Money Bills Amendment Procedure and Related Matters Bill [B75-2008]: presentation of revised version

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Finance Standing Committee

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

The revised version of the Money Bills Amendment Procedure and Related Matters Bill was reviewed by the Parliamentary Legal Adviser, Adv Frank Jenkins and Parliamentary Researcher Ms Alta Folscher. They took the Committee through each clause of the Bill, from clause 1 to 10.

The most notable addition to Clause 1 was the amended definition of the Fiscal Framework, for which two options were provided. After much debate the Portfolio Committee reached a consensus that the second definition would be more appropriate to the purposes of the Bill. Clauses 2 and 3 remained the same as the original draft. A new clause on Fiscal Responsibility was now included as Clause 4, and two options were again presented. The discussion centred around the use of broad terminology. Issues discussed included the need for distinction between capital and current spending, the possibility of including developmental indices for consideration and the possible inclusion of annual reports and key performance indicators. The second option was generally preferred as it was broader in scope and more comprehensive. In respect of Clause 5, it was noted that this related to issues of expenditure, and it should be clarified that matters would be referred to the Appropriations Committee. Clause 6, referring to the procedure prior to the introduction of the national budget, was outlined, and the debate on this clause covered the possible role of the NCOP, the consideration of the estimates of the outer two years and the exact sequence of events from when the Money Bill would be introduced by the Minister of Finance to the adoption of amendments by the House. The quality of the proposed annual reports was seen as a major issue. The Committee wanted to have a tangible view of what departments had achieved in order to know how the budget transformed the economy. Concerns were voiced about the need to ensure that Parliament did not overstep its role, the possible demands of government departments and the role of mediation committees. It was proposed that the phrase “statement of intent” be replaced by “budget review and recommendations”.

It was explained that Clause 7 set the framework for the subsequent sections, and brought together the Fiscal Framework and the Fiscal Responsibility Clause by asking for very specific information.  Suggestions were made for the inclusion also of developmental indices in the list of information that would be required, but conflicting views were given that this should not be legislated for, but rather requested as additional information.
Clause 8 related to adoption of the fiscal framework, and Members discussed the provision for joint public hearings, how amendments would be motivated in terms of the Fiscal Responsibility Clause and time frames. It was indicated that if the NA accepted the amendments but the NCOP did not, Section 75 of the Constitution could be used to determine the solution. Members questioned the use of the word ‘amend’ in clause 8(7), the adoption of revenue aggregates, the use of the adjustment estimates in the Medium Term Budget Policy Statement, and the composition of financing in the case of a deficit. Queries were raised on clause 9(5)(a) around participation of parties and the role of the NCOP, and it was suggested that the two houses should sit jointly. Members felt, in relation to clause 10, that the strategic plans of departments needed to be considered, and one Member called for a clause stating that any increase in expenditure must be motivated. There was debate around the respective roles of the Portfolio Committees and the Appropriations Committee, and the changes would be reflected by referring the Appropriations Bill to the Appropriations Committee and the estimates of expenditure and strategic plans to the Portfolio Committee. Once the Fiscal Framework and Division of Revenue were accepted, there must be consideration of reallocation to key priorities within and outside programmes, and the economic effectiveness of a programme. The drafters were asked to look also at Section 216 of the Constitution, around Treasury control.


Meeting report

Money Bills Amendment Procedure and Related Matters Bill: Revised Version: Parliamentary Legal Adviser and Parliamentary Researcher briefing
The revised Money Bills Amendment Procedure and Related Matters Bill (the Bill) was presented to the Portfolio Committee on Finance and members of the Joint Budget Committee. The Chairperson noted that the revisions that had now been made were based on the proposals resulting from the submissions that had taken place in the previous week.

Adv Frank Jenkins, Parliamentary Legal Adviser, summarised the changes that had been made. He noted that the changes were highlighted on the attached document. In Clause 1 there were changes the definitions, with some new definitions being added. The most notable was the expanded definition of Fiscal Framework. It was more clearly spelled out and had two alternative options for consideration by the Committee.

Another addition was the new “Fiscal Responsibility” clause, which was now shown as the new Clause 4. This too had two options being presented.

With regard to the comments that had been made around the National budget issues, the Bill now treated different Money Bills differently. He reported that the Bill had grown, and that the two clauses at the end that as yet were not fully fleshed out would still require some work in relation to the procedure. Provision had been made for the committee’s procedure and infrastructure as well as the inclusion of the medium term budget policy statement (MTBPS) and annual report processes. Finally, the revised draft elaborated on the procedure prior to the discussion of the budget.

