Korea assembly committee warns fund bill would weaken fiscal control
In short
A National Assembly committee said the government's National Finance Act amendment and its bill to create a Future Response Fund could expand the government's fiscal flexibility while relatively reducing the legislature's prior deliberation and control over budgets and fund plans. The committee objected to a clause that would let surplus fund money move to the general account without a supplementary budget, and to a rule letting the fund itself change up to 30% of major spending items. The government said such a transfer would not raise total spending above the amount already approved.
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A review report by the National Assembly's Finance and Economy Planning Committee said the government's National Finance Act amendment would expand the government's fiscal flexibility while relatively reducing the National Assembly's prior deliberation and control over budget and fund management plans, according to Yonhap and Seoul Economic Daily. The report, issued on Oct. 4 and written in the name of committee expert member Yoo In-kyu, was accompanied by a separate committee review report on a bill to establish the Future Response Fund, which Seoul Economic Daily said is due to launch next year. [ 1 , 3 ]
The committee pointed to a special clause that would allow surplus money to be moved from the Future Response Fund to the general account when tax revenue falls short, without drawing up a supplementary budget. Under the current National Finance Act, the report said, reflecting such a transfer in the revenue budget requires a supplementary budget and a change to the fund management plan; the amendment would only require the changed plan to be submitted to the National Assembly without delay. The committee said that is a report on changes already made and differs from prior deliberation and approval. A Planning and Budget Ministry official told Yonhap the concept is to supply that much from the fund when there is not enough money to cover the amount the National Assembly has already approved for spending, and the government said, in both outlets' accounts, that total expenditure would not rise above the initially planned level. [ 1 , 3 ]
The committee also questioned a provision that would let the fund change up to 30% of major expenditure items itself, applying the same exception given to financial-type funds. It said the Future Response Fund's spending structure differs from that of financial-type funds and that most of its projects resemble budget programmes. Yonhap reported that if the bill is confirmed as written, the amount that could be changed without going through the National Assembly would be considerable, and in a follow-up report said the 30% rule is expected to be contested during the legislative process. [ 1 , 2 , 3 ]
The committee raised doubts about the fund's revenue durability, saying that if additional tax revenue does not continue sufficiently, fund resources could shrink, and that mid- to long-term sustainability should be examined. It warned that if spending demand for continuing projects remains after the fund shrinks, the burden could shift to the general account and other sources, increasing rigidity in mid- to long-term fiscal management. The committee added that the bill sets the goal of raising the potential growth rate but gives no specific criteria for what counts as a future-response investment or which projects qualify, that the bill's definition of “excess tax revenue” does not match the National Finance Act amendment's concept of “excess tax income”, and that the resulting special clauses could reduce the size of local allocation grants depending on government decisions. Yonhap said debate over changing the fiscal paradigm on the back of unprecedented tax revenue driven by the semiconductor boom is expected in the regular parliamentary session. [ 1 , 3 ]
Why it matters
The committee's review reports are a formal input into the legislative process, and Yonhap said debate over changing the fiscal paradigm on the back of record tax revenue driven by the semiconductor boom is expected in the regular parliamentary session. If the special clauses stand as written, the committee argues, a substantial share of fund spending could be changed without prior parliamentary approval and mid- to long-term fiscal management could become more rigid. The documents do not say whether the bills will be revised.
Key facts
- The National Assembly's Finance and Economy Planning Committee issued review reports on the government's National Finance Act amendment and on a bill to establish the Future Response Fund. [ 1 , 3 ]
- The reports were written in the name of committee expert member Yoo In-kyu, according to Yonhap and Seoul Economic Daily. [ 1 , 3 ]
- The committee said the amendment would expand the government's fiscal flexibility while relatively shrinking the National Assembly's prior deliberation and control over budget and fund management plans. [ 1 , 3 ]
- The committee singled out a special clause allowing surplus fund money to be transferred to the general account without a supplementary budget. [ 1 , 3 ]
- The committee questioned applying the financial-type fund exception, which allows up to 30% of major expenditure items to be changed by the fund itself. [ 1 , 2 , 3 ]
- The committee said the fund's mid- to long-term revenue sustainability should be reviewed, warning the burden could shift to the general account if spending demand continues after revenue falls. [ 1 , 3 ]
- The government said transferring surplus fund money to the general account without a supplementary budget would not increase total spending beyond the initially planned level. [ 1 , 3 ]
- Seoul Economic Daily said the Future Response Fund is due to launch next year. [ 3 ]
Confirmed by several sources
- The Finance and Economy Planning Committee's review report said the amendment could expand the government's fiscal flexibility while relatively reducing the National Assembly's prior deliberation and control over budgets and fund management plans. [ 1 , 3 ]
- The committee's concerns include a special clause allowing surplus fund money to be sent to the general account without a supplementary budget, and the rule permitting the fund to change up to 30% of major expenditure items itself. [ 1 , 2 , 3 ]
- The government said such a transfer would not raise total spending above the originally planned level. [ 1 , 3 ]
- The committee said the fund's mid- to long-term revenue sustainability should be examined. [ 1 , 3 ]
Still unclear
- Whether the two bills will be changed in response to the committee's report. No document reports any follow-up, amendment or response to the review reports.
- The exact size of the Future Response Fund and the amount that could be reallocated without parliamentary approval. No document gives figures; Yonhap says only that the amount changeable without the National Assembly would be considerable, and Seoul Economic Daily says the fund is too large without quantifying it.
- When the Future Response Fund will be launched. Only Seoul Economic Daily says it is due to launch next year; Yonhap gives no timing.
- The full wording of the Planning and Budget Ministry official's comment to Yonhap. The article text in the document is cut off mid-sentence after the first part of the quote.