Several Arab and Western governments have adopted austerity measures intended to lower their budget deficits and boost their deteriorating economies. Among such efforts is to lower or limit spending by ministers and officials - a practice applied in Greece, Spain, Brazil, France, Tunisia and Algeria, and more recently in Saudi Arabia. These states differ regarding the amount deducted from the budgets of their ministers and officials, according to the budget for state wages and salaries. The best way to lower spending has been to make efforts to promote economic growth and rationalizing public expenditure in the long term, taking into account the nature of the security and economic threats that affect the efficiency of economic measures taken by the state.
Varying experiences
There are many reasons why governments impose austerity measures. However, the nature and scale of those measures varies from one state to another and depends on the challenges they face. The common motivation is the desire to reduce public deficits. The following are some notable examples:
1. Greece: Following the government debt crisis that slammed the Greek economy in April 2010, the former Greek Prime Minister, Antonis Samaras announced in his first cabinet meeting in June 2012 a set of bold measures to reduce spending to mollify the country’s poorer classes. He announced that the salaries of members of the government would be cut by 30 per cent, while fewer cars would be available for ministers and staff. Samaras also declared that state funding for political parties would be reduced by a fifth to cut costs and close the large gap in the budget while restoring trust between citizens and the government.
2. Brazil: Shortly before being ousted from her post at the end of August 2016 and while trying to refute accusations of falsifying public accounts to hide the actual size of the country’s economic deficits, President Dilma Rousseff reduced spending of eight ministries in her government and cut the wages of three thousand employees in a set of austerity and reform measures. Rousseff further lowered her personal salary and that of the vice president and several other leading politicians by 10 per cent, confirming that she wanted to cut the overall government spending by 20 per cent. However, those measures failed to help Rousseff maintain her position. As Brazil’s Senate voted by a majority of 61 out of 81 senators to impeach her, and her deputy, center-rightist Michel Temer, took over the presidency until 2018.
3. France: After Francois Hollande had become President in May 2012, the French government decided at its first meeting to cut the salaries of Hollande and his ministers by 30 per cent. The ministers signed a code of conduct that bound them to reduce expenses incurred as a result of running their ministries. Such measures included the use of trains instead of planes where air transport was unnecessary. Following those adjustments, Hollande’s salary was set at 14,910 euros a month before tax and social security, a cut from 21,300 euros, Along with the Prime Minister receiving a similar wage. The salaries of other members of the government were set at 9,940 euros per month, instead of 14,200 under Nicholas Sarkozy.
4. Saudi Arabia: The Kingdom’s Council of Ministers issued a royal decree on September 26, 2016, cutting their salaries by around 20 per cent, as well as lowering the bonuses and the housing and furniture allowances received by members of the Shura Council by 15 per cent, and cutting their transportation allowances for vehicles, drivers, maintenance and fuel.
These decisions coincided with an unprecedented slump in oil prices, which had negative impacts on the Saudi economy. Furthermore, and fitted within the framework of “Vision 2030”, Saudi Arabia’s reform package announced earlier this year to turn the Kingdom’s economy into a global investment power that no longer relies on oil exports as its primary source of economic income.
5. Tunisia: In the spirit of solidarity with his country, which is passing through difficult economic times, the Tunisian President, Youssef Chahed, decided in September to lower the privileges and benefits given to members of the government by 30 per cent of their monthly salaries as well as cutting 20 per cent of their monthly vehicle fuel allowance. That amounts to around 1,000 Tunisian dinars ($454) a month. Also, similar measures are expected to be applied to members of the Tunisian parliament, in order to boost the Tunisian economy that has suffered recently as a result of repeated terrorist attacks hitting the tourism sector.
Varying challenges
Efforts to cut spending by ministers face a number of challenges that must be taken into account if such measures are destined to succeed. For example:
1. The economic, political and security context of the state in question. This can be decisive in terms of whether or not efforts to cut spending by ministers bear actual results. For example, despite efforts by President Francois Hollande to lower salaries, that has not led to a reduction in France’s public debt, which has risen from 80 per cent of GDP - just before Hollande took power - to 96.2 per cent today.
The continued growth of France’s public debt can be attributed to developments in Europe and terrorist attacks on French soil over the last couple of years, as well as the French far right’s exploitation of those events to criticize the government, something that has negatively affected the country’s investment climate. The same applies to Tunisia, in the light of the recent decline in tourism as a result of terrorist attacks, which has, in turn, led to some investors withdrawing from the country thus hindering economic growth. Therefore, the policy of cutting spending by ministers and officials is merely a small step in a wider reform strategy that depends on cutting government spending. It depends on the economic and political stability and the security of the country to have a tangible impact on the budget deficit.
2. The extent to which cutting ministers’ spending must be linked to specific goals, a vision for reform and a clear timetable. This is needed to refute accusations that the government has no economic vision.
3. The challenge posed by a lack of data on how ministers spend money. Cutting ministers’ expense accounts will have no tangible impact as long as there is no sufficient data available from the same budget regarding the way provisions are spent. This makes it hard to audit whether the policy has been effectively implemented, and weakens the impact of such policies on budget deficits.
4. The challenge of accounting and transparency in announcing the results of such policies. Continuous publication of the results of these policies and what they achieved, in light of other challenges, encourages more reform measures and improves receptiveness by the public.
In general, the impact of limits on ministerial salaries and benefits is linked to other conditions in the country. It is important that these measures are accompanied by other, complementary economic policies, as they will not bear fruit alone. Measures to cut spending on, and by, ministers and officials achieve a political goal in light of the other economic measures taken by the government, as they can help bridge the gap of trust between the government and its citizens. These policies increase citizens’ faith that their government is working for the public good and its ministers are not trying to achieve personal gain at the expense of the state and the public.
