exercise parliamentary duties, Kenya’s bicameral legislature is, to put it mildly, a mishmash. Reading the Constitution textually, the Senate’s duties are strictly limited to protecting the interests of the counties. The role of the National Assembly in the discussion and adoption of the 2010 Constitution primarily explains the political-economy factors that led to the Senate’s powers being restricted.
In a strictly presidential system, Parliament (National Assembly and the Senate) is anticipated to play the role of the official opposition, and in doing so, provide checks and balances. Because of this, the Senate must reclaim all authority regarding the protection of counties’ and their governments’ interests under article 96(1).
Every matter that has an impact on the counties, both primary and secondary, must be brought before the Senate for approval to be consistent with the principle in Article 96(1); otherwise, it should be viewed as unconstitutional. The idea is to give the Senate unrestricted access to those particular issues that would fall under its purview but might not be expressly covered by the Constitution.
The Senate’s Roles in Fiscal Policy
Through the administrative processes in the Public Finance Management Act of 2012 and other laws, the Senate’s role in determining fiscal policy has mostly been reduced to that of an observer. Key financial policy documents include the Budget Policy Statement, Program Based Budget, Division of Revenue Bill, County Allocation of Revenue Bill, Appropriations Bill, Budget Books, and the Finance Bill, to name a few. The senate’s voting role has only been limited to the Division of Revenue and County Allocation of Revenue Bill which is the vertical and horizontal revenue allocation. However, the two fiscal policy documents are not the only laws that affect the counties as directed by article 96(1) of the constitution where the Senate is required to represent the counties and serve to protect the interests of the counties and their governments.
The first example of why the Senate needs to be involved directly in the government’s fiscal policy measures is the Appropriations-in-Aid, which essentially comes from the government’s ability to levy user fees as permitted by Article 209(4). The national and county governments are permitted to impose fees for the services they provide, and a significant portion of expected national revenues are expected to come from these sources. The national government or shared functions are directly responsible for some user fees. The funds obtained from the shared services give the senate the authority to approve all matters about fiscal policy. The A-I-A is estimated at 15% of all total revenue collected by the national government in the 2021/2022 financial year and was equivalent to 2.5% of GDP as per reviewed data collected from Quarterly Budget and Economic Review published by the National Treasury.
The second illustration is the financial bill’s allocation of incentives to certain industries and counties. The finance bill, which permits manufacturing companies to deduct investments, is a prime example. At this point, Article 96(1) would take effect and call for the senate’s approval because the residents of those particular counties would feel the intended and unintended consequences of the policy decisions. The incentives given to manufacturing firms would allow the firm formation to follow a certain spatial distribution and could easily benefit specific counties (counties with large urban areas). Additionally, the incentives bring about additional unique constitutional considerations, such as the equity considerations outlined in Article 27 (1-6). Let’s say county X benefits and County Y benefits from a fiscal policy incentive passed through the finance bill without the concurrence of the senate and little or no public participation. The Constitution prohibits the use of taxes in a manner that jeopardizes national economic policies, cross-county economic activity, or the national mobility of goods, services, capital, or labour[2]. If such a decision was to be ever made, it must have the concurrence of both houses and especially the Senate.
The main document outlining Kenya’s priorities for fiscal policy, the Budget Policy Statement, and there is no public record that it has been debated in the Senate, is a third example. There is a public record that National Assembly deliberated on the Budget[3]. Section 180 of the Senate standing orders which speaks on the presentation of the Budget Policy Statement requires Budget Policy Statement to be laid on the senate floor and be committed to the Senate Committee on Finance and budget[4]. Thereafter, the Senate Committee on Finance and Budget should deliberate and table a report with recommendations on Budget Policy Statement within 12 days after incorporating the views of the stakeholders and public. A search of all parliamentary notices and newspaper adverts shows that there is no record of such an event. The approval of the motion shall constitute Senate Resolution.