Advocate Jenkins mentioned that, in respect of the infrastructure of committees, what the media had referred to as the “central committee” had now been replaced by two committees: an Appropriations Committee (which would deal with expenditure) and a Finance Committee (which would deal with matters of revenue). The infrastructure of the “central committee” had disappeared as a result. Provision would be made for Money Bills be referred to these committees, as well as the MTBPS and annual reports. Speaking broadly on the definitions section, he remarked that some ancillary definitions would have to be added, such as identifying and defining ‘adjustments’, ‘committees on appropriation’ and ‘contingent liabilities’. With regard to the definition of the Fiscal Framework, consideration must be given to defining the issues to be considered when dealing with amendments.

The Chairperson asked why it was necessary to refer to the annual Division of Revenue Bill (DORB). HE suggested that surely it could simply be referred to as just “the DORB”. He requested a proper definition of the DORB.

Fiscal Framework definition
Adv Jenkins referred to the definition of ‘Fiscal Framework’ and the attempt to provide a good definition for the Fiscal Framework, with the inclusion of sub-clauses. There were two options proposed. The first option was based on what the National Treasury proposed and was aimed at locating the Fiscal Framework in the macro-economic framework. The second definition was a little broader. It was his understanding that the subsections were central to having a proper definition.

Ms B Hogan (ANC) agreed, and remarked that the second definition should have the addition of the aggregate of the debt estimate.

Dr D George (DA) responded that he preferred the first definition, but suggested that it be called ‘fiscal balance’ instead. He commented that the definition also should be tightened up a bit.

Mr K Moloto (ANC) wanted to motivate for the second definition. He suggested that ‘Fiscal Framework’ be confined to the current fiscal year, not a rolling forecast, as this would give an impression of the Medium Term Expenditure Framework (MTEF). He asked if the drafters could find a way to accommodate the point raised by Dr George.

Ms Hogan made a point on the first definition. She asked if there were other ratios that could be looked at, and added that once the aggregates were in, it would be possible to compute the ratios. This should be in keeping with the definition of aggregates. The minimum ratios should be specified and based on the Gross Domestic Product (GDP) figures.

Ms Alta Folscher, Committee Researcher, responded that later on in the Bill it was noted that it would be the Fiscal Framework that would be approved. The drafters had noted the aggregates on which Parliament would make amendments. The moment GDP shifted, this would need revision. It needed to be more clear what it was that Parliament would actually approve, and how they would go about setting limits on the amendments.

Ms Folscher pointed out that the second definition of the Fiscal Framework was, in her opinion, a narrower definition and needed to be read together with Section 7(2), bearing in mind the additional information needed.

Mr S Marais (DA) responded that he agreed with what they were trying to do with the Fiscal Framework, in terms of setting objectives and targets while not being too specific. His concern was that the Fiscal Framework might be seen as only applicable to that fiscal year, rather than setting out a path into the future. One fiscal year would feed into the fiscal years in the medium term. It might lose effect in the following years. He expressed the opinion that the fiscal framework should dovetail with the medium term financial framework.

The Chairperson replied that he imagined that concern had been addressed in Clause 7. Perhaps the issue of forward estimates could be added. He asked the Committee if they generally agreed that the second definition of Fiscal Framework should be used.

Ms Hogan said that the Bill was assuming, in a sense, approval of estimates, which did not amount to hard facts. She asked what would happen if those estimates changed. She asked if this would then mean that there must be a revised framework.

Mr B Mnguni (ANC) commented that if it was intended that the Fiscal Framework would be approved in February with the current approved estimates, then the changes that came thereafter would come into the MTBPS, as there would have been approval of the Fiscal Framework.

The Chairperson remarked that if there were dramatic changes there should be adjustments. He had no problem with that.

Mr Marais agreed, and stated that the only problem was that the Fiscal Framework was defined for the current fiscal year, when it should have effect on the following fiscal years. This must apply in the medium term budget period.

Ms Folscher responded that the Appropriations Committee would be approving revenue and that would happen through the adjustments. She referred to the medium term in the definition of the Fiscal Framework and the question of using future numbers. The problem was that the Fiscal Framework would be fixed for 3 years. This Portfolio Committee would be approving the definition of Fiscal Framework. Any additional information could be added in Clause 7.

The Chairperson agreed that the Committee would concentrate on the Fiscal Framework. He stated that the Committee needed to choose a definition that would define the Fiscal Framework that the Portfolio Committee on Finance wanted. He noted that the Fiscal Framework was critical, and the Members needed to adopt it first and then decide on what would go into it.

