Minister on Budget 2007; Division of Revenue Bill: briefing & adoption

PORTFOLIO COMMITTEE ON FINANCE AND JOINT BUDGET COMMITTEE
22 February 2007
MINISTER ON BUDGET 2007; DIVISION OF REVENUE BILL: BRIEFING & ADOPTION

Joint Chairperson(s): Ms L Mabe (ANC) and Mr N Nene (ANC)

Documents handed out:
Minister of Finance: Budget 2007 Powerpoint Presentation
Recommendations of the Financial and Fiscal Commission: Powerpoint Presentation
Financial and Fiscal Commission’s Comments on the Division of Revenue Bill
National Treasury: Division of Revenue Bill: Powerpoint Presentation

Relevant Documents:
Estimates of National Expenditure 2007
Budget Review 2007
Division of Revenue Bill [B3-2007]

Audio Recording of the Meeting

SUMMARY
Minister Trevor Manuel highlighted the key aspects of the Budget 2007. Increased revenues and steadily improving economic growth enabled greater expenditure in key policy areas, which included investment in social and economic infrastructure, improvement in the education and health services, the modernization of justice and administration services as well as long-term investment in social security. Critical concerns raised by members included the design of the social security reform, methods to improve the current shortage of skills needed for economic growth and the need to improve export performance. Concerns were also raised over the continued inaccessibility of transport services, despite improvements in transport infrastructure.

The Financial and Fiscal Commission presented an overview of recommendations and comments on the Division of Revenue Bill 2007. An analysis of the allocations of funds to all three spheres of government was provided as well as comments relating to the spending and allocations of conditional grants. Questions and concerns raised by members included the confusion over concurrent functions and responsibilities of provincial governments and municipalities; the need for greater coordination between spheres of government as well as the improvement in the monitoring and spending of conditional grants.

National Treasury briefed the Committee on the particulars of the Division of Revenue Bill. Clauses dealing with the Gautrain Rapid Rail link had been amended to remove provisions no longer relevant. New clauses were also inserted which aimed to improve the management of new grants. These included the 2010 FIFA World Cup Stadiums Development Grant, and the Bulk Infrastructure Grant. Clauses were also refined to facilitate the project registration of the Municipal Infrastructure Grant. Responses to the recommendations made by the Financial and Fiscal Commission were also provided.

The Committee approved the Division of Revenue Bill.

MINUTES
Budget 2007: National Treasury (NT) Briefing
Mr Lesetja Kganyago, Director General, provided an outline on the key aspects of the 2007 Budget as contained in the detailed Budget Review document.

Hon Trevor Manuel, Minister of Finance, explained that the presentation was complex as it dealt with two sets of interests. The first part of the presentation would focus on South Africa’s macro-economic framework, which also informed the fiscal framework. The second part would focus on the allocations, which informed the work of the Joint Budget Committee. The allocations also included the outcomes of the Medium Term Budget Policy Statement (MTBPS) process. Members were welcome to raise these issues.

The 2007 budget added R89.5 billion for expenditure over the next three years. This included R534 billion for the 2007/2008 financial year. The funds would be used to further the following policy objectives: the acceleration of economic growth; investment in social and economic infrastructure, improvement in the education and health services, the modernisation of justice and administration services as well as long-term investment in social security.

The budget built on the improvement in the growth of the domestic economy. Fast growing industries included agriculture, manufacturing, financial services and construction. All indications confirmed the likelihood of achieving and maintaining the five to six percent projected annual economic growth by 2009. This was a marginally better target than that of 4.9% projected by the Accelerated Shared Growth Initiative for South Africa (ASGISA). Inflation expectations remained at the projected three to six percent for the period ending in 2009. Rising producer prices had an impact on the rate of inflation, despite robust growth in investments.

The current account deficit did not merely reflect the widening imbalance between savings and investments but also indicated that consumption was greater than production levels. The corporate sector remained the key drivers of savings while household savings were low. It was anticipated that this deficit would remain between five and six percent of gross domestic product for the period ending in 2009.

Government expenditure had growth by 9% in real terms, due to the steady growth in revenue. This led to an improved fiscal position and a recorded surplus for the current financial year. This improved position resulted in a net tax relief of R12.4 billion and the abolition of retirement fund tax. Greater investments in health and education to improve the skills capacity and improved remuneration of teachers and health workers were also highlighted.

