The drafter of the Money Bill Amendment Procedure and Related Matters Bill went through the changes they had been asked to incorporate as suggested by the Committee at the 12 August meeting as well as the additional sections they had been asked to flesh out. Clause 1: Definitions, one definition had been added which referred to revenue bills. Clauses 2 and 3 remained the same. Clause 4, the Fiscal Responsibility clause, now had wording that matched the option the Committee had chosen at the previous session. There were changes to Clause 6 on the procedure prior to the introduction of the National Budget. They had separated the processes into two sections. The first would concern what the Portfolio Committee would do prior to the tabling of the National Budget and the second concerned the processes around the Medium Term Budget Policy Statement, the Fiscal Framework and the Division of Revenue Act.
Clause 7 was an overall section on the tabling of the National Budget. New inclusions here were references to the medium and long term where applicable, the key macro assumptions and contingent liabilities for the long term debt situation.
Clause 8 dealt with the adoption of the Fiscal Framework. A process had been added for when the National Council of Provinces passed a different Fiscal Framework to the National Assembly.
Clause 9 proposed two options in order to reflect the separate processes of the NA and the NCOP. The issues that arose from this clause were that this would be a Section 76 Bill and the current procedure for a Section 76 Bill.
Clause 10 concerned the passing of the Appropriations Bill. The meaning of “optional” in 10(1)(b) was questioned. The reference to capital and recurrent expenditure was queried. A suggestion was made that the Fiscal Framework, once adopted should take on the status of a resolution – to differentiate it from other documentation.
Other questions were about terminology such as “consult” versus “recommend”, the inclusion of performance assessments and the possibility of Treasury control. General comments were made on policy prioritisation, the difficulty of sourcing the required information and the emphasis on attempting to influence the budget by allowing the National Treasury to be aware of the issues that concerned Parliament. The functioning of the US Congressional Budget Office was mentioned. It was suggested that the report on the Appropriations Bill might be the appropriate opportunity for opposition political parties to respond.
Clause 11 covered the passing of Revenue Bills. The main issue concerned the subject and number of public hearings that would be held – views varied on this matter. The ability of the Portfolio Committee on Finance to amend the schedule of the Appropriations Bill was questioned. DORA already provided a limit on the capacity to raise revenue and that this question depended on the source of the revenue. General comments were that the Committee should not close the door on that possibility but that they should have already dealt with those issues in the budget review and amendments at such a late stage would be destabilizing to any government.
Clause 12 covered the National Adjustments Budget. Questions here concerned the inclusion of the term “transfers” and issues of time frame. Late special adjustments also fed into the issue of inadequate time.
Clause 13 dealt with the passing of other Money Bills which could have a serious impact on the Fiscal Framework in light of the ring-fencing of funds.
There was general consensus that a maximum of two weeks would be sufficient to finalise the Money Bill Amendment Procedure and Related Matters Bill.
Ms Alta Folscher, Drafting Consultant, reported to the Committee on the changes that had been incorporated into the Bill. The last sections of the draft that were mere headings at the previous meeting had now been fleshed out.
Clause 1: Definitions. Only one new definition had been added. This was the definition of “revenue bills”. Additionally the preferred definition of Fiscal Framework was now in place. The additional line included estimates of borrowing and revenue which were listed as taxes, levies, duties and surcharges. She proposed that revenue be defined as in the Constitution and that they could discuss it in the revenue bill section.
Clause 4 dealt with Fiscal Responsibility. She reported that the wording was reflective of the option the Committee had chosen at the previous meeting.
She outlined Clause 6: Procedure prior to the introduction of the national budget. These provisions concerned the changes to the process prior to the tabling of the National Budget. They had separated processes into two sections. Sub-section 1 would refer to what the Portfolio Committee would do prior to the tabling of the National Budget. Sub-section 2 concerned processes around the Medium Term Budget Policy Statement (MTBPS), the Fiscal Framework and the Division of Revenue Act (DORA). They start sub-section 1 with a definition of the National Budget as the Public Finance Management Act (PFMA) did not specify Revenue and Expenditure estimates over the medium term. The additional information requirements included financial statements, annual reports and Standing committee on Public Accounts (SCOPA) reports of departments, entities and institutions. The word “oversight’ should come out and should just be “other committees” as they had already defined “other committees”. There was to be a separate section for the MTBPS, otherwise the second half of Clause 6 remained unchanged.
Clause 7 was an overall section on the tabling of the National Budget. It now provided for the medium term and the long term where applicable. She specifically mentioned the addition of the key macro assumptions in the short, medium and long term. The reference to contingent liabilities would refer to the long term debt situation.
Clause 8 covered the adoption of the Fiscal Framework. The original wording was that the House could “adopt, amend or reject”. This would now be changed to read, the House would “consider” as to not make it explicit in the legislation. The process for when the National Assembly approved the Fiscal Framework and the National Council of Provinces rejected it, had been provided for.
Clause 9 had two options on the separation of processes between the National Assembly and the National Council of Provinces – the central processes around adoption of the Division of Revenue Bill. The first kept it as it was. Clauses 10, 11, 12 and 13 were debated in the course of the discussion.