Mr Moloto proposed a different approach. He suggested that instead Ms Folscher should take the Committee through the conceptual framework and note if there were any deviations from the Fiscal Framework.

Ms Hogan responded that she was happy to proceed clause by clause and asked if it was necessary to go through the conceptual framework. With reference to the definition of the Fiscal Framework, she pointed out that the estimates of revenue could not be fixed. As the Committee could not predict how the economy would perform, the estimate of expenditure was the only aspect over which they had control. Interest, under the heading of debt servicing, could change, as the interest rate may change. She asked why the Appropriations Bill could not deal with those matters over which the government had control, while all other estimates would be projections. This was the reason that other models were proposed that did not try to fix the ratio. The problem was that GDP could change and so could revenue.

Mr Mnguni agreed.

The Chairperson suggested that the Committee proceed with the second definition of the Fiscal Framework.

Adv Jenkins noted that the Fiscal Framework was functional as it related to the processes of the Bill. He added that the MTBPS still had the rolling forecast, and there was much said on the interaction on the outer years in Clauses 6, 7 and 8.

Fiscal Responsibility: optional wordings
The Chairperson asked the drafters to highlight the differences in the two options for the Fiscal Responsibility Clause.

Adv Jenkins noted that this was now the new Clause 4 in the draft. He commented that the second option provided more scope, but created uncertainty. The intent was to bind Parliament to the actions of the Fiscal Framework. The main difference lay in the use of the verbs. In option 2, the use of the words like “prudent” and “adequately” in sub clauses 4(1)(b) and (d) did not bind the Committee to strict levels and provide scope for debate. He noted that, depending on a point of view, Members might prefer one or the other. Members would have to look at the purpose, and the need to put parameters in place for Parliament on how to deal with Money Bills. It was important not to have amorphous concepts. What was best for South Africa would ultimately have to be considered.

Mr Marais responded that what Adv Jenkins had stated made sense. He noted that the challenge that option 2 presented was really what would be done in practice. If there was not sufficient knowledge and skills, then the implications of option 1 were huge. With regard to option 2, it was necessary to ensure that the issues were really taken into account and how the fundamentals would be ensured.

Ms Folscher responded that the different factors would impact upon the function of resources, such as government's fiscal policy, which made up a very large part of the economy.

Ms L Mabe (ANC) referred to option 2 for clause 4(1)(b)  and asked what was meant by ‘prudent levels’. With reference clause 4(2)(a), she also pointed out the reference to ‘long term growth potential’ and asked for clarification on the use of this term.

Ms Folscher responded that the ‘prudent’ levels in the Bill reflected the aim of avoiding bankruptcy or a debt trap when considering money bills. Further debate would have to give the word specific meaning. It was meant as an alternative to saying something like “the deficit should be limited to 3% of GDP” – which would be a fixed rule. The long term growth potential referred to issues such as debt levels, which would stay with the economy down the generations. This was the long term intention. How the Fiscal Framework was proposed for the fiscal year would impact over the long term.

Mr Mnguni agreed with Mr Marais. Option 2 seemed to be more comprehensive as to what must be taken into  account, and expanded on the responsibility of the committees. He noted that it was almost the same in all other aspects.

Mr Moloto pointed out that when one looked at the two clauses, they were basically the same, but agreed that option 2 looked more comprehensive. He expressed the opinion that there was a weakness in option 1, specifically sub-clause (3), and its use of the phrase ‘adequate capital and maintenance spending. He compared this to option 2 ‘s version of clause  4(1)(c)  and pointed out the main distinction was that option 2 clarified this much better. The type of spending was singled out in (d) and taken further in (c). Option 1 collapsed the two concepts together, and there was no distinction made between capital and current spending.

Ms Mabe wondered if the clauses should not include issues that affected employment equity in the Fiscal Responsibility Clause, and asked if that kind of arrangement should also be a part of the Fiscal Framework.

Ms Hogan asked about the long-term growth and developmental issues. She commented that she had been pondering whether perhaps it would be appropriate for Statistics SA or the National Treasury to table critical indices of development as a way to look at outcomes (for instance, infant mortality). This could form part of the additional information. The purpose would be to determine what outcomes the money allocated would finally have. Possibilities for the indices were noted as the Gini coefficient and infant mortality rates.

The Chairperson suggested that the Members must flag that issue for a later stage. He commented that when looking at what was missing from option 1 of the Fiscal Responsibility clause, the first line became critical. He asked if the word ‘consider’ should not be replaced by ‘ensure’ in this statement of mandate. He pointed out that the second option spoke more to that.

