Seoul : The National Assembly’s Finance and Economic Planning Committee holds a plenary meeting on the 17th of last month to adopt the confirmation hearing report on Lee Hyung-il, nominee for deputy prime minister and minister of finance and economy. Yonhap News
The National Assembly’s Strategy and Finance Committee warned that the Future Response Fund, set to launch next year, could weaken the legislature’s control over public finances. The committee said the government would hold wide discretion in running the fund given its nature, while its scale is excessively large. It also flagged doubts over whether the fund’s revenue base can be sustained through economic cycles.
In a review report on the proposed amendment to the National Finance Act, issued on the 4th under the name of expert adviser Yoo In-kyu, the committee said that if the amendment passes, “the government’s flexibility in fiscal management will expand, while the scope of the National Assembly’s advance review and control over budget and fund management plans could be relatively narrowed.”
The committee’s position is that the government’s proposed amendment to the National Finance Act contains several special provisions that encroach on the National Assembly’s right to review the budget. A leading example is a provision allowing surplus money to be transferred from the Future Response Fund to the general account without a supplementary budget when tax revenue falls short.
Under current law, reflecting transfers from the Future Response Fund in revenue estimates requires both a supplementary budget and a fund management plan. The amendment, by contrast, only requires that changes to the fund management plan be submitted to the National Assembly without delay. That means advance control centered on review and resolution would be weakened into after-the-fact control, such as examination following a report. The government countered that even if it moves surplus money from the future fund to the general account without a supplementary budget in response to a revenue shortfall, total expenditures would not rise above the original plan.
The committee also took issue with a rule that would let the fund alter major spending amounts on its own by close to 30%. The provision follows precedents set for financial funds, but the committee said most of the Future Response Fund’s programs resemble regular budget programs and therefore cannot be judged by the same standard as spending from financial funds.
Questions were also raised about the fund’s sustainability. In the review report, the committee said that “if sufficient additional tax revenue does not continue to flow in, the funding base could shrink,” advising that “medium- to long-term sustainability of the revenue source should be examined.” It added that “if spending demand for continuing programs is maintained even after the fund’s resources decline, the burden for those programs could shift to other sources such as the general account, raising the possibility of greater rigidity in medium- to long-term fiscal management.”
The committee further noted that while the future fund act sets raising the potential growth rate as its goal, the specific criteria for selecting future-oriented investment programs are not clear. It also cited as a notable gap the fact that the concept of “excess tax revenue” defined in the future fund bill does not match the “excess tax income” concept in the proposed amendment to the National Finance Act.
