Draft Money Bills Amendment Procedure Bill [B75-2008]: public hearings

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Finance Standing Committee

04 August 2008
Chairperson: Mr N M Nene (ANC)
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Meeting Summary

The Business Parliamentary Organisation endorsed the principles of strengthening of oversight and parliamentary democracy the Bill sought to achieve. The BPO's points of departure included transparency in the Fiscal Budget Process, that there was a good case for close examination of the global experience and that the Bill should strive toward “procedure” and enhance Parliament's role to perform such duties.

The People's Budget Campaign, a coalition of the SACC, COSATU and SANGOCO, reviewed the history of their interaction with this legislation and commented specifically on the definition of fiscal framework, time constraint on different categories of Money Bills, the lack of rationale for the establishment of the Clause 4 Parliamentary Committees and what the consequences would be if Parliament did not agree with the fiscal framework. Referring to Section 7(3), they noted that it was unreasonable to expect Parliament to motivate such a proposal with reference to 11 items. The PBC proposed that the mandate of the Budget Office be broadened to include research and technical experts in the area of public finance. Other issues included the Bill being silent on any form of public participation. Pertaining to civil society, opportunities should be created for the structured participation of civil society in the budget process along the lines of poverty hearings as well as a proposed role for NEDLAC. In conclusion the PBC welcomed the introduction of this piece of legislation that dealt with Parliament's constitutional mandate.

It was the view of IDASA that this was very important legislation and that it had been a long time coming. They noted that the detail would determine the quality and whether the parliamentary engagement would contribute to improved budget outcomes. IDASA highlighted that there were risks to a poor legislative engagement in this regard. The first issue noted was what was meant by “fiscal framework”. They did not think the current legislation provided a clear sense of what was meant by “Amendment” and there was no sense in the legislation on what the thinking on these issues was. They were also not sure having a third committee would be the most administratively efficient way of organising Parliament's amendment engagement. Issues surrounding the information to the be submitted by the Minister of Finance were reviewed and the proposal was made that Parliament take a medium term approach in an effort to gain more authority over medium term budgeting to ensure the executive does incorporate Parliament in the MTBPS process.

AFReC noted that the Bill needed distinction between macro-economic forecasts and fiscal policy targets and that macroeconomic forecasts should be validated by an independent agency. They proposed that Parliament adopt a fiscal rules framework for considering budgets and have stronger emphasis on stakeholder consultation during the budget processes and the amendments. It was also recommended that Parliament needed to exhaust all reasonable avenues before amending budgets. Their comments included: the definition of “fiscal framework” would have to be refined to include the rolling three-year forecasts methodology, consistent with the Medium Term Expenditure Framework (MTEF). They would also like to see an outline of reconciliation of proposed amendments relative to initial proposals from National Treasury. AFReC proposed that the Budget Office should be adequately resourced and capacitated and that the Budget Office’s mandate and performance criteria may need to have an explicit focus on non-partisanship and objectivity. They needed to take into account the need for amendments and budget trade-offs. Other issues were allocative efficiency, geared towards maximising citizen welfare with current resources, the need for properly planned budgets and minimising the cost of marginal output as further considerations for Parliament when dealing with amendments.

The National Treasury strongly supported and welcomed a greater role for Parliament in strong accountability and oversight. They noted that there were a number of technical problems in the Bill that would require conceptual clarification. The range of power possibilities that Parliament may assume in changing the budget was discussed. They proposed that the bill should contain a fiscal responsibility clause, that the bill should differentiate between different types of money bills and provide for different procedures for each type. And that there should be a sequence of decisions. The structure of the budget was discussed and it was suggested that amendments to the proposed Bill revolved around the budget cycle. Mr Naidoo noted that the procedure to amend might be slightly different and would require different time frames. Lastly he proposed that the Bill included a general fiscal responsibility clause, that Parliament should be obliged to consider any changes in the economy over the short, medium and long term. Parliament had to strive to keep government debt and interest at reasonable levels, ensure that there was adequate capital and maintenance spending and that cyclical factors were taken into account. They further pledged their support in setting up and capacitating the Budget Office.

