1996 BUDGET Few surprises and lacking in boldness
Lynda Loxton
There was a predictably mixed reaction from political parties to Finance Minister Chris Liebenberg’s 1996/97 budget on Wednesday.
The African National Congress welcomed the fact that Liebenberg had not succumbed to the “short-sighted and insensitive free advice” of the likes of the South African Foundation to sharply increase value-added tax (Vat) while slashing the deficit.
This was never likely anyway, given the extensive consultations with representatives of both business and labour ahead of the budget, but rank and file members must have been somewhat alarmed by the widespread publicity given to the foundation’s suggestions and wondered who would win the war of words.
Labour Minister and chairman of the ANC’s national executive economics committee Tito Mboweni said that the budget was a clear rebuff of the foundation’s outdated views and set a more sustainable course for growth.
But the ANC did give notice that it expected the government to “remain firmly focused throughout the year on the critical areas of Reconstruction and Development Programme (RDP) delivery” and, as Liebenberg had said, make this the Year of Meaningful Delivery on the RDP.
Mboweni said that although some progress had been made in reprioritising government spending, more should be done, especially to support the critical task of job creation.
He believed that labour intensive public works programmes could play an important role in creating jobs.
The ANC also welcomed progress in introducing tax reform but said that this should be speeded up “so that certainty can be achieved”. The controversial introduction of a 17% tax on pension fund income had been handled in a “responsible and strategic manner” and Mboweni called on the industry to co-operate with government to make it work.
“There is no cause in our view for any alarm on the part of members of retirement funds,” he said.
National Party finance representative Theo Alant condemned plans to tax pension fund interest and rental income as an “ad hoc” measure that would affect savings. Freedom Front finance representative Willie Botha said the tax “targeted the sitting ducks providing for their retirement”.
Democratic Party finance representative called the budget a “spend now, pay later budget” because the budget had not been cut substantially and had instead raided retirement funds.
“The government is forcing future generations of taxpayers and pensioners to pay for its inability to control its excessive expenditure,” he said.
Alant welcomed the fact that the government had adopted sound economic policies that had demonstrably led to growth, but warned against complacency.
“The challenge facing the Government of National Unity is to strengthen confidence in the new South Africa and in the government’s ability to maintain peace and law and order, and to apply sound economic policies amid signs of growing tensions and support for populist policies,” Alant said.
On the positive side, most parties welcomed the reduction of the secondary tax on companies and marketable securities tax, but equally hoped that the planned revamp of revenue collection services would show rapid results.
Liebenberg is banking on getting an extra R1,5-billion from the revamped service but Alant said that progress in getting this up and running had been “unacceptably slow”.
The fact that all parties agreed on the need for fiscal discipline and reducing the budget deficit bodes well for continued efforts to bring the deficit down. But the proof of the pudding will be in the eating, and it might not be very palatable.