Principles underpinning the new social reforms included equity; mandatory participation in the social security pension system, including the compulsory participation of employees and self-employed individuals on reasonable terms, administrative efficiency and the promotion of social solidarity. The new reforms needed to include unemployment benefits, disability and death benefits, and savings and pension would be based on a standard payment log of 15 to 18% percent of income of all workers in the formal employment sector. A wage subsidy would be introduced for low-income earners to encourage employment creation and the improvement in the working and living conditions of low-income earners. This would also offset the social security contribution of this group. The total cost of this system would be around R20 to R30 billion.

Discussion
Mr I Davidson (DA) noted that the Committee had reflected on a position paper on the reform of the retirement industry about two years ago. Since these reforms held great ramifications for the retirement industry, it was stressed that further consultations would be held with the private sector. He asked to what extent the impact of the proposed new social security system had been workshopped with the private sector.

Minister Manuel advised that a more detailed paper on the new social security system would be made available at a press conference in Johannesburg the following morning. It was a product of the preceding discussions held with various stakeholders and had highlighted the inter-relationship of the needed reforms to social security and the retirement fund industry. The reform of the retirement industry was also essential, but would unfold collaboratively. The development of a framework for these changes was a priority. Detailed discussions would be held with the private sector and trade unions. It was not yet known whether talks needed to be held with fund managers and line officers or whether a body such as Business Unity South Africa would be sufficiently encompassing to deal with this matter. Similarly discussions would be held with trade unions. The architecture of the reforms would be defined between now and the end of the year. The Portfolio Committee on Finance and the Joint Budget Committee, as well as other relevant parliamentary committees, would play a critical role in this process and take it forward. An improved measurement for poverty had also been collaboratively developed to ensure that government tackled the ‘poverty trap’ effectively. A detailed paper on this measurement had been posted on the National Treasury (NT) website that morning.

Mr Manuel added that Chapter Six in the Budget Review dealt specifically with the issues surrounding social security. These issues had been dealt with previously as part of the fiscal policy or medium term priorities and service delivery. A key concern was how people provided security for themselves. There was a severe bifurcation as there were tax benefits for those who could afford retirement annuities (RA), while low-income earners faced the reality of the ‘poverty trap’. This was manifested in the ease of provident funds, the notion of portability and the fact that workers between jobs were earning too little to save. The application of the means test excluded many from receiving the R870 state pension. Government wanted to improve the transition from employment to retirement for all working people. The reform of the retirement industry also necessitated improvements in death and disability benefits and the unemployment insurance fund. Unrecorded workers were also earning too little or were regarded as independent contractors.

Mr Davidson commented that he initially thought that the proposed wage subsidy was connected to the reform of the retirement industry. This meant that the subsidy would be granted to those individuals who could not afford a retirement fund or the payment of a social security tax. He asked whether the wage subsidy was in respect of the employer or the employee.

Minister Manuel stated that the wage subsidy was aimed at improving conditions of employment and registration. The table on the options for a wage subsidy was illustrative and would be discussed further. NT would also consult with the Committees from time to time during the course of the year, owing to the magnitude of the changes proposed. The wage subsidy was not a party-political issue, but attempted to improve the provisioning for all South Africans.

The wage subsidy was employee-directed. NT did not capture any employee within a certain range, since no tax returns were submitted and no individual records held. There needed to be reconstruction of records of working and out of work people to bring South Africa in line with the rest of the world. This was not a stand-alone issue and other reforms needed to be tackled, including administrative improvements that included business registration. Parliament would be looking at the proposals for the substantial reform of the Companies Act over the next few months. Information on companies and intellectual property rights was important to give accurate measurements for revenue purposes, and to get an accurate sampling frame for the survey of earnings and employment. These major administrative changes were all directed at the employee and the proposed wage subsidy that would happen through the agency of the employers, as there was no alternative direct line.

Mr Davidson said that Government had resolved to improve export performance through appropriate training in industrial policy and changes in the current industrial policy. He asked National Treasury to explain what measures were contemplated, and whether it was likely that possible incentives would be general, industry-specific or project driven.

Mr K Moloto (ANC) raised questions about the current account deficit. The Minister had alluded to capacity constraints hampering greater economic growth, especially as related to the steel industry. He asked how NT would respond to this challenge, and whether there would be greater investment by the private sector as well as state owned enterprises (SOEs) to reduce this deficit. If so, he asked if this activity would be incentivised to encourage the manufacturing of machinery domestically. He enquired the best way to incentivise greater investment by business. Finally he asked if the depreciation of the Rand allowed for cuts on corporate taxes.