As part of the People's Budget Campaign, the Black Sash endorsed their proposals. There was strong support for the tabling of the Bill 11 years ago and the tabling of the Bill now, demonstrated Parliament's will that it should have the power to amend the budget and be a critical component in the shaping of the budget through proposed procedure and processes. A matter of concern was that they did not hear any mention of transformation of the economy. The Black Sash was also of the view that more resources needed to be made available to anti poverty measures and a more developmental economy, inherently linked to a process that was inclusive of civil society and public participation. Another concern was an exclusion of matters relating to the Section 214 of the Constitution dealing with “equitable shares and allocations of revenue” from parliamentary oversight from this Bill. They noted that some of it was amended slightly or withdrawn. They were concerned that Parliament might not be able to influence critical programmes and suggested that Parliament should and did have the capacity to influence such programmes. Silence on any form of public or civic participation in the drafting of the bill was also matter of concern. It was their view that civil society could provide critical contextual insights through the Budget Office. Regarding the role of NEDLAC, they stated that the Draft Bill may promote positive prospects when engaging with the budget process. In conclusion they highlighted that it was imperative that there be better communication between the constituencies, NEDLAC and the public in general and they believed this Bill would provide that opportunity.

The discussion raised several issues. Among these was the rules based framework proposed, the minimum or maximum thresholds proposed on the amendments, whether fiscal policy could be separated from the budget process, what the role of the Financial and Fiscal Commission would be in the future and what the role of the National Council of Provinces would be. The use of the Medium Term Budget Policy Statement (MTBPS) was queried, as was the proposed role for NEDLAC by various Committee members. Regarding the National Treasury’s range of possibilities, a committee member asked what currently signaled a need to change the fiscal stance and to what the cyclical changes were referring. AFReC was asked to expand on what was meant by time consistency and unintended consequences in their submission. A committee member queried the National Treasury’s aforementioned difficulties with producing a draft budget by October.

Meeting report

Business Parliamentary Organisation (BPO) submission
The BPO was presented by Mr Abdul Patel, Senior Manager: BPO. Having carefully observed the proceedings of the Portfolio Committee on Finance during the initial briefing by the parliamentary legal advisor, they believed it was important that the Portfolio Committee in reporting to the House, satisfied itself that sufficient consideration was given to all the matter contained in the Draft Bill. The BPO supported the general principle of the legislation, which sought to enhance oversight and law making abilities of Parliament, in a manner which strengthened democracy itself. They had consistently held up the practices of Parliament as a world-class example of good governance. The need for Parliament to continue on this path must be regarded as part of good fiscal governance. The BPO's points of departure included transparency in the Fiscal Budget Process, that there was a good case for close examination of the global experience and that the Bill should strive toward “procedure” and enhance Parliament's role to perform such duties.

The BPO's specific comments covered amendments to money bills. This comment pointed out that the Bill did not contain the provincial and local government implications of the implementation of the Bill. They also wondered whether there would be minimum or maximum thresholds applying to budgetary arrangements.
An important consideration would be the constitutional home for macroeconomic policy. The timing should lend itself to how coherently the macroeconomic policy was set up, expanding further on sections 4, 5 and 6 of the Bill and its impact on socioeconomic development, fiscal policy and monetary policy. Mr Patel commented on the global movement toward the establishment of the Budget Office and used the Congressional Budget Office in the USA as an example. There were also examples in Asia and Latin America and he added that valuable lessons could be learnt from their Ugandan counterpart. There were a few key areas as concerned the Budget Office. These were partisanship, objectivity, codification of core functions in law, core functions, staff, size and resourcefulness and capacity. In conclusion, Mr Patel reiterated the BPO's endorsement of the principles of strengthening of oversight and parliamentary democracy.

People's Budget Campaign (PBC) submission
The People's Budget Campaign (PBC) was represented by Mr Keith Vermeulen (South Africa Council of Churches), Mr Mfanafuthi Tsela (COSATU parliamentary Office), Mr Sidney Kgara (NAHAWU parliamentary Officer) and Ms Wendy Nefdt (National Treasurer: SANGOCO).

