[Secret Budget Negotiations] ② "Only the Speaker and Party Floor Leaders Are Needed"... The Budget Committee Reduced to a Mere Spectator

Budget and Tax Law Discussions Decided by Negotiation 'Closed-Door'
This Year's Budget Passed to Negotiation Without Deciding Reduction Scale
Only Banner Budget Waving After Closed-Door Review

Editor's NoteThe budget bill for next year barely passed the National Assembly, exceeding the legal deadline by three weeks. Now that the budget has been processed to avoid a provisional budget crisis, does that mean there are no more issues? This year's budget review was a clash between the government and ruling party, who hold the right to approve increases, and the opposition party, which holds the majority of seats. Throughout this process, fundamental problems with the National Assembly's budget review system were revealed all at once. Although the budget was barely processed, we cannot simply overlook the issues because this year's problems may recur in next year's budget. Over three parts, we will shed light on the problems in the National Assembly's budget review and seek solutions.

[Asia Economy Reporter Naju-seok] "The system runs smoothly as long as there are just three people: the Speaker of the National Assembly and the floor leaders of the ruling and opposition parties."

On September 27, Rep. Cho Eung-cheon of the Democratic Party of Korea made this remark during a 'Reflection and Innovation' forum, pointing out the need to reform the National Assembly's operational system by criticizing how the current system functions. The process of handling next year's budget at the end of this year, from tax law to budget negotiations, was a clear example confirming Rep. Cho's criticism.

Of course, during negotiations, not only the floor leaders but also the chairpersons of the Policy Committee, the budget and accounts special committee secretaries, and the Planning and Finance Committee secretaries participated in some discussions. However, ultimately, all decisions were made through 'closed-door negotiations.' This method of handling the budget could be seen as a tightly controlled negotiation wrapped in the leadership of the ruling and opposition party heads, but it cannot escape criticism that the foundation of budget review and the principle of tax legislation has been undermined.

The National Assembly opens the Budget and Accounts Special Committee to review the overall direction of the budget bill, then holds the Budget Adjustment Subcommittee, commonly called the 'sub-subcommittee,' to review the budget based on preliminary reviews conducted by standing committees. Typically, after the subcommittee completes the reduction review, only the ruling and opposition party secretaries gather to review increases in the 'sub-subcommittee.' This increase review stage, considered the core of the National Assembly's budget review, has long been criticized for leaving no transcript records.

However, this year’s situation was even more serious. The usual reduction review was not even completed at the subcommittee stage.

For example, in last year's budget review (2022 budget), it was officially announced at the end of the subcommittee that "KRW 1.2281 trillion was cut from expenditures and KRW 1.152 billion from revenues." In contrast, this year’s budget review did not even confirm the scale of reductions at the Budget and Accounts Committee level. The committee, after disruptions, moved to the sub-subcommittee without completing the reduction review.

[Image source=Yonhap News]

Lee Sang-min, senior researcher at the Nara Salrim Research Institute, explained, "It has been customary for the subcommittee to summarize which projects were cut and by how much before moving to the sub-subcommittee. This time, there was no such summary, so the sub-subcommittee proceeded without the Budget and Accounts Committee officially knowing what was cut."

Although the budget review was conducted behind closed doors from the sub-subcommittee stage, the ruling and opposition party secretaries of the Budget and Accounts Committee ultimately failed to reach an agreement. Subsequently, the leadership of both parties stepped in. However, this stage also proceeded solely through negotiations between the parties without any official records. The ruling and opposition parties held 2+2 meetings involving the Budget and Accounts Committee secretaries and Policy Committee chairpersons, then 3+3 meetings including the floor leaders, and finally negotiations between the Speaker and floor leaders. Throughout this process, negotiations were frequent, but no records of the discussions exist, and the content of the negotiations remains undisclosed.

Ruling and Opposition Parties’ Budget Agreement Document: Clear Evidence of Closed-Door Negotiations

The extent to which next year’s budget was handled behind closed doors was clearly reflected in the budget and tax law agreement document between the ruling and opposition parties on the 22nd. Article 1, Clause 1 of the agreement states, "The National Assembly will reduce KRW 4.6 trillion from the government’s budget proposal." This officially confirms that the reduction scale was agreed upon through negotiations between the floor leaders of both parties.

