Defense spending ought to be more transparent

It’s glaringly obvious that although the state declares that people are its highest priority, the actual budget figures give priority to national security. This is balm for the soul of the military, of course – but is everything really that simple?

On March 9, President Vladimir Putin sent his budget address to Prime Minister Mikhail Fradkov and the speakers of the Duma and the Federation Council. For the first time, the budget address arrived well in advance of the President’s annual address to parliament. That’s because this is a special year: the federal budget has to be approved earlier than usual, and it’s the very first three-year budget. Note that the budget address is not a proposal being put forward for debate; it is a decision which has already been made.

It’s glaringly obvious that although the state declares that people are its highest priority, the actual budget figures give priority to national security. This is balm for the soul of the military, of course – but is everything really that simple?

Multi-year budget plans are nothing new in Russia. We remember five-year plans, or even seven-year plans. They were the chief tools used in strategic planning and operations management; they were approved at the very highest level of the state hierarchy. Annual plans and the corresponding annual budgets were adopted without much detailed discussion, simply as extracts from five-year plans.

That system of administration had its advantages: a sense of stability, and the ability to implement long-term projects. But it had its disadvatages as well: making adaptation difficult in a rapidly-changing situation, when reality ceases to resemble forecasts, or when our understanding of optimal choices becomes more precise. An approved plan could only be supplemented by new work based on joint decisions by political and state government bodies. Consequently, it required more and more spending.

Thus far, the decision to develop and adopt a three-year federal budget has only one apparent advantage, which President Putin needs in order to stabilize our state’s political and socio-economic course. This one-time action will lock Putin’s successor into the path that seems correct at present. However, it won’t guarantee that all movement along that path is right. After all, the Soviet Union had long-term plans and programs at the moment of its collapse. Did they prevent that twist in our history?

The following question is also worth asking: what if the three-year budget turns into blinkers? What if it makes the new leadership incapable of seeing what’s going on around it and responding to current events appropriately?

Many economists take the view that the main problem with our system of planning budget spending lies in the fact that a transition to results-oriented budgeting still hasn’t produced any achievements which citizens can see. Strategic goals and objectives haven’t been made public; success and performance criteria haven’t been justified; reliable oversight hasn’t been confirmed.

These omissions are also having an impact on the Armed Forces. For example, the public ought to have some indicator for judging the effectiveness of the transition from conscription to voluntary service: something like a decrease in the total number of military posts filled with conscripts, and an increase in the overall number of contract personnel across the military, not only in permanent combat readiness units. What we are seeing, however, is an outflow of contract personnel from other units (because salary bonuses are not available there), as a result of which the Armed Forces aren’t as prepared as they should be for the reduction in conscription terms in 2008. This outflow of contract personnel may yet increase, while conscript numbers may grown, since remuneration for soldiers, sergeants, and junior officers is still below the average wage. What’s more, planned increases in military remuneration won’t keep pace with the growth of the average wage.

If we are so concerned about the income gap between rich and poor reaching critical levels, why do we keep silent about the fact that the gap between salaries of low-level contract personnel and the remuneration packages of the top brass has also reached the critical 15-fold level?

The second problem is secrecy. Budget spending is kept secret from citizens. Somebody reported these words to the President, and they have been included in the budget address: “A system of budget classification and budget calculations based on international standards has been implemented, making budget reporting significantly more transparent and meaningful for administration purposes.” Alas, this isn’t entirely true. In fact, the proportion of budget spending that is classified as secret has been rising (from 11.8% in 2006 to 12.2% in 2007).

From whom are we hiding these figures? From our fellow citizens? For example, Russian citizens still receive far less information about their state’s military spending than the information available to United Nations and NATO specialists. Russia provides far more detailed information abroad – in line with UN standards adopted in 1980 and NATO standards within the “partnership” framework. And the differences aren’t harmless. They are embarrassing for the Russian leadership, when it compares Russia’s military spending as calculated according to domestic classification with the spending of other countries which do meet international standards.

Almost simultaneously, President Putin announced that Russia will allocate 5 trillion rubles between now and 2015 for re-arming the Armed Forces. How will this vast sum of tax-payers’ money be spent? It’s public funds, after all. But everything is shrouded in secrecy. Only the Defense Ministry’s senior officials know all the details. Transparency is minimal. Although there has been much talk of public oversight, the very possibility is excluded.

Obviously, rearmament plans will require some corrections over such a lengthy period of time. Who will make those decisions? The same small group of people. Civil society is left out. Even members of parliament can’t debate or evaluate defense spending plans properly, because they are denied access to detailed information.

Relying entirely on the wisdom of a small group of the top brass is a remnant of our Soviet past. As everyone knows, it’s always impossible to determine who is to blame in the event that any rearmament program fails. The military’s collective interests prevent accountability. That’s the result of a system that entirely rules out the possibility of public oversight for the security and law enforcement agencies.

Civil society still doesn’t know – not even approximately – what kind of calculations are used by the rearmament program decision-makers. No one can assure us that Russia won’t find itself in the position of the Soviet Union, which spent a substantial part of its resources on 40,000 tanks. The burden of destroying those tanks was left to Russia. How rational are present-day calculations, if they exist at all? There’s no problem with this in the United States, Britain, or France; the public not only knows long-term plans for producing particular kinds of military hardware, but even makes decisions about the expediency of particular projects. Meanwhile, Russian citizens are still left in the dark.

Solving these problems is far more important than changing the status of the prospective financial plan for the next three years, whether the President approves it or not.