Mr Vermeulen introduced the PBC as a coalition of the SACC, COSATU and SANGOCO. The PBC sought to define fiscal strategies that can eradicate poverty, support economic development and ensure greater equity by race, gender and class, by: meeting basic needs, especially by restoring and enhancing the public sector and social spending, ensuring the retention and creation of quality jobs in a context of economic growth, giving the majority of people greater access to assets and skills, supporting increasingly democratic and participatory governance and protecting the environment and ensuring sustainable development throughout the Southern African region.

He reviewed the history of the PBC's interaction with the Bill, as dating back to 1997, when the Money Bill was first discussed. The then COSATU general secretary, Zwelinzima Vavi explained civil society's frustration at participating in a budget process inherited from the apartheid era. The PBC affirmed the process and the interaction in the development of the Money Bill. Although they lamented its lateness, they welcomed the tabling of the bill and that Parliament should have the power to amend the budget.

Mr Tsela outlined the comments from the submission. A concern from the definitions Section was what constituted a fiscal framework. A key issue was that Parliament was required as per clause 6(1) to consider and adopt this framework, which may set parameters for subsequent amendments. The point was that it was not clearly specified and went to the heart of how Parliament may amend. They were also not sure if this referred to fiscal aggregates such as GDP and Expenditure.

The PBC noted that the term Money Bills covered 2 categories: national budget process bills and bills of taxation. This aspect was subject to practical concerns such as time constraints. It would be problematic to apply the same time constraints to bills of taxation as apply to budget bills, as these may be held over for much longer consideration by Parliament and provision must be made for meaningful civil society participation in the amendment process.

Mr Tsela stated that there was no rationale provided for the establishment of a Section 4 parliamentary committee, its role and how it would relate to the existing committees. This matter required consideration and there had to be a shift of emphasis (notably in terms of time) from debates in the House to deliberations in the committees and all the Portfolio Committee would have to be more actively involved.

Responding to Section 5 on the information required prior to the introduction of the national budget, the PBC proposed that the time period be lengthened so that Parliament could engage and communicate its view, leading to enhanced stability and greater policy predictability.

Referring to Section 6 of the draft, a concern was what the consequences would be should Parliament not agree with the fiscal framework and noted that greater clarity in the procedure was required.

Responding to Section 7(3), he noted that it was unreasonable to expect Parliament to motivate such a proposal with reference to 11 items. They proposed that that the list be broadened to include government's constitutional obligations. This would have implications for Section 7(7) which referred to items the committee needed to take into account when considering a report related to an amendment. Section 7(9) specified that the committee must provide the House with reasons for a proposed amendment. Both 7(7) and 7(9) cross reference 7(3).

The PBC proposed that the mandate of the Budget Office be broadened to included research and technical experts in the area of public finances. Expert capacity would be particularly essential in areas such as macroeconomic analysis and modelling. The Budget Office could be an appropriate institutional mechanism for providing Parliament, particularly the Finance and Budget committees with the necessary information. They also agreed with research conducted in 2002 that a 5-8% increase in parliamentary budget could build a good skeleton service.

Ms Nefdt outlined two opportunities for broad engagement. She said the Bill was silent on any form of public participation. They proposed that NEDLAC should be able to engage on all-important aspects of the medium term budget cycle. Opportunities for inputs must be introduce throughout the budget cycle. They should not be confined to the final stages when substantial amendments become difficult to incorporate without causing serious disruption. Secondly, pertaining to civil society, opportunities should be created for the structured participation of civil society in the budget process along the lines of poverty hearings. Organs of civil society had valuable inputs to make in terms of their needs expenditure priorities and problems in the current programmes. This information would not only improve the quality of the budget but also give people a sense of ownership of the budget. Interaction could take the form of hearings on particular functions, in particular provinces, on an annually rotating basis. If the PBC's proposals were adopted, there would be two main ways to proceed. First, they would be able to make submissions to Parliament at various stages of the budget cycle. Second, there would be opportunities for input through NEDLAC. In conclusion the PBC welcomed, even at this late stage, the introduction of this piece of legislation that dealt with Parliament’s constitutional mandate to provide an Act of Parliament providing for a procedure to amend money bills before Parliament. They realised that Parliament was working under tight time constraints and outlined the PBC's close affinity for budget reform, the transformation of the economy and democratic control over allocation of public resources. They had raised what they believed to be shortcomings within the Bill, offered proposals and believe that without the participation of civil society, the Bill would be fundamentally flawed. The PBC looked forward to further engagement with Parliament on this matter.