By the 15th of February each year, the National Treasury must prepare the Budget Policy Statement, submit it to Cabinet for approval per Section 25(1)(2) of the Public Finance Management, and then submit the approved Budget Policy Statement to Parliament. The National Treasury is required to outline the broad strategic priorities and policy objectives that will direct the national government and county governments in developing their budgets both for the upcoming fiscal year and over the medium in the Budget Policy Statement. The National Treasury already handles county-specific issues, which are the purview of the Senate.
In the Budget Policy Statement, National Treasury provides the proposed expenditure limits for the national government including those of Parliament and the Judiciary and indicative transfers to county governments and defines fiscal responsibility principles and financial objectives over the medium-term including limits on total annual debt. Given those specific issues that Budget Policy Statement seeks to define, the interests of counties cannot be safeguarded without the concurrence of the Senate.
The review of the budget policy statement should be acknowledged as a concurrent parliamentary process under section 25 of the Public Finance Management Act, and the standing rules of the Senate and national assembly should be changed to reflect this. According to Kenya’s Constitution, Article 220, the national legislature including the Senate has the authority to regulate the form, content, and timing of budgets. A resolution of Parliament is a fiscal policy resolution that has been codified, and hence it is a law, and should be advise, rather than dictums that guide Cabinet Secretary for National Treasury in the preparation of the budget. Section 180(7) and (8) of the Senate standing orders should be redrafted to show the same.
Conclusion
Article 96(1) expands the functions and reach of the Senate to anything that affects counties and their people. All Senate constitutional functions must be reclaimed, and it is the responsibility of the Senate and all other stakeholders to make sure that happens. Since it has already been codified in national legislation, any administrative parliamentary procedures granting authority to only one house over constitutional provisions must be reviewed and revisited. The allocation of resources is the only law that can have a greater impact on counties. In essence, Kenya’s fiscal policy must be decided equally by both houses of Parliament.
References
[1] IEA Kenya. “Fact Sheet Kenya’s Budget, 2022/2023,” 2022. https://ieakenya.or.ke/?wpdmdl=2593.
[2] Article 209(5) prohibits taxation and other revenue-raising powers of a county from being exercised in a way that prejudices national economic policies, economic activities across county boundaries or the national mobility of goods, services, capital or labour.
[3] National Assembly. “Report of the Budget and Appropriations Committee for the Financial Year 2022/2023 and the Medium Term,” February 2022. http://www.parliament.go.ke/sites/default/files/2022-02/Report%20on%20the%20Budget%20Policy%20Statement%20for%20Financial%20Year%202022-2023%20%26%20the%20Medium%20Term.pdf.
[4] 12th Parliament. “The Senate Standing Orders.” As adopted by the Senate on 14th June 2017 pursuant to Article 124 of the Constitution and Standing Orders 248 and 249 of the Senate Standing Orders, and amended on 14th December 2017, 9th August 2018 and 21st July 2020., 2020. http://www.parliament.go.ke/sites/default/files/2020-12/Senate%20Standing%20Orders%202020%20-%20Final.pdf.
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Are the interests of the counties being protected in the fiscal policy process without the Senate’s input?
| Post date: Mon, Aug 1, 2022 |
| Category: Fiscal Policy |
| By: Leo Kipkogei Kemboi, |
Overview and Policy Issues
The National Assembly and the Senate comprise the Kenyan Parliament, established by Article 93(1). The roles of each house are explained in detail below.
The Senate serves to represent counties, protect their interests, and enact laws by debating and passing county-related bills defined from Articles 109 to 113. The Senate also participates in the oversight of State officers by debating and voting on any resolution to remove the President or Deputy President from office as provided in Article 145, exercising oversight over national revenue given to county governments, and allocating national revenue among counties as provided in Article 217.
The National Assembly represents the constituents and special interests of the people in the National Assembly and decides how much money should be appropriated for use by the national government and other national State organs. They oversee the nation’s finances and how they are spent, investigate the President, the Deputy President, and other state officials’ conduct while in office, and begin the process of having them removed. The National Assembly also gives its approval to war declarations and extensions of states of emergency.
Given that the National Assembly and the Senate do not have equal authority to exercise parliamentary duties, Kenya’s bicameral legislature is, to put it mildly, a mishmash. Reading the Constitution textually, the Senate’s duties are strictly limited to protecting the interests of the counties. The role of the National Assembly in the discussion and adoption of the 2010 Constitution primarily explains the political-economy factors that led to the Senate’s powers being restricted.
