The parliamentary finance committee criticised slow Budget reform, but praised fiscal discipline, reports Lynda Loxton
AFTER intensive week-long public hearings, Finance Minister Trevor Manuel and his team were handed brickbats and bouquets from the parliamentary finance committee for the 1997/98 Budget.
“Overall, the committee commends the minister for the manner in which this Budget balances the need for fiscal discipline with the urgent imperative for transformatory social spending,” the committee said in its report, finalised before the start of the Budget debate in the National Assembly.
“The Budget presented is consolidative in nature, building on the sound platform laid in 1995/96 and 1996/97, and stabilising public finances in the aftermath of what has been a difficult year owing to currency volatility. Most importantly, the Budget gives definite shape to trends and principles identified over the past two years.”
The Budget, the first presented within the framework of the growth, employment and redistribution (Gear) strategy, had attracted some criticism from public interest groups for its focus on fiscal discipline in its quest for growth and job creation.
The committee tip-toed around this criticism, but did add that “it is critical that the accelerated pace of deficit reduction … is carefully managed to prevent ad hoc, quick-fix expenditure cuts.
“An imperative for the government in the 1997/98 financial year is ensuring greater progress on the reprioritisation of state spending. It is only with reprioritisation and improved management that the proposed spending cuts can be realised in a manner that nevertheless sees active and tangible progress in the reconstruction and development of the nation.”
It was concerned that R8,9-billion in unspent funds would be rolled over into the Budget for a number of reasons, not least because of the inability of the government to get new programmes up and running quickly. This, it said, would hopefully be tackled by the move to multi-year budgeting, but it added that the whole issue needed further investigation.
It was particularly critical about the slow pace of Budget reform, even though it was well aware of the complexities involved. “Not only does a new constitutional dispensation have to be accommodated, financial management drastically overhauled and Parliament empowered to perform its oversight function, but the success of government economic policy … is critically dependent upon the reprioritisation of public spending in the face of severe Budget cuts,” the committee said.
The Financial and Fiscal Commission had again complained to the committee that its work was still not integrated into the Budget cycle. “While the government has firmly committed itself to reforming the Budget process, the slow pace of implementation is a matter of extreme concern to this committee.”
It appeared that the process was still dominated by separate initiatives at various levels ranging from the commission, the Finance Ministry and Parliament itself. These initiatives had to be drawn together and various gaps filled, mainly in bringing forward the Budget cycle, performance targeting and auditing.
On public sector reform, the committee welcomed steps to rationalise the sector and eliminate “ghost” workers. But some areas of concern remained, notably the fact that the central bargaining chamber negotiations usually took place after the Budget, creating uncertainties about expenditure estimates.
The committee was also worried by the fact that government consumption expenditure continued to rise, despite the commitment in Gear to reduce it. This could make it difficult to meet macro-economic targets.
The strategy to “right-size” the civil service did not appear to be working as planned and it was unclear whether savings from the voluntary retrenchment programme would be enough to pay for the new salary grading process.
At the same time, skilled and key staff appeared to be taking up the voluntary retrenchment packages which could affect the quality of the civil service. The committee recommended that the whole process be evaluated and that the issue of targeted involuntary retrenchments be explored.
In the public hearings, concern had been expressed by the effect of the Budget on social services. The committee said this could only be evaluated once provincial budgets had been tabled because of the switching of some functions and budgets to the provinces.
The committee ended its report by looking back to last year and whether the government had taken action on any of its suggestions. Of the 35 recommendations, the committee said decisive action had been taken in only 12 areas, while on 11 there had been some progress.
It is a sore point to many committee members that the divide between the legislature and the executive appears to remain firmly in place and that they, as elected members, cannot always feel they are making any difference to the way the country’s finances are run.
This was brought home to them rather forcefully last week when the Congress of South African Trade Unions presented a damning submission and threatened not to provide an input into the Budget process ever again unless it could be reassured that someone out there was listening.