IDASA submission
Mr Len Verwey, Senior Researcher: Public Finance, stated that it was the view of IDASA that this was a very important legislation and that it had been a long time coming. He noted that the detail would determine the quality and whether the parliamentary engagement contributed to improved budget outcomes. There were risks in poor legislative engagement with budgeting, such as fiscal profligacy, tokenism and most fundamentally, a loss of credibility of the budget process which would result if parliamentary interventions were of poor quality. The legislation did need to address these potential risks. Some of these issues were not adequately captured in the draft Bill and IDASA felt that many of the issues were too important, not to get the thinking in the legislation.

He briefed the Committee on IDASA’s specific concerns with the Draft Bill. The first issue noted was what was meant by “fiscal framework”. There were fundamentally two approaches. One could see it as a rules based approach to the fiscal governance. He referred to European Union's use of specific, explicit, quantitative laws on governing behaviour, which was not what one had in South Africa presently. In South Africa, one had a transparency, discretionary based system, where the executive was largely accountable for results. He stated that it would clearly be easier for Parliament to approve some kind of quantitative target. The risk here was that Parliament would end up engaging with vague commitments, for instance, to fiscal prudence. This could sweep under the carpet the more pressing issue of how one envisaged the scope of amendment power, specifically, the macroeconomic aspect. This issue was not adequately covered by referring to a fiscal framework and was a fairly general concern.

He did not think the current legislation provided a clear sense of what was meant by “Amendment”, specifically as it related to what its macroeconomic aspects would be. There were many options as regards the understanding. There was no sense in the legislation on what the thinking on these issues would be, no clear statement of principles that would guide further discussion. IDASA regarded this as the most serious omission.

A third concern was contained in a brief comment on the budget committee. They were not sure having a third committee would be the most administratively efficient way of organising Parliament's amendment engagement with the budget. It might be more advisable to look at changing the strategic vision of the Joint Budget Committee or the Portfolio Committee on Finance.

The fourth point looked at the information to the be submitted by the Minister of Finance. IDASA had no problem with Section 5, in terms of what was required. Most of that information was already provided in the Medium Term Budget Policy Statement (MTBPS), which was available, an adequate length of time before the budget and already constitute a significant opportunity to engage with the budget. Flowing from that was the issue of time frames. The Draft Bill gave Parliament four months to go through the amendment process. The proposal was that Parliament take a medium term approach in an effort to gain more authority over medium term budgeting, to ensure the executive did incorporate them in the MTBPS process. The power to amend could be seen as a final authority Parliament had if they felt their concerns were not being addressed by the executive in the budget it provided.


Discussion
Mr Moloto stated the submissions had raised critical points. To IDASA, he referred to the rules based system of the EU which had been mentioned earlier and to the Macroeconomic Policy project with SADC and said that those were the targets they also aspire to achieve. He asked how this rules based system would impact on Parliament's power to amend Money Bills.

Mr Naidoo responded that his understanding of the macroeconomic convergence criteria was that the economic policies of one country did not negatively impact on the macroeconomic policies of SADC as a whole or on neighbouring countries but also that if you were to get economic convergence in a union of states, you had to have convergence in a number of other criteria such as inflation, the budget deficit, income and revenue. He used the example of the Euro Zone and the potential gains that could be made from differences in the domestic inflation rate as opposed to the inflation rate of the economically integrated region. Economic convergence criteria were designed to limit such gaming. He did not think the power to amend money bills would negatively impact on our ability to have economic convergence; neither, did he think the Fiscal Responsibility clause would impact on that ability.

