Appropriation Bill [B3-2011]: briefing by National Treasury

Meeting report

Appropriation Bill {B3-2011]: National Treasury (NT) briefing
Mr Matthew Simmonds, Acting Deputy Director-General: Budget Office, National Treasury, explained that the Bill provided for the appropriation of money from the National Revenue Fund in terms of section 213 of the Constitution and section 15 of the Public Finance Management Act (PFMA), 1999. The Bill was divided by vote and by main division within a vote (programmes). An aim was set out for each vote and a purpose is set out for each programme. Allocations were divided into current payments (compensation of employees, goods and services and other payments), transfers and subsidies, payments for capital assets and payments for financial assets. Conditional grants were specifically and exclusively appropriated and were also listed in the Division of Revenue Bill 2011.

In relation to budget priorities, the budget transferred resources in line with Government priorities which were job-creation, infrastructure, education, health, rural development, the combating of crime, local government and human settlements. Outcomes had been translated into detailed delivery agreements and targets for national and provincial governments, agencies and municipalities. While these commitments addressed Government’s broad mandate, the New Growth Path identified the creation of employment as the single all-encompassing objective of public policy, with the aim here to create 5 million jobs within the decade ahead.

In terms of savings, spending baselines had undergone rigorous review and current expenditure had been realigned so as to support Government’s 12 outcomes. The 2011 Budget made R94.1 billion available for the allocations to programmes over the Medium-Term Expenditure Framework (MTEF) period. This included savings amounting to R30.6 billion. Of these savings, R21.6 billion was reprioritised within departmental budget baselines so as to meet existing commitments. Added, R9 billion was channelled to key outcomes. This included R6 billion which resulted from a 0.3% reduction in the budget baselines across national and provincial departments. In order to accommodate this, government departments were asked to decrease spending on no-core goods and services, reschedule expenditure, adjust foreign exchange projections, reduce transfers to certain public entities, improve financial management and cut expenditure on administration.

In relation to the baselines additions of R94.1 billion over the MTEF period, compensation of employees was to rise by 6.6% per annum, real transfers to households were to grow by 3.2% per annum, payment for capital assets was to grow by an average of 5.3%, while real interest costs were to rise by 11.4% per annum and was, as such, the fastest area of growth.

In relation to the key baseline additions, R11.4 billion was marked for compensation of employees adjustments, R2.3 billion for job-creation, R2.1 billion for public transport, R622 million for rural development and emerging farmer support, R200 million for the green economy, R794 million for human settlements upgrading and municipal services, R840 million for water infrastructure and services and R2 billion for FET college expansion and skills development. Added, R780 million was set for school infrastructure, R858 million for hospital revitalisation and primary health family care teams, R60 million for HIV/AIDS and ARVs, R1.2 billion for social protection, R100 million for police personnel expansion and training, R470 million for the Municipal Disaster Grant and R683 million for the payment of municipal charges.

Discussion
Mr B Mashile (ANC, Mpumalanga) asked how the reduction of compensation of employees and transfers and subsidies would be achieved. What had informed the figure around compensation of employees and had there been any engagement with unions around the 6% increase in this regard? Where was expenditure related to donor funding listed?

Mr Simmonds replied that the amounts being spent as well as the revenue received were being changed and these affected the amounts being spent. Therefore, if revenue were to increase, the percentage that compensation of employees claimed on revenue would decrease. Although expenditure was increasing over the MTEF period, it was doing so at a slow pace and was stabilising and was expected to stabilise around 2014/15. This was as a result of the budget deficit being increased at a rate which would give the financing requirements that would attract less interest. Transfers and subsidies were stabilising. This projection was based on forecasts done which were based on policy as well as trends within the demographic. There were, in deciding the compensation of employees, difficult trade-offs which had to be made. As interest, capital and goods and services were not categories in which cuts could be made, the only other option was compensation of employees. It had been decided that compensation of employees needed to stabilise. Though this was a difficult target to reach, the consequences of not meeting it would entail the employment of less people, capital costs and goods and services needing to be cut, the need to borrow more or the increasing of taxes. Donor funding was included within the Estimates of National Expenditure (ENE) and was discussed in the Budget Review. There were improvements that needed to be made here. Part of the problem was that grant money was in kind and accounting requirements for departments to disclose these had been revisited and was in the process of being implemented.

Mr M Makhubela (COPE; Limpopo) asked how the saving of R30.6 billion would be generated. How would spending by Government be reduced?

Mr Simmonds replied that outputs needed to be delivered more efficiently. Although there were risks of affecting service delivery with any savings exercise, these needed to be averted.

Mr C De Beer (ANC; Northern Cape) said that a decrease in expenditure was not always necessarily a good thing. A balance needed to be created so as not to affect service delivery.

Mr Mashile proposed that the Committee engage further with National Treasury as well as other relevant stakeholders on issues which the Committee needed greater clarity on. Could National Treasury furnish the Committee with a short report providing more information around donor funding by the end of July 2011. There also needed to be greater engagement with unions around the compensation of employees so as to avert disruptions to Government’s New Growth Path. National Treasury also need to look at ways in which in which it could transform the Government’s political objectives into monetary forms and not, as was being done currently, the other way around.

The Chairperson said that such a platform for engagement would be created as this was a necessity.

Mr Simmonds replied that National Treasury would provide the Committee with the report on donor funding.

Adoption of Appropriation Bill Report
The Chairperson asked whether the Committee’s Report on the Appropriation Bill could be adopted.

Mr Mashile proposed that the Report be adopted without amendments.

Mr De Beer seconded this.

The Report was adopted.

The meeting was adjourned.