The Minister explained that one of the debates of the State of the Nation address was how government could stimulate behavioural change. Corporate rates had been at 48% recently and were currently at 29%. A measurement was needed to assess whether the reduction of the rates already had or would achieve the desired outcome of greater investments and new investments that expanded economic outputs and created employment. Beyond a particular point, these tax measures would not be effective on their own. It was necessary to assess what stimulated corporate change of behaviour. Sometimes an effect was achieved that had not been anticipated. Although the origins and intention of the secondary tax on companies had been explained, some people had chosen to add it to the corporate rates. This was problematic as the constructs of these taxes were entirely different. He noted that the current rate was similar to competitors, and said it might be time to use other measures to induce the desired outcomes. Government had not yet been able to develop a long list of possible incentives. The strategic investment package was launched two years ago, but the debate around changing behaviour was ongoing, and had been raised during the debate around industrial policy. Some of the issues would be very challenging to address, partly because it was very difficult to pick up capacity where it had been destroyed. He gave the example of a factory in Germiston that used to manufacture parts for rolling stock, but that had closed down and started importing the parts. It was very difficult to establish whether the methods and technologies used to manufacture these instruments were still viable today, and very difficult to start the factory up again. This would involve a whole series of investigations into economies of scale, and economies of scope.

Mr Moloto noted the substantial payment made to Southern African Customs Union (SACU). He said that Government needed to negotiate payments as well as decide whether this fell into development funds or development aid. He asked if NT could comment on this issue, the possible negotiation of payments and indicate what these payments were used for.

Minister Manuel answered that in a meeting earlier in December South Africa informed member states that it would be seeking amendments of the agreement. Follow-ups on this issue had not yet been made.

Dr S Van Dyk (DA) wanted to know whether the Minister was satisfied that the budget focused on the projected growth rate of 5% in the next three years. The rate of unemployment compared to the projected economic growth rate was a cause of concern. He enquired if the Minister was satisfied that the budget adequately prioritised the supply side of the economy, particularly as it related to the private sector.

The Minster responded that capacity constraints were experienced both in the public and private sector. Although five bidders for each tender for the construction of stadia were received, certain companies ended up retracting their bids. Moreover, the shortage in engineers and other skilled professionals, as well as the high demands in building material were not unique to South Africa. It was also difficult to convince successful construction companies, profiting from the expansion in infrastructure in Gulf States, to invest in South Africa. These were complex issues that continued to be considered.

Mr B Mguni (ANC) focused his attention on the policy priorities as related to the capacity of departments to spend, as well as the availability of skills. He enquired how much would be spent on these priorities and whether the skills were adequate to reach these goals?

Minister Manuel explained that the rate of employment was higher than the number of school leavers per annum. There was a further challenge of people 45 years old, who, having been unemployed for long periods, did not have the requisite skills even to become entrepreneurs. In respect of the periods ahead and the changes, these were measurable. Priorities included further education and training (FET) and bursaries to improve enrolments at FET Colleges, funding for University Chairs to improve the number of scientists and engineers, and a focus on teacher bursaries. There was a clear plan and the challenge was to match the skills and demand for those people who still had twenty to thirty years of work life. There was not an easy solution to this challenge and supply chain measures were complex. National Treasury merely took the views of their colleagues in government to prepare the budget. Despite their individual passions, NT was not responsible for the implementation of various line functions.

Mr Mguni asked what level of exchange NT preferred. Although acknowledging that the markets determined the rate of exchange, he wanted to know what factors were needed to achieve a stable exchange rate.

Mr Kganyago answered that South Africans were very preoccupied with the nominal exchange rate. The Growth Employment and Redistribution Strategy (GEAR) that was adopted eleven years ago stated the importance of a competitive and stable exchange rate. The floating exchange rate preferred by government made the economy vulnerable to external shocks, but also enabled it to absorb these shocks. Mitigating factors for the economy would be a solid macro economic framework as well as the strengthening of reserves.

Ms J Fubbs (ANC) said the budget review and the presentation had highlighted the increase in imports and the welcome increase in infrastructure expenditure. These two issues were linked to each other as well as the current account deficit. It was said that the increase in exports would decrease the deficit. She asked how this balance would be struck, given the increased global commodity prices.