To the BPO, he referred to their proposals on the minimum/ maximum thresholds on amendments and asked if the BPO could propose answers to this complex issue.

Mr Patel responded that the minimum/ maximum threshold was put as a question, not as a statement and that there were differing practices globally. Some issues were legal provisions and questions such as who should be setting such frameworks. They were merely trying to alert the Portfolio Committee that the issue should be considered. There was a very good outlook for the economy, generally, but the issue needed to have a measure of fiscal prudence.

Mr Verwey responded that if the criteria meant a more rule based system it would be bad for fiscal governance, as they would have to sacrifice flexibility. As a positive, it might make the actual work easier as there would be a set procedures.

Ms B Hogan (ANC) mentioned an example of two approaches used in New Zealand. This was composed of their Fiscal Policy Act which was separated from their budget process. The broad parameters were set by the FPA and the budget was then judged, quantitatively or qualitatively by the FPA. She asked if government should be able to table the fiscal policy framework and if this was too rigid to be part of the budget process.

Mr Verwey responded that more discussion was needed and legislation needed to be clearer. He referred to the beefed up MTBPS and said that this was a good approach, as it seemed to be from legislation. He also noted the importance of a viable information base for Parliament.

Turning her attention to the BPO and the PBC, Ms Hogan asked what role the FFC could play. She said there should be some facility for Parliament to requisition support from the FFC. More specifically she queried the difference between the FFC and the Budget Office.

Mr Patel replied that the role of the FFC linked to the section in their submission on institutional memory. There were many good practices in place whether through the Portfolio Committee, Joint Budget Committee, the Standing Committee on Public Accounts or the FFC. The main aim was budget transparency and there was room for continual improvement.

Mr Kgara, NEHAWU Parliamentary Office, responded that the question concerning the FFC was difficult and that its role was prior to the tabling of the budget.

Ms Hogan pointed out that a role for the National Council of Provinces (NCOP) was absent. She noted that they had a very important role in the budget process of Parliament. This omission was a concern and she sought comments on it.

Mr Vermeulen responded that a comment on the NCOP was included in their submission. He asked if it would be possible to re-present this part.

The Chairperson responded that this could be submitted in writing.

Mr Patel responded that the role of the NCOP should not be taken lightly. There were implications for provincial and local government. There were glaring areas that needed to be dealt with, regarding intergovernmental co-operation and fiscal transfers. The NCOP role had to be clearly stipulated.

Ms Hogan referred to the MTBPS being thin on detail and the recommendation that service delivery be considered.

Mr Verwey agreed that the MTBPS was probably a bit thin and that a beefed up MTBPS would be a more useful way of approaching it. That in combination with the annual report, strategic plan and other information released throughout the year should constitute a more viable information base for Parliament's engagement.

Mr S Marais (DA) referred to the BPO submission on the basic characteristics of the bill and asked them to elaborate on points (a) to (f). He asked what the dangers would be if this was not done appropriately, regarding the process. To the PBC, he asked if they were proposing an enshrined role for NEDLAC. He wondered if a submission from NEDLAC would not be adequate during the public participation phase.

Mr B Mnguni (ANC) asked for clarity on the minimum/ maximum threshold proposed. Referring to the BPO, he asked what the normal practice was in other countries, concerning such amendment and if they had any examples. He asked if the PBC were saying that Parliament should disregard what the country could afford and pointed out that the government may not be able to meet what the people proposed.

On the role of NEDLAC, he asked if that would not be duplication.

Mr Kgara responded that NEDLAC's role was a process for further democratisation.

Mr Marais referred to the magnitude of Parliament's ability. He mentioned that certain characteristics, such as a coherent predictable process, were important in order to maintain confidence in the public eye.

Applied Fiscal Research Centre (AFReC) submission
Mr Juan Bester, Programme Manager: AFReC, said that the broad theme was to introduce a phased approach to the budget process with parliamentary oversight at each stage.