Mr Moloto pointed out that Option 1 had another weakness, and it fed into the debate the Members had had at the initial briefing. This related to what would happen in the event that Parliament did not adopt the Fiscal Framework. Option 2’s subclause 4(2)(a) provided for this consideration. As a result his view was that Option 2 was broader and more comprehensive.

Mr S Asiya (ANC) suggested that the issue of Key Performance Indicators (KPIs) in the annual strategic plans and annual reports be used as a yardstick to gauge the performance of a department. A specific indication of movement must be given. If departments presented these strategic documents to Parliament, it would be helpful.

The Chairperson asked if there was any reason why the Committee should not agree upon Option 2.

Ms Mabe agreed that option 2 was better. She stated that as the work continued this was going to help, as it was not only speaking to administration issues. It would then be possible to see if the public had received value for money.

Parliamentary Committee: Clause 5
Adv Jenkins noted that the media made reference to a central committee, as the drafters had no name for these committees. Detail was now provided in Clause 5 of the revised Bill, specifically sub-clauses (1) and (2). In short, the sub-clauses called upon each House to establish a Committee on Finance and a Committee on Appropriations. He stated that these would be the two committees that would consider all Money Bills. He proposed that the standing rules outlined in 5(3) fitted in better with the Parliamentary system.

The Chairperson commented that the committees were now appropriately defined.

Ms Hogan referred to DORB and the use of the word ‘revenue’ therein, and pointed that this was in fact an issue of expenditure (as it related to spending the tax revenue). She asked if it was clear that this would go through to the Appropriations Committee

Ms Folscher replied that this was set out in the new Clause 6. This outlined the procedure that would go with the information provided to Parliament. The three procedures specified that the committees would be able to look at the MTBPS three months prior to the introduction of the budget, which would be provided by the Minister of Finance. These committees would engage with the departments' annual reports, provided by the accounting officer. The reports would be an update of the strategic priorities and the impact of the budget allocations. There was another provision that was not yet drafted – and that was a provision that the Portfolio Committees would look at the performance of departments. She remarked that it would be a good point to include.

The Appropriations Committee would be the point at which the reports would be consolidated. The consolidated report would then be presented to the House by the Appropriations Committee. The Portfolio Committee could then signal to the House its intent to propose amendments. These would then be taken to the Minister of Finance for consideration in the finalisation of the Budget.

Ms Folscher indicated that sub-clause (5) and onward dealt with the MTBPS, and sub-clause (6) specified what the MTBPS should include.  Clauses (6)(c) and (d) specifically asked for a draft Division of Revenue Bill. She noted that the MTBPS did not have a legal framework and this would give a framework to it. She reviewed sub-clauses (7) to (11). In respect of sub-clause (12), she pointed out that the Portfolio Committee on Finance could look at the phrase ‘statement of intent’, as they might prefer something softer.

Mr Asiya noted a need to give more teeth to the Public Finance Management Act (PFMA). He suggested that the KPIs, strategic plans and annual reports be included in the Bill.

Ms Hogan noted that the implication was that the National Assembly members would be the only ones dealing with the national departments, and she asked what the role of the NCOP would be. She noted issues concerning the presentation of the draft budget to Parliament.

Ms Folscher responded that the estimates for the outer two years would be considered as a way to influence what was coming next. The outer two years now rolled over into the second year  of the MTEF. The third year would be included. It was unlikely to produce an accurate picture. The draft budget provision meant that all draft budgets would be a month earlier, but as the December numbers would not be in yet, this would again compromise the accuracy of the draft budget.

Ms Folscher responded that it was a difficult point to ask for further information. The timing of the budget cycle generally would prove tricky.

Ms Hogan stated that this highlighted the particular problem the Committee was trying to address. She commented that relying on government departments for this information was a dangerous process to put forward, as it could lead to battles. In addition, she did not think that the outer years’ estimates provided much substance, and that this might the opportunity for the Portfolio Committees to reflect on service delivery and not necessarily be tied to figures.

Ms Hogan remarked that ‘statement of intent’ was an unfortunate term, and suggested that it be replaced with ‘budget review and recommendations’.

She noted that when the Portfolio Committees reviewed the annual reports, they could get an idea of what departments expected to be coming in February, and that when the time came to review annual performance, there should also perhaps be a presentation of the outer two years.