Minister Manuel explained that the level of imports was always a cause of concern, without necessarily appreciating the potential contribution these may have to future economic growth. The global fluctuations from trade deficits to trade surplus were also indicative of the huge imbalances in the global economy. Issues related to the level of imports should continue to be raised and needed to be addressed. South Africa had imported R462 billion worth of goods in the 2006/2007 financial year. This included machinery (R121 billion), transport (R54 billion) and mineral products such as oil (R89 billion), equipment (R15billion) and chemical products (R36 billion). Since South Africa adhered to an international standard of classification, these and consumer goods were classified as inputs.

Ms Fubbs welcomed the introduction of social security reforms aimed at alleviating poverty. She raised concerns that although the necessary transport infrastructure was being developed and improved, the cost of accessing the transport systems was prohibitive for the poor. Increases in social grants and improvements in the social system would not assist the poor in their search for employment opportunities if transport remained inaccessible.

Minister Manuel clarified that the inaccessibility of transport formed part of a greater dilemma. Job seekers needed to know where possible employment opportunities were, before using public transport for that purpose. The huge information symmetries needed to be addressed in collaboration with the Department of Labour and other relevant Departments to ensure the dissemination of employment information. The multi-purpose development centres were central.

Ms Fubbs alluded to Minister Manuel’s interview on SA-FM that morning, and asked how the ‘loose money’ available for further spending by government would be monitored. She noted that the Joint Budget Committee was very concerned about the pattern of under expenditure by government departments, especially in light of increased allocations.

Minister Manuel answered that he could not exercise the oversight responsibilities of parliament. The Public Finance Management Act (PFMA) empowered parliament to request underperforming or under spending departments to cede money back to NT. He considered the spikes in spending in the latter part of the financial year as indicative of parliament’s failure to effectively exercise its oversight role during the year over Departments. He would continue to campaign, motivate, agitate and risk unpopularity to encourage parliament to exercise its responsibilities effectively.

Dr P Rabie (DA) enquired how many South African were currently paying taxes currently as the Minister had some years ago indicated that four or five million South Africans were paying taxes.

Commissioner P Gordhan, Commissioner: South African Revenue Services (SARS) answered that there were currently 5.5 million taxpayers and that the tax registry had been growing annually by 10%. This growth rate exceeded the annual economic growth. He added that one million companies, and 600 000 VAT vendors were currently paying taxes. Depending on the type of taxes, there would always be a 5% rate of people whom SARS would like to draw into the tax system.

Dr Rabie asked whether the present customs scanners were working effectively and if SARS anticipated the loss of revenue due to smuggling. A recent article had highlighted that the tax on certain textiles were not being paid. He noted that R1.3 billion had been allocated for the upgrade of call systems and scanners.

Commissioner P Gordhan explained that a tender was currently being processed. A new set of scanners would be installed shortly, while currently only one scanner was being used at Durban shipping port. There would always be some imports that slipped through customs, since currently only three to five percent of containers were examined. Additional control mechanisms were being put in place. The R1.3 billion allocation was for the purposes of upgrading these systems over the next three financial years.

Dr Rabie wanted to know how effective the tax amnesty was for small businesses.

Commissioner Gordhan answered that SARS had received 13 000 applications to date and anticipated an increase in applications nearer to the deadline. NT would embark on a awareness campaign over the next few weeks.

Mr Marais enquired the specific allocation to South African Sports Confederation and Olympic Committee (SASCOC).

Minister Manuel regretted that he was unable to provide a response to this question. NT compiled the Estimates of National Expenditure through feedback provided by departments on the allocation letters sent to them. This would include an explanation of measurable objectives and these would not be published until the Directors-General of all departments had signed these documents. Chapter 18 of the Estimates of National Expenditure 2007 dealt with the Sport and Recreation Budget Vote and was the responsibility of the DG of the relevant department.

Mr Moloto commented that the attainment of a stable exchange rate was critical, and was an issue raised by President Mbeki.

Minister Manuel answered that although the exchange rate needed further engagement, he could not recall the president commenting on this issue.

Division of Revenue Bill: Financial and Fiscal Commission (FFC) Briefing
Dr Betheul Setai, Chairperson and Chief Executive Officer, FFC noted that the bulk of the Commission’s recommendations focused on the various conditional grants. It believed that conditional grants should only be used to deal with spillover effects and to address the funding of new national priorities that required institutionalisation in the provincial and local government budgeting process. The commission had recommended national norms and standards in areas of concurrent responsibilities and the need to monitor service delivery to ensure compliance with the minimal standards of conditional grants.