A summary of AFReC's general recommendations was that the Bill needed distinction between macro-economic forecasts and fiscal policy targets and that macroeconomic forecasts be validated by an independent agency. Parliament needed to adopt a fiscal rules framework for considering budgets, which would have to include: consideration of criteria targeting, efficiency, effectiveness, economy, transparency, zero sum gains and losses, internal consistency, time consistency, and broad stakeholder consultation (as broad as possible). There should be stronger emphasis on stakeholder consultation during the budget processes and the amendments. It was also recommended that Parliament needed to exhaust all reasonable avenues before amending budgets.

Specific recommendations were that they would have to refine the “fiscal framework” definition to include the rolling three-year forecast methodology, consistent with the Medium Term Expenditure Framework (MTEF). Sections 5(1) and 5(2) of the Bill should be rewritten to read “medium term statements”. The Section 7(9) report should also include the word “medium” to get into that framework of three-year rolling forecasts and all the accompanying qualitative components. Staying with the Section 7(9) report, AFReC would like to see an outline of reconciliation of proposed amendments relative to initial proposals from National Treasury and that the Section 7(9) report note an expanded list of stakeholders to be consulted when considering amendments. The Budget Office should be adequately resourced and capacitated. The Budget Office’s mandate and performance criteria may need to include having an explicit focus on non-partisanship and objectivity.

There was a particular focus on the establishment of fiscal rules. He noted that research showed that fiscal rules were necessary to maintain fiscal discipline when economies were vulnerable and not prone to macroeconomic stabilisation such as was the case with South Africa. It needed to have very clear methodologies defined when looking at the rules, for example: borrowing for capital assets but not for current consumption, holding referendums for drastic tax hikes, the number and size of amendments, the ratio of government expenditure to GDP and balanced budgets. Some international case studies were noted in the report. Special mention was made of the report on Brazil. They needed to take into account the need for amendments to take into account budget trade-offs. Other issues were allocative efficiency, geared towards maximising citizen welfare with current resources, while not indebting future generations, as well as operational efficiency which was described as the need for properly planned budgets and minimising the cost of marginal output.

The criteria for fiscal rules framework were more fully explained: effectiveness, economy, and transparency. The zero sum gains and losses referred to the fact that what was taken away from a department or agency should amount to what was given to another. Internally consistency and time consistency spoke to the requirement that what was voted i to the MTEF in the first year did correspond to policy targets and that tinkering with that without macroeconomic/fiscal problems, would not be doing the voter justice.

Amendments should be regarded with great circumspection. Appropriation amendments should be seen as a last resort measure. Compelling rationale would be necessary, in terms of improved allocative and operational efficiency, fiscal discipline, or fiscal accountability. There should be risk considerations by Parliament as regards potential absorption capacity by organs of state, potential underspending and rollovers. Some fiscal rigidities exist such as personnel wage structures and social grants which left little fiscal discretion for changes in the short term.

The recommendation regarding the parliamentary Budget Office was that it was good idea, but it would be imperative that it was dedicated, properly resourced and capacitated, non-partisan and independent. A critical success factor was that there must be clarity on the roles of Executive Authorities and Accounting Officers to relieve tension between the Parliament’s oversight function and its ability to amend budgets.

National Treasury submission
Mr Kuben Naidoo, Budget Office: National Treasury, remarked that Treasury strongly supported and welcomed a greater role for Parliament in accountability and oversight over current and past budgets as well as influencing future budgets. He said this would deepen parliamentary participation in the budget process. The Treasury supported the underlying objectives of the proposed bill to empower Parliament by enabling it to amend money bills, thus giving effect to section 77 of the Constitution. There were hard conceptual issues around the role and functioning of Parliament that had to be resolved to prevent further delays in this Bill as there had already been an 11 year delay due to lack of clarity. There were a number of technical problems in the Bill that would require conceptual clarification. He discussed the range of possibilities regarding the range of power possibilities in changing the budget. The first issue was the bill should contain a fiscal responsibility clause. Also proposed was that the bill should facilitate greater involvement in the budget process, that the bill should differentiate between different types of money bills and provide for different procedures for each type and that there should be a sequence of decisions on the budget so that each decision defined the parameters within which subsequent decisions must be made.