Ms Mabe commented that the quality of reports was a major issue. She said that she did not have a solution, but indicated that they should get a tangible view of what departments had achieved in order to determine if the budget allocations were transforming the economic trajectory of South Africa. She referred specifically to the budget allocations of the Departments of Education and Housing, and what South Africa got out of that.

Mr Mnguni remarked that they had to be cautious that there was not an overstepping of roles, and that Members must be careful that they did not set the budget themselves, thus becoming both the referee and the player.

Mr Marais expressed concern around the departments’ demands. He noted that the control of this depended on the discipline enforced by the committees. If the annual reports were properly evaluated, departments would know where the problems were. He suggested that perhaps there should be a mediation committee, to go to the evaluation and see who had not performed, and where the allocations could be moved. Discipline was key.

Ms Hogan pointed out that the Portfolio Committee would have two opportunities to make statements. The first would be in relation to the strategic plan and budget of a department, and the second would be a statement on the annual report of a department. She asked if this rolling conversation with the departments would not be a better way to include the review of reports. There could, of course, be exceptions in crisis situations. The Standing Committee on Public Accounts (SCOPA) reports would also have to be incorporated.

Ms Folscher asked if it would work if subclauses 1 and 2 remained. Sub-clause 2(a) could be taken out and 2(b) could be strengthened to include the Portfolio Committee reviews and SCOPA reports.

Ms Hogan voiced concern about the opening clause and tying this to the outer two years. She suggested that this might need to be reworked completely, and that a completely separate section be drafted that would not necessarily be tied to the MTBPS.

Clause 7
A broad review was given of Section 7: Introduction of the division of revenue bill, the national budget, the appropriation bill and the revenue bills.

Ms Folscher reported that this was a general section and set the framework for the subsequent steps. Sub-clause (2) added specific steps in terms of bringing together the Fiscal Framework and the Fiscal Responsibility clause, by asking for specific information. She made special mention of sub-clause (2)(c ),  which listed several key fiscal indicators that would be required as ratios of GDP. Overall, subclause (2) should include a reference to the medium term of three years. On the aggregate debt, she stated that the intention had been to ensure a long term projection. She said that perhaps it was here that one could include additional economic indices, such as employment figures.

The Chairperson asked if the drafters could find a better way of including those indices.

Ms Folscher responded that perhaps it might be possible to include medium and long term in the overall statement, and then to include a sub-clause around indices like the Human Development Index (HDI), the Gini coefficient, and employment figures.

Mr Mnguni responded that those were broader socio-economic measures, and that it would not help to include them in the Bill. He did not think the Bill should legislate those indices. The overall target was to improve matters.

The Chairperson agreed and pointed out that this was covered by the provision in 7(2)(g) that stated that the documentation tabled by the Minister with the National Budget must include any other information stipulated by Parliament from time to time. He said that the better way to deal with it would be not to include the specifics.
As to the suggestion made earlier by Ms Hogan on the use of ‘statement of intent’, he agreed that it should be changed to ‘budget review and recommendations’.

Clause 8
Ms Folscher reviewed Section 8. She highlighted subclause (1), which referred to the joint hearings of the National Assembly (NA) and the National Council of Provinces (NCOP) and the separate reports they must submit to their respective committees on finance. She outlined subclauses (3) and (4). Subclause (5) provided for how amendments would be motivated according to the Fiscal Responsibility Clause. Subclause 6(a) was noted for the short time (only two days) the Minister would be given to respond to the proposed amendments prior to submission of the reports to the Houses. Subclause (7) also meant an effective 2 days was allotted to the Houses to adopt, amend or reject the proposed amendments. Subclause (8) concerned the provision that amendments should be in line with the adopted Fiscal Framework.

Ms Folscher noted that one matter that was not discussed at the last engagement was what would happen if the NA accepted the Fiscal Framework, but the NCOP rejected it. Precedent suggested that one would either follow a Section 75 procedure, where the NA would have to vote again, and that whatever was passed would then stand, or to use the alternative section 76 procedure, when the issue would go to a mediation committee.

The Chairperson said that it was clear that, since Money Bills themselves were considered in accordance with Section 75, that this would be the best route to follow.

Mr Marais expressed concern about the word ‘amend’ in clause 8(7), as it might imply the House may be able to effect amendments without taking into consideration the implications of that. This did not seem too democratic to him, especially in view of the Fiscal Framework, public hearings and the Fiscal Responsibility Clause, as the House could effectively do as it wished. When Houses were considering an amendment for adoption there could be the options of referring the amendment back or refusing it.

The Chairperson responded that it was not possible to take away Parliament's rights.

Mr Moloto suggested that Mr Marais' view be accommodated.