The Commission recommended the merging of the Hospital Revitalisation Grant (HRG) and the Provincial Infrastructure Grant (PIG). Government recognised the need to streamline all infrastructure transfers to the provinces and would report on this issue in the 2008 Budget. The FFC believed that the Land Care grants and Comprehensive Agricultural Support Programme (CASP) grants had a common objective and that these grants could also be merged, to ease the administrative burden. However, Government considered these grants to have distinct objectives and preferred the separation. The FFC had recommended that the conditions attached to the National School Nutrition Program Grant (NSNP be reviewed and relaxed. Government would consider this recommendation as part of the baseline study on these grants that was currently underway.

The FFC made two important general comments. It proposed a review of the application process of conditional grants to ensure that the credibility of the budget process was not eroded. Where departments failed to spend conditional grants, these funds should be reallocated to other departments or provinces. This necessitated the strengthening of the role of Treasuries and the Budget Council. The clause pertaining to the accreditation of municipalities needed to be retained. It stressed the streamlining of housing delivery process as well as the importance of accrediting capacitated municipalities. This principle was an important part of the Bill.

Discussion
Dr van Dyk noted that FFC recommended the review of the formula for Municipal Infrastructure Grant (MIG). This would take into account the operational and maintenance needs of infrastructure rollout. The Auditor-General had previously recommended the transfer of funds from national government to municipalities to assist in service provision. He asked what measures had been put in place to monitor the spending of funds.

Mr J Josie, Deputy Chairperson, FFC responded that effective monitoring systems were part of the conditions attached to the conditional grants.

Mr B Khumalo, Project Manager: Fiscal Policy, FFC added that the Municipal Finance Management Act (MFMA) provided guidelines for the spending of MIG. The FFC’s powers were limited and it could only highlight challenges and provide recommendations.

Ms B Dambuza (ANC) focused attention on the recommended accreditation of municipalities. Both FFC and members had a common understanding of the capacity challenges as well as the confusion of responsibilities faced by many municipalities. She asked what specific recommendations FFC had made to NT.

Mr Josie acknowledged the critical challenges in the accreditation of municipalities. These included a lack of clarity on how many municipalities had been accredited. Although the principle of accreditation was sound, challenges in the capacity of municipalities and intergovernmental relations systems on the concurrent functions needed to be addressed. National Treasury was currently in discussion with the Department of Housing on some issues.

Mr Y Bhamjee (ANC) asked which sphere of government was ultimately accountable for the spending and management of municipal grants, and how spending was monitored.

Mr Khumalo explained that grants were national transfers to municipalities and provincial departments, and the national department was ultimately accountable for the spending on these grants.

Mr Bhamjee said that it was critical that the South African Police Services and The Department of Home Affairs sought closer cooperation with each other, if electronic fingerprinting and dockets would become the norm. He asked how effective spending here would be assured?

Mr Khumalo answered that the FFC was not in a position to respond on the finer details of this particular process. National Treasury participated in the approval of the grant.

Mr Bici noted FFC’s recommendations on the Land Care and CASP programme, as well as the NSNPG, but asked for further clarity on the recommendations.

Mr Josie explained that the FFC had recommended last year that the conditions for the application of the NSNPG needed to be improved upon to enable communities to receive the grant. The delays in the submission of these plans and non-compliance of provinces also needed to be addressed. Some of the stringent conditions needed to be relaxed. This report could be made available to the Committee.

Mr Khumalo added that a broader review of the NSNPG suggested assimilation of this grant into the provincial education budgets. The Select Committee on Finance had requested the FFC to investigate the possibility of the extension of this grant to cover all learners.

Dr Setai explained that both the LC and CASP needed to be merged due to their overlapping objectives. The burden on provinces would be alleviated as one grant would be available to provinces for which agriculture was a main activity. The new Schedule 4 grant would be spent creatively in accordance with particular circumstances. National Treasury however viewed these two grants as having distinct objectives.

Ms N Mokoto (ANC) asked to what extent the FFC was assisting in the operations between provinces and municipalities to ensure proper coordination between departmental programmes.