In fact, aside from individual project budgets, the most contentious issue during budget negotiations was the scale of reductions. The reason reductions are important is that the National Assembly discusses increases based on how much it has cut from the government’s budget proposal. The ruling and opposition parties sharply disagreed on this issue. The ruling party tried to maintain the government’s budget as much as possible, while the opposition party demanded significant cuts from the original budget proposal. During this process, Rep. Joo Ho-young, floor leader of the People Power Party, argued, "This year, discretionary spending has decreased, so reductions should also decrease." In response, Rep. Park Hong-geun, floor leader of the Democratic Party, countered, "They are proposing absurdly low reduction levels." It is reported that the government and ruling party demanded reductions between KRW 2 trillion and 3.5 trillion, while the opposition party demanded about KRW 5 trillion.

Ultimately, the reduction scale was decided through negotiations involving Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho and the floor leaders of both parties, with the final figure close to the midpoint between the two sides’ demands. The detailed project budgets that became contentious were similar. The opposition party’s priority project, the local gift certificate program, was allocated KRW 3.525 trillion, half of the opposition’s original demand. The ruling party’s must-protect budgets for the Ministry of the Interior and Safety’s Police Bureau and the Ministry of Justice’s Personnel Management Unit were also maintained at about half. Moreover, it was confirmed that the budgets for local constituency projects of influential politicians from both parties increased. The media has already criticized the increase in local constituency budgets for political heavyweights from both parties.

Speaker of the National Assembly Kim Jin-pyo, People Power Party Floor Leader Joo Ho-young, and Democratic Party Floor Leader Park Hong-geun are exchanging greetings before holding a meeting at the Speaker's Office of the National Assembly on the 8th. Photo by Yoon Dong-joo doso7@

Rep. Bae Jin-kyo of the Justice Party, who opposed the budget bill during the debate, pointed out, "This year, the budget review and agreement process was conducted even more secretly and covertly," adding, "Not only Budget and Accounts Committee members like myself but also most members present here had no way of knowing the budget review situation."

The Nara Salrim Research Institute criticized, "All projects increased by the National Assembly in the Ministry of Land, Infrastructure and Transport’s budget during this review are merely local development projects," citing projects such as the Buyeo-Iksan, Dodam-Yeongcheon rail lines, Chuncheon-Sokcho rail line, West Coast Line, and Byeollae Line rail projects. These projects had previously had large unspent balances, so the increases are likely 'banner increases' that will not actually be spent."

Tax Law Review Subcommittee Formed After Four Months Due to Ruling and Opposition Power Struggle

The tax law review was similar. This year, after the formation of the National Assembly, the tax law subcommittee was formed only on the 6th of last month, four months into the second half of the session, after a power struggle over which party would chair it. The tax law subcommittee held six discussions but failed to reach an agreement within the subcommittee framework due to significant disagreements over corporate tax and other issues.

As a result, all tax laws were submitted as government proposals, then revised bills reflecting agreements between the floor leaders were submitted for each law. Since tax laws were handled through agreements between the ruling and opposition floor leaders, they were agreed upon behind closed doors and kept secret.

Because of this, during votes on laws such as the Corporate Tax Act, lawmakers appeared confused. The voting board in the plenary session showed lawmakers frequently changing their votes between abstention, opposition, and support. The voting process sometimes took longer than usual electronic voting times.

Rep. Lee Eun-joo, floor leader of the Justice Party, protested the tax law amendments in the plenary session, saying, "The principle of tax legislation, a fundamental principle of the Constitution and democracy, does not merely mean a procedure to vote in the legislature. It means that citizen representatives should engage in sufficient debate and adjustment to create public-interest alternatives on tax issues with sharp conflicts of interest. Nevertheless, this revision appeared like a goblin, threatening democracy and the spirit of the Constitution and insulting our National Assembly."

This content was produced with the assistance of AI translation services.