The structure of the budget was discussed with reference to an outline of what the budget consisted of. These components were listed as the fiscal framework, the Division of Revenue Bill, taxation legislation, appropriation bills, adjustments appropriation bills and special appropriation bills, statutory appropriations and standing appropriations. Amending money bills impacted on the entire budget process and this must be factored into the legislation. The bill must differentiate between different types of money bills. Referring again to the range of possibilities, he noted that the structure of the budget had an impact on the entire range. He outlined the current budget process: Once the MTBPS is tabled, Parliament may suggest changes to the framework, division of revenue and budget priorities. The Executive must explain in a memorandum, any changes to the fiscal framework between the MTBPS and the budget and how the recommendations were taken into account in preparing the main budget. After the budget is approved, Parliament should make recommendations on outer years (forward estimates). The Executive must then submit a memorandum explaining how these recommendations have been taken into account in preparing the main appropriation.

He briefly detailed the proposed sequence of decisions: The fiscal framework should be adopted ten days after tabling, including the possibility of amendment. The Division of Revenue Bill should then be processed and any changes must be consistent with the approved fiscal framework. Tax and appropriation legislation would be dealt with simultaneously and any changes to tax or appropriation bills must be consistent with the approved fiscal framework and the Division of Revenue Bill. Such a process provided the parameters for subsequent changes to money bills and it was important that the National Treasury was not proposing a limitation on the process.

Suggested amendments to the proposed Bill revolved around the budget cycle and Mr Naidoo noted that the procedure to amend might be slightly different and would require different time frames. Lastly he proposed that the Bill include a general fiscal responsibility clause: that Parliament should be obliged to consider any changes in the economy over the short, medium and long term; that Parliament must strive to keep government debt and interest at reasonable levels and that there is adequate capital and maintenance spending and that cyclical factors were taken into account. The Treasury supported the Bill and looked forward to working with the Committee to finalise the Bill. They further pledged their support in setting up and capacitating the Budget Office and wherever else they may be needed.

Black Sash submission
Mr Elroy Paulus, Advocacy Programme Manager: Black Sash, said that as part of the PBC, the Black Sash endorsed their proposals. He commented that the separate submission would therefore be supplementary and additional.

He noted that there had been strong support for the tabling of the Bill 11 years ago and they were now pleased that the Bill had finally been tabled. They concurred that the tabling of the Bill demonstrated Parliament's will that it should have the power to amend the budget and be a critical component in the shaping of the budget through proposed procedure and processes.
 
A matter of concern to the Black Sash was that they did not hear any mention of transformation of the economy and it was important that this Bill contribute to that. They were of the view that more resources needed to be made available to anti poverty measures and a more developmental economy, inherently linked to a process that was inclusive of civil society and public participation.

The Black Sash was a human rights organisation and dealt with advice giving to clients, daily. They dealt with people whose living standards measured 1 – 5 and they had developed a fairly comprehensive database that had served almost 59 000 people. The information their clients shared, helped them notice trends and they would like to share this information with the Committee.

Their concerns were similar to those of the PBC with additional motivations. He noted that, in the Preamble to the Draft Bill, there was an exclusion of matters relating to Section 214 of the Constitution dealing with “equitable shares and allocations of revenue” from parliamentary oversight from this Bill, that some of it was amended slightly or withdrawn. If that was correct, then this was one of the things about which the Black Sash wished to raise concern. They were concerned about whether Parliament would be able to influence critical programmes such as the Anti-Poverty Strategy, which was a long term strategy of government and the allocation of resources to the five Clusters, run by the Presidency. They suggested that Parliament should and did have the capacity to influence such programmes. They were also concerned about Parliament not having due influence over these issues.

The silence on any form of public or civic participation in the draft bill was a matter of concern. This was an opportunity to ensure a meaningful role for civil society participation in the budget process. It was their view that civil society could provide critical contextual insights. The Black Sash would therefore like to see mechanisms, preferably through the proposed Budget Office, work with civil society to better link development indicators to the future allocation of resources.

