Brazil’s supreme court declares ‘secret budget’ unconstitutional

Brazil’s supreme court has ruled that a parliamentary scheme dubbed the “secret budget” — which has been criticised for doling out funds to lawmakers with little oversight in exchange for backing the government — is unconstitutional.

Judges on the country’s highest court voted 6-5 against the mechanism, through which grants were handed out to parliamentarians for projects in their constituencies.

Transparency campaigners have said the opaque practice came to represent around one-quarter of Brazil’s discretionary federal budget, often benefiting allies of outgoing president Jair Bolsonaro. They argued it trampled on principles of democratic accountability, with limited disclosures over how the funds were spent.

The development was welcomed by backers of president-elect Luiz Inácio Lula da Silva, who have accused Bolsonaro of employing the ‘secret budget’ to boost his failed re-election campaign.

By removing a bargaining tool lawmakers held vis-à-vis the executive, the decision will weaken the speaker of the lower house of Congress, Arthur Lira, according to analysts.

Bolsonaro relied on Lira for a governing majority in a fragmented parliament while ‘secret budget’ resources — for local education, healthcare and infrastructure — helped lawmakers woo voters at election time.

With his inauguration due on 1 January, Lula also benefited from another ruling by a supreme court justice on Sunday night. It determined that his campaign promise of extra spending on welfare payments can sit outside a fiscal cap that limits growth in public expenditure.

“Taking back control of the budget and the guarantee that Bolsa Família [benefits programme] will not be subject to the spending ceiling . . . are important assets for the elected government,” said Rebeca Lucena, political analyst at BMJ Consultores.

Lula, a former two-term president, has been seeking Lira’s support for a constitutional amendment, in order to bypass the spending cap and release an extra R$145bn (£22.5bn) for next year’s budget. It would need to be approved this week.

Lucas de Aragão, partner at political consultancy Arko Advice, said the incoming government was now less dependent on that route.

“There is a clear tension between Lira and the government-elect right now,” he said. “[But] they are unwilling to burn bridges. They are looking for a common ground — and it could be a vote for the constitutional amendment, with a reduced amount of R$80bn”.

Both supreme court decisions will only further fuel the opposition’s allegations of judicial over-reach and activism. Bolsonaro supporters have accused top judges of bias in favour of Lula, who first ruled in 2003-10.

The veteran leftwinger was jailed for corruption in 2018, but his convictions were annulled by the supreme court last year, paving the way for a presidential run.

Parliamentarians have long received government cash for public works schemes, but critics of the ‘secret budget’ argued it was on a different scale. Formally known as rapporteur’s amendments, the mechanism was implemented in 2020, following Bolsonaro’s inauguration the previous year.

The ‘secret budget’ was set to hit R$19.4bn in 2023, according to estimates by the non-governmental organisation Open Accounts.

Gil Castello Branco, Open Accounts’ secretary-general, said this was equivalent to six times the size of Brazil’s environmental budget. “This gives a dimension of how these amendments were absolutely exorbitant and were distorting public policies,” he added.

Lira has previously rejected the term ‘secret’ and said the set-up is “democratic”, ending the exchange of favours from the executive for legislative votes.

Additional reporting by Emily Costa