Ms Hogan remarked that the adoption of the Fiscal Framework presupposed the adoption of the revenue aggregates, and that the Finance Committee must adopt the income tax schedule.

Ms Folscher responded that the revenue might be adopted but that its distribution may change.

Mr Mnguni noted that if the Fiscal Framework was adopted then tax revenue was automatically adopted as well.

Ms Hogan presupposed that tax revenue also included revenue from borrowing, and she pointed out that they were not looking at the distribution between borrowing and the tax revenue, believing that it would reflect the level of deficit ratio.

The Chairperson wondered if this was not covered in 7(2)(c)

Ms Folscher responded that Members needed to return to the Fiscal Framework and this would prove critical.

Dr George wondered whether it was possible to refer to ‘tax revenue’ and then have another line for other revenue. He thought that might make it easier.

Ms Hogan replied that adopting the Fiscal Framework was not implementing it. The Executive would have to implement it. It could be adopted on the expenditure side as there was control over this. Should the Executive require changes, these could come through in the MTBPS. There might even be a need to separate out the two categories of revenue and expenditure.

Mr Moloto asked how many Fiscal Frameworks were being spoken about.

Ms Hogan stated that the adjustment estimates for the current year would be contained in the MTBPS draft  for future years. The actual Fiscal Framework would come when the aggregate figures were announced.

Ms Folscher responded that the deficit was not mentioned anywhere, nor how it would be financed. There was no legal framework for this information, and perhaps there should be another line for financing.

Mr Moloto queried what was meant when ‘financing’ was stipulated.

Ms Folscher responded that, by definition, financing would be the opposite of whatever it was meant to offset. Therefore a deficit would require borrowing. It was the composition of the borrowing that had huge financial implications.

Mr Moloto responded that all that information was now in the budget review, including the figures for international borrowing.

Clause 9 and 10
Ms Folscher continued her review of the changes to the draft Bill. She reported that clauses 9 and 10 followed a similar format. Section 9 specified the committees, the motivations required and what the committee should look like, in subclauses (1), (2) and (3). Subclause (4) specified the standing rules on this process. She asked Members if they thought that this was an exhaustive list, or if some items should be left out. She then discussed subclauses (5), (6) and (7). Finally she noted that the Division of Revenue Bill would be passed as a Section 76 Bill.

Ms Hogan referred to subclause (5)(a) onwards and asked if provision would be made for the participation of political parties. Regarding the role of the NCOP, she stated that she anticipated that the Appropriations Committees would follow a similar procedure to what was usual for the NCOP, and proposed the possibility of  a joint sitting.

Ms Folscher responded that these were two separate processes.

The Chairperson asked which would be more appropriate.

Ms Hogan replied that the joint committees could take up whatever process was appropriate and decide whether they wanted to confer.

Mr Mnguni replied that there had to be provision for the joint sitting of the NA and NCOP.

Mr Moloto responded that it made sense for the committees to confer, but he did not know how to deal with that in the legislation.

Mr Mnguni responded that the issue of joint sittings was addressed in the Standing Rules.

Ms Hogan asked if the Standing Rules gave the committees the discretion to confer. She remarked that when she looked at what the committees had to consider in clause 9(4) she wondered if it meant that the Appropriations Committee must concern themselves with that. She stated that consideration should be given to setting a standard set of things. It had to be remembered that the NCOP went through a very long process when conferring, and that meant a long process for the NA in a joint committee scenario.

The Chairperson asked if Ms Hogan was proposing that the NCOP process be done separately, looking specifically into provincial and local government allocations.

The Chairperson asked how to approach the issue of conferral and NCOP participation in the later part of the process.

Mr Mnguni proposed that the NCOP adopt first, then the process would continue in the NA.

The Chairperson suggested that the Committee should flag the issue and look into it again.

Mr N Singh (IFP) referred to clause 9(4)(d) and asked what was meant by ‘local government’. He wondered if there should not rather be reference to ‘municipalities’.

The Chairperson clarified that municipalities were local government and that the reference was correct.

Clause 10
Ms Folscher reported that the next clause dealt with the Appropriation Bill and noted that the Appropriations Bill would be referred to the Committee of Appropriation for the adoption of the fiscal framework. She highlighted subclause (2) and noted that the separation of the processes here was clear. Subclauses (3) and (4) were reviewed. Subclause (5) detailed the standing rules that would provide procedure for the adoption of the Appropriations Bill, according to its sub-clauses (a) to (e). Subclause (6) set a time limit of ten days for the Minister or any other member of Cabinet to respond to the amendments prior to the Appropriations Committee reporting to Parliament. Subclause (7) detailed the issues the report of the Appropriations Committee had to take into account, as presented to the House, and as listed in the items (a) to (k)

Mr Moloto responded that they should include the clause for the purpose of sequencing things properly .