In a strictly presidential system, Parliament (National Assembly and the Senate) is anticipated to play the role of the official opposition, and in doing so, provide checks and balances. Because of this, the Senate must reclaim all authority regarding the protection of counties’ and their governments’ interests under article 96(1).
Every matter that has an impact on the counties, both primary and secondary, must be brought before the Senate for approval to be consistent with the principle in Article 96(1); otherwise, it should be viewed as unconstitutional. The idea is to give the Senate unrestricted access to those particular issues that would fall under its purview but might not be expressly covered by the Constitution.
The Senate’s Roles in Fiscal Policy
Through the administrative processes in the Public Finance Management Act of 2012 and other laws, the Senate’s role in determining fiscal policy has mostly been reduced to that of an observer. Key financial policy documents include the Budget Policy Statement, Program Based Budget, Division of Revenue Bill, County Allocation of Revenue Bill, Appropriations Bill, Budget Books, and the Finance Bill, to name a few. The senate’s voting role has only been limited to the Division of Revenue and County Allocation of Revenue Bill which is the vertical and horizontal revenue allocation. However, the two fiscal policy documents are not the only laws that affect the counties as directed by article 96(1) of the constitution where the Senate is required to represent the counties and serve to protect the interests of the counties and their governments.
The first example of why the Senate needs to be involved directly in the government’s fiscal policy measures is the Appropriations-in-Aid, which essentially comes from the government’s ability to levy user fees as permitted by Article 209(4). The national and county governments are permitted to impose fees for the services they provide, and a significant portion of expected national revenues are expected to come from these sources. The national government or shared functions are directly responsible for some user fees. The funds obtained from the shared services give the senate the authority to approve all matters about fiscal policy. The A-I-A is estimated at 15% of all total revenue collected by the national government in the 2021/2022 financial year and was equivalent to 2.5% of GDP as per reviewed data collected from Quarterly Budget and Economic Review published by the National Treasury.
The second illustration is the financial bill’s allocation of incentives to certain industries and counties. The finance bill, which permits manufacturing companies to deduct investments, is a prime example. At this point, Article 96(1) would take effect and call for the senate’s approval because the residents of those particular counties would feel the intended and unintended consequences of the policy decisions. The incentives given to manufacturing firms would allow the firm formation to follow a certain spatial distribution and could easily benefit specific counties (counties with large urban areas). Additionally, the incentives bring about additional unique constitutional considerations, such as the equity considerations outlined in Article 27 (1-6). Let’s say county X benefits and County Y benefits from a fiscal policy incentive passed through the finance bill without the concurrence of the senate and little or no public participation. The Constitution prohibits the use of taxes in a manner that jeopardizes national economic policies, cross-county economic activity, or the national mobility of goods, services, capital, or labour[2]. If such a decision was to be ever made, it must have the concurrence of both houses and especially the Senate.
The main document outlining Kenya’s priorities for fiscal policy, the Budget Policy Statement, and there is no public record that it has been debated in the Senate, is a third example. There is a public record that National Assembly deliberated on the Budget[3]. Section 180 of the Senate standing orders which speaks on the presentation of the Budget Policy Statement requires Budget Policy Statement to be laid on the senate floor and be committed to the Senate Committee on Finance and budget[4]. Thereafter, the Senate Committee on Finance and Budget should deliberate and table a report with recommendations on Budget Policy Statement within 12 days after incorporating the views of the stakeholders and public. A search of all parliamentary notices and newspaper adverts shows that there is no record of such an event. The approval of the motion shall constitute Senate Resolution.
By the 15th of February each year, the National Treasury must prepare the Budget Policy Statement, submit it to Cabinet for approval per Section 25(1)(2) of the Public Finance Management, and then submit the approved Budget Policy Statement to Parliament. The National Treasury is required to outline the broad strategic priorities and policy objectives that will direct the national government and county governments in developing their budgets both for the upcoming fiscal year and over the medium in the Budget Policy Statement. The National Treasury already handles county-specific issues, which are the purview of the Senate.