Regarding NEDLAC, it should be able to engage substantively with the budget process in a way which complements the role of elected representatives. As stated by the PBC, engaging the draft Budget and public finance matters through NEDLAC seemed to be having better prospects for serious civil society participation in more recent times. He was happy to report that civil society was now able to participate in the Public Finance and Monetary Policy Chamber of NEDLAC. Also, there has already been some strengthening of the Development Chamber and recognition that there was a need and merit for the Community Constituency to participate in the Public Finance and Monetary Policy Chamber. They were pleased to report that the
Financial Sector Charter Council and Black Sash had participated in the previous PFMPC meeting, and the new Development Chamber Coordinator for the Community Constituency has just begun subscribing to the Parliamentary Monitoring Group alerts on Parliament. They believed that these events indicated a move in the right direction but they would be keeping a careful eye on the way the discussions at NEDLAC inform those in Parliament in the future. It was imperative that there be better communication between the constituencies and NEDLAC and the public in general and they believed this Bill would provide that opportunity.
 

Discussion
Ms Hogan referred to the proposed role for NEDLAC. She said there was inherent tension between NEDLAC and Parliament, stemming from the fact that NEDLAC may not encroach on the legislative authority. She asked what the NEDLAC process would involve and suggested that perhaps that should appear in the NEDLAC Bill. More specifically, she queried what the dimensions of the engagement would be.

Mr Paulus responded that his understanding of the NEDLAC Act was that if you came to an agreement with NEDLAC on a certain issue, the issue could not be raised again in Parliament as this would be seen as negotiating in bad faith. If there was no fixed position, the issue could be re-raised

Dr D George (DA) referred to the “range of possibilities” section of the National Treasury's presentation regarding the power to change fiscal stance. He wondered what currently signaled a need to change the fiscal stance and whether this was part of the fiscal framework.

Ms J Fubbs (ANC) referred to the AFReC proposal that fiscal rules should be time consistent. She asked for further expansion on this. She referred to the submission on debt and the possibility of future generations bearing the debt of current generations and wondered if this was not a better way of doing it – by phasing out the amount over time.

Mr Bester responded that there was more than one kind of debt. The good debt would be capital expenditure debt – spending on transport, education, health and so on,
with a time horizon of 30 years.

Adv M Malahlela asked what the unintended consequences may be. He queried AFReC on their recommendation that there needed to be clarity about the roles of Executive Authorities and Accounting Officers to relieve tension between Parliament’s oversight function and its ability to amend budgets. He asked if this would be legislation or if it was mentioned by the way

Mr Naidoo responded that in drawing up a budget there was often a trade off between short-term and long-term gain. The inter-temporal budget constraint meant that Parliament would have to consider the longer term when it considered any change. Other aspects were the consideration of cutbacks and cyclical factors in the budgetary system

Ms L Mabe (ANC) referred to National Treasury's statement that there would be difficulties in drawing up a draft budget sooner and asked what these difficulties would be.


Mr Naidoo responded that the National Treasury would produce the draft budget by October if Parliament wished it to do so. He stated that they would have to produce a revenue estimate before the December/ January numbers were in. A fifth of consumption in South Africa took place in December. This was one difficulty. Another difficulty was that the Statistician General revised the national accounts in November and this could sometimes produce significant revisions. These factors increased the chance that they would get it wrong.

Ms Mabe commented on the views on the central planning committee and asked what the general aims would be in the medium term. She requested comments from all presenting submissions.

Ms Tania Ajam, Knowledge Director: AFReC, pointed out that the South African system was inherently decentralised. A central allocation committee would require capacity to implement. There was also a logistical impediment in terms of the enormous amount of information required. With regards to the time consistency, she stated that one would have to look at the pattern of decisions and the cumulative effect on long-term goals.

Mr Naidoo responded that the Fiscal Responsibility clause was a trade off between the long-term and short-term. Parliament would have to consider the long-term impact when it considered amendments. There were also cyclical factors to consider. There would be consequences if there was no fiscal responsibility clause, in how the markets respond to the budget. Participants in the economy make decisions based on such considerations.

The meeting was adjourned.

 

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