Ms Hogan remarked that the appropriation was just the schedule of the estimates of the national expenditure and strategic objectives should be incorporated into national expenditure. Once again the focus was just on the figures. She thought that the committee should approve the strategic plan that went with the figures. It would have to be able to comment on the strategic plan as it would not be proper to interfere with the government’s executive power.

Mr Mnguni responded that the core functions of the strategic plan, where everything was put into place, were in the estimates.

Mr Marais added that the annual report was where the strategic objectives would be set out and, as such, he concurred with Mr Mnguni.

Ms Hogan responded that for the purposes of going forward the strategic plan would be the point to consider the possible amendments. She added that it must be borne in mind that the PFMA was a vote on programmes and that there should not just be a look at total aggregates.

Mr Asiya agreed to keep the KPIs. HE noted that as the strategic plan ran over three years it would give some indication of a programme. He noted the importance of determining the cause of the problems as a way of trying to bring a remedy before a department fell into serious difficulties. In relation to the c
ommittee’s report to the Appropriations Committee, he asked if it was permissible, in terms of Parliamentary procedure, that a particular committee reported to the House.

Mr Singh commented on the consultation and how the process should start. He said that it was important that the Appropriations Committee did not micro-manage departments and that the Portfolio Committee looked at strategic plans and objectives.

The Chairperson agreed that this was what the Bill needed to capture.

Ms Hogan remarked that this was not just the consultation process,  and that there should be a clause to the effect that any increase in expenditure would have to be motivated in terms of the revenue or savings that would be used to provide for the increase. It should not be possible to increase expenditure willy nilly. She asked if it should also be possible to initiate an amendment with the Budget Office.

Ms Folscher responded that the current formulation of the consolidation to prepare a report may change according to requirements; for instance it may need to be stronger.

Ms Hogan stated that the point remained that there was only reference to the Appropriations Bill expenditure aggregates. She said the Portfolio Committees must be the first step, and that the Appropriations Committee must receive recommendations from these Committees. There was a ring of about 5% opportunity to amend the budget, as government was bound by contractual relationships. The appropriations would also have to look at the onward changes for all government departments.

Mr Marais noted that the mediation was not the decision that would be taken, as it was just a proposal to the House. The Appropriations Committee would not make the final decision. He added that he assumed that the Committee would be adequately equipped to make the proposal to effect a better macro allocation of funds.

Mr. Asiya asked if that referred to clause 10(5)(e), and if the Appropriations Committee had the power to reject an amendment if there was a serious problem. He referred to clause 9(4)(c) and requested that the definition be made more clear, as he felt that this was a drafting issue.

Mr Singh remarked that the Appropriations Committee should be looking at globular amendments within a department and the shifting of the allocation. He said that the PFMA provided for virements and that the Appropriations Committee should be very careful of micro-managing.

The Chairperson responded that on the issue of virements, they should be careful of amending the PFMA.

Mr Moloto agreed with the role of the Appropriations Committee and thought that it would be dangerous for Portfolio Committees to go directly to the House with amendments. He took Mr Asiya’s point and suggested that the sub-clause be rephrased to say that the Appropriations Committee should recommend that the House debate.

Ms Folscher responded that, in terms of the PFMA, the Appropriations Act referred to allocations to programmes, and gave Parliament the power to amend programmes.

Ms Hogan stated that if this did refer to programmes, the Appropriations Bill should look at the actual programmes. She noted that the amendment of the allocations between programmes presupposed that the Appropriations Committee would have the technical expertise to handle this. It was worrying that there was not a good idea of the composition of the Appropriations Committee. She referred to the Budget Committee in Germany, commenting that it was very powerful and that this required technical and specialist expertise. This German Committee was divided into sections of specialisation and these sections were always present at the hearings of the Appropriations Committee. When the Appropriations Committee sat, the Budget Committee section would offer its opinions on the specific meetings. She stated that generally, this had to be based on in- depth understanding.

On a different point, Ms Hogan asked how political parties would be involved. She wondered if this could be built into a non-political committee like SCOPA. She said that SCOPA was a good indication of the level of skill that would be required.

Mr Asiya commented that these points would be difficult to put into legislation, as they would create far reaching implications.