Mr C Van Gas, Manager: Budget Analysis, FFC answered that there were many cases of overlap between municipalities and provinces, particularly in terms of housing and transport functions. A clear definition of the functions of municipalities and of provinces was needed. This was particularly problematic in the housing function, which should reside at the level of municipalities to ensure the coordination of housing with basic services such as sewage and refuge removal services. The many cases of overlap were a cause of confusion.

Mr Josie explained that the concurrent functions of different departments and spheres of government contributed to the coordination challenges. The coordination of the budgeting process would not be easy. National Treasury’s budget process team needed to contemplate this complex matter.

Mr Mbele thought the housing allocations would be better managed at municipal level but enquired what could be done to improve capacity.

Mr Setai responded that funds should be transferred to an entity that was fully capacitated. The transfer officers were responsible to ensure that all the necessary structures were in place prior to completing the transfer.

Ms Robinson wanted to know if the new library services grant included the funding for the salaries of librarians, or if other provision was made for their salaries. She asked how adequate spending would be monitored.

Mr Khumalo answered that the FFC was merely providing recommendations, but the details of the grant were the responsibility of the departments.

Mr Bamjee expressed his dissatisfaction at the inability of FFC to respond to some of the questions raised. The FFC served as a watchdog for civil society, and had a direct contact with the NT. He asked how constructive was its engagement with NT.

Mr Josie answered that the FFC was a statutory body and not a civil society body. This role was defined in Section 214 of the Constitution. The Minister of Finance needed to take its recommendations on the division of revenue and equitable share into account. Its budget analysis team would meet with each department over the next few weeks, to discuss the monitoring of expenditure. The specific recommendations to each department would be made available subsequent to this process. These discussions would commence within the mandate of the FFC, the requirements of the Division of Revenue Act (DORA) and the specifications of the Medium Term Expenditure Framework.

Division of Revenue Bill: Briefing by National Treasury (NT)
Mr Lungisa Fuzile, Deputy Director-General: Intergovernmental Relations, NT and Mr Kenneth Brown, Director: Provincial Budget Analysis, gave the briefing, which noted that the Division of Revenue Bill (DORB) aimed to strike two critical balances; one between executive authorities and administration and the other between executive authorities across spheres.

Clauses that dealt with revised provincial and municipal boundaries; responsibilities of the Auditor-general; municipal capacity building and risk management clauses had been deleted. Clauses dealing with the Gautrain Rapid Rail link had been amended to remove provisions no longer relevant. New clauses were also inserted which aimed to improve the management of new grants. These included the 2010 FIFA World Cup Stadiums Development Grant, and the Bulk Infrastructure Grant. Clauses were also refined to facilitate the project registration of the Municipal Infrastructure Grant. The exemption clause was also simplified.

The impact of the realignment of municipal and provincial boundaries necessitated the realignment of municipal allocations in March 2006. However, provincial allocations could only be realigned on 1 April 2007. The PES formula had been revised although the structure of the formula was unchanged. Statistical information needed to take account of the shifts in boundaries.

The future work on local government and provincial fiscal framework was outlined. This included the acceleration of the housing accreditation process, the review of certain conditional grants and the review of the local government fiscal framework, which would include the replacement of the RSC levy, the restructuring of the electricity distribution and constitutional powers and functions.

The key considerations that guided the drafting of the bill were outlined. These included possible gaps identified in the implementation of the Act, unintended consequences of certain clauses, and the necessity of new provisions or clauses due to changed contexts. It was important that the provisions of the Bill were consistent with other legislation. Issues that could better be covered by legislation and regulations should not be addressed in the Bill. Administrative issues were largely covered in the frameworks.

Responses to the recommendations were also provided. With regard to the revision of the housing allocation formula, NT recognised the urban bias of housing development at the expense of rural development. Although housing could be viewed as an urban problem, funds for housing to rural provinces were on a steady increase. The formula government was using took into account the backlogs in traditional housing, and the developmental aspect of housing provisions, but did include the delivery capacity, which ran contrary to the aims of the FFC’s recommendation. NT did not agree that the formula should include a cost variation of housing between provinces, as this would complicate it. The costs of inputs varied within provinces. It would be useful if the FFC developed and submitted a proposed formula to take into account all these variations and factors.

The Chairperson read the Motion of Desirability on the Bill, and the Report on the Division of Revenue Bill. Members agreed to both and resolved to pass the Bill.

The meeting was adjourned.