In the Budget Policy Statement, National Treasury provides the proposed expenditure limits for the national government including those of Parliament and the Judiciary and indicative transfers to county governments and defines fiscal responsibility principles and financial objectives over the medium-term including limits on total annual debt. Given those specific issues that Budget Policy Statement seeks to define, the interests of counties cannot be safeguarded without the concurrence of the Senate.
The review of the budget policy statement should be acknowledged as a concurrent parliamentary process under section 25 of the Public Finance Management Act, and the standing rules of the Senate and national assembly should be changed to reflect this. According to Kenya’s Constitution, Article 220, the national legislature including the Senate has the authority to regulate the form, content, and timing of budgets. A resolution of Parliament is a fiscal policy resolution that has been codified, and hence it is a law, and should be advise, rather than dictums that guide Cabinet Secretary for National Treasury in the preparation of the budget. Section 180(7) and (8) of the Senate standing orders should be redrafted to show the same.
Conclusion
Article 96(1) expands the functions and reach of the Senate to anything that affects counties and their people. All Senate constitutional functions must be reclaimed, and it is the responsibility of the Senate and all other stakeholders to make sure that happens. Since it has already been codified in national legislation, any administrative parliamentary procedures granting authority to only one house over constitutional provisions must be reviewed and revisited. The allocation of resources is the only law that can have a greater impact on counties. In essence, Kenya’s fiscal policy must be decided equally by both houses of Parliament.
References
[1] IEA Kenya. “Fact Sheet Kenya’s Budget, 2022/2023,” 2022. https://ieakenya.or.ke/?wpdmdl=2593.
[2] Article 209(5) prohibits taxation and other revenue-raising powers of a county from being exercised in a way that prejudices national economic policies, economic activities across county boundaries or the national mobility of goods, services, capital or labour.
[3] National Assembly. “Report of the Budget and Appropriations Committee for the Financial Year 2022/2023 and the Medium Term,” February 2022. http://www.parliament.go.ke/sites/default/files/2022-02/Report%20on%20the%20Budget%20Policy%20Statement%20for%20Financial%20Year%202022-2023%20%26%20the%20Medium%20Term.pdf.
[4] 12th Parliament. “The Senate Standing Orders.” As adopted by the Senate on 14th June 2017 pursuant to Article 124 of the Constitution and Standing Orders 248 and 249 of the Senate Standing Orders, and amended on 14th December 2017, 9th August 2018 and 21st July 2020., 2020. http://www.parliament.go.ke/sites/default/files/2020-12/Senate%20Standing%20Orders%202020%20-%20Final.pdf.
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Kenya’s National Budget: A Matatu Ride Reflecting Fiscal Volatility and Structural Inefficiencies
Introduction The matatu metaphor can be used to analytically frame Kenya’s budget as a system that is subject to binding constraints, evolving expectations, and continuous adjustment to shocks. Like the matatu sector, fiscal policy reflects a balancing act between efficiency and quick action seeking to respond to public service delivery while constrained by competing sector […]
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Absurd hypotheticals are useful precisely because they stress-test a system until its constraints become visible. This note asks what would break first if SpaceX, now a public company following its record-breaking Nasdaq debut in June 2026, with a post-IPO market value of approximately US$ 2.5 trillion, sought a secondary cross-listing on the Nairobi Securities Exchange. […]
The Arithmetic of Ambition: What Kenya’s First-World Dream Really Requires?
Kenya’s proposed post-2030 Vision commits the country to high-income status “within a generation.” One positive issue that should be emulated is that the document seeks to solve the most important policy decision and the foundational problem in economics, which is to expand output and labour. Skeptics ask the most important question, why would this plan […]
Kenya’s Debt: Borrow Today, Pay Tomorrow
According to the Annual Debt Report 2024/25, as shown in Chart 1 below, Kenya today is such that for every one hundred shillings the Kenyan government raises in tax revenue, approximately ksh71 goes directly into servicing existing debt before a single hospital is staffed, a classroom is built, or a kilometre of road is constructed. […]