Ms Folscher wanted to clarify what the changes to the draft had to be. The first clause had to change, so that it referred not to the Appropriations Bill but to the estimates of revenue and expenditure and the strategic plan, which would then be an additional document introduced to the document list currently in place. The process of referral with the Appropriations Bill would still be referred to the Appropriations Committee. The legislation then had to refer the individual votes and relevant chapters to the Portfolio Committee. This would be a clause added to the Rules section.

Ms Hogan noted that it would fundamentally undermine Portfolio Committees if the first step of any  appropriations was not referred to the Portfolio Committees. It would be preferable to say that the budget and strategic plan would be referred to the Portfolio Committee, and refer the Appropriations Bill to the Appropriations Committee. The Portfolio Committees would then make recommendations for the amendments to the Appropriations Bill. She added that the only power they had was to affect the Appropriations Bill.

Ms Folscher agreed that those changes would go into clause (1), referring the Appropriations Bill to the Appropriations Committee and the estimates of expenditure and strategic plans to the Portfolio Committee. In respect of the earlier clause, concerning what happened during the year, the Portfolio Committee would submit a report on the budget and strategic plan. Clause 10(5)(c) then needed to state something on the relationship between the Portfolio Committee and the Appropriations Committee on the amendments to the appropriations, and how they would confer. This subclause currently used the word ‘consult’. Sub-clauses 10(5)(d) and (e) would remain. The question was how the (c) subclause would set that relationship.

Ms Hogan suggested that Ms Folscher should work out something further on this issue.

Ms Folscher detailed the items for discussion on the next day, which included the adjustment budget, the revenue bills and other Money Bills.

The Chairperson proposed that the Committee make recommendations on the areas as highlighted in the discussion during the deliberations on the following day.

Ms Hogan wondered what was actually being amended. She noted that she did not want to get into the situation of re-allocating every little item. She wanted to see an effect on the total programme. She wanted clarity on what Parliament’s power of amendment actually was. If it was purely related to shifting funds between programmes it could be very unhelpful.

Mr Moloto replied that this was a very crucial matter that Ms Hogan had raised. He stated that the strategic priorities had to be clear. The ancillary matters were not important. It was to do with the allocation of funds to where they would really matter. Certain departments had large fund allocations to areas that were not key priorities, and there would now be the ability to reallocate these funds between departments.

Mr Mnguni wondered how much change could be effected to the fiscal framework based on the macro-economic considerations. He also noted that the reallocations within and between departments were to be an issue of recommendation for the Appropriations Committee.

Mr. Singh noted that this was not just an inter-programme amendment. It was looking at government priorities as a whole. There were macro decisions to be made, which currently the Executive decided upon. Parliament must be empowered to do this as well.

Mr Moloto pointed out that once there had been agreement on the Fiscal Framework and DORB, there were 2 areas left – namely, allocations within programmes and allocations outside programmes. The re-allocation to key priorities could go to this extent. If not, these changes might just be cosmetic.

Ms Hogan stated that there would two kinds of issues at play. The first was macro allocation efficiencies and the second was the issue of State Owned Enterprises (SOEs), which was the domain of the Department of Public Enterprises. In this regard, the Appropriations Bill became quite important, as Parliament could have a real influence on the real allocations on a broader level. The nuts and bolts of the issue would lie in how economically efficient a programme was. She referred to the German system, which used something called a “qualified freeze”. This meant that the system had the ability to put a stop to funding until a department could motivate for the resumption of this funding. This motivation would have to be performance based. She noted that Parliament’s power was to influence, and wondered if there was something with greater power that Parliament could use in the budget process to influence spending.

A Committee Member commented on the workings of the Congressional Budget Office (CBO).

Ms Hogan responded that the CBO assumed Executive power and she did not think it was desirable to go that route.

The Chairperson remarked that this and the remaining sections of the Bill would be the centre of discussion on the following day. Besides beginning to flesh out the issue of actual amendment powers, Members would want also to begin to look at some of the models that had been mentioned.

Ms Hogan mentioned Section 216 of the Constitution, dealing with Treasury Control. It referred specifically to the Treasury being able to withhold funds from organs of state.  She asked what would stop Parliament from making a very strong recommendation that section 216 be utilised by the National Treasury to stop the transfer of funds until such time that the performance of a department had improved. It was very difficult for the Treasury to withhold funds against powerful government departments. If Parliament used its full force it could become a very powerful decision. She then asked the drafters to look at Section 216.

The Chairperson noted that the drafters would be looking at those outstanding issues, and remarked that the Committee had already made considerable progress.

The meeting was adjourned.



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