The Chairperson suggested that the Committee discuss the two options and stated that, in his view, Option 2 was much clearer.
Mr Marais agreed on Option 2. He asked if it referred to the whole Division of Revenue Bill with reference to the NCOP and wondered if these were the parts only applicable to provincial structures. Of particular interest was whether this was a Section 75 or 76 Bill.
Ms Folscher responded that it was a Section 76 Bill.
Adv Jenkins commented that constitutionally it could be introduced in the National Council of Provinces (NCOP). He added that attempting to amend the Constitution through a piece of legislation would not hold water.
Mr Moloto remarked that the current procedure was that the National Assembly (NA) would consider a bill first and then the NCOP would consider it second.
The Chairperson agreed that this was the normal practice.
Adv Jenkins noted that Section 76 (1) of the Constitution was quite specific on that issue and apologized for the oversight.
The Chairperson asked the Committee if it was agreed that Option 2 would be accepted.
Ms Folscher added that this could refer to any other member of Cabinet as well as to the different roles of the Portfolio Committees. She also noted that the Portfolio Committee would want the Select Committee to engage with the Appropriations Bill as this did not currently occur. She added that clause 2 would be sufficient.
Ms Folscher reported that Clause 9(6) had undergone significant changes, and detailed them points (a) through (d)
Ms Fubbs requested an explanation for the use of the word “optional” in sub-clause (1)(b), as she was not sure what would be optional. On clause 6(c), she referred to recurrent and capital expenditure. She asked if they necessarily had to separate recurrent expenditure and expressed the opinion that she did not think this was necessary. Also, she asked what was meant by a ‘member of Cabinet’ and if this would also refer to a Deputy Minister. Regarding this, she referred to the convention that if there were a need for change, the Deputy Minister would do this in conjunction with the Minister.
She pointed to a reference to documentation being bought before the House and stated that the fiscal framework would no longer be a mere document. She suggested that, as it would be passed in the House, perhaps it should be referred to as a resolution - giving it greater significance than the rest of the documents.
Ms Folscher responded that the word ‘optional’ could be left as is or tied to the earlier sub-clause. On the estimates used for capital and recurrent or transfer payments, she responded that this was classified separately in the Government Finance Statistics (GFS) system. The issue of the ministers would need to be defined, referring to the other ministers the Appropriations Bill would affect.
The Chairperson stated that it had to be clear whether they were referring to the Cabinet or a member of the Executive.
Ms Folscher agreed that it should be clear that the Fiscal Framework was adopted by resolution.
Adv Jenkins responded that the Deputy Ministers were not members of Cabinet but that they had executive authority with the other members of Cabinet. The Deputy Ministers did not have original constitutional authority. He suggested that they leave it as a ‘member of Cabinet’ as this was an internal thing, the Executive would have to deal with. He added that if the Minister allowed it, then it must stand.
The Chairperson stated that he wanted them to be very clear about whether the ultimate responsibility would rest with the Minister.
Mr Marais stated that there were instances where lesser portfolios were assigned to Deputy Ministers and that this was tricky. He suggested that perhaps they should leave it at ‘member of Cabinet’.
The Chairperson reiterated that they must be explicit if the final responsibility should rest with the Minister and clearly exclude the Deputy Minister.
Ms Fubbs wondered how many legal advisers were under the impression that Deputy Ministers were part of the Executive.
The Chairperson asked if they should refer to it as a member of the Executive
Adv Jenkins responded that the Deputy Ministers had a role in the Constitution, and that was what he had referred to. He clarified that the Cabinet consisted of the President, the Deputy President and all the Ministers excluding Deputy Ministers. He pointed out that it appeared that a Minister could not give a portfolio to a Deputy Minister, however, they could assist with portfolios.
The Chairperson agreed that they should leave it as ‘member of Cabinet’.
Mr Singh pointed out that Clause 10 spoke alternatively of the ‘Appropriations Committee’ and the ‘Committee on Appropriations’ and asked for clarity on which it would be. He commented on “in view” being used in 10(6)(c)(b) and suggested that perhaps “after” should be used. He asked if there was not a provision in the Constitution for this and should it not be taken into account?
Adv Jenkins responded that they would go for the ‘Committee on Appropriations’ as this was the parliamentary naming convention.
The Chairperson asked if the members agreed.
Ms Folscher responded that the choice for ‘Appropriations Committee’ was a slightly weaker formulation and as a consequence the suggestion was a stronger formulation.
After debate, the Chairperson concluded that they could agree that there was nothing wrong with “in view”
Mr Singh referred to 10(6)(c), and queried the meaning of “proposed” amendments.
On the same clause, Ms Hogan queried the use of “consult” and asked if it could read “recommends” as it was not clear who had the final say. In 10(6)(a) she pointed that it lacked a clear stipulation of the strategic objectives and allocations. She added that this could not be based purely on the power to amend as it was not talking about allocative efficiency.
The Chairperson suggested that the Committee return to Clause 6, sub-clause (1) as this was covered in that clause.
Ms Folscher replied that she was concerned about the fine line in terms of policy making powers. And suggested that they might want to look at the lower level priorities. One option in 6(1) was to assess the financial and policy performance.
Ms Hogan referred to the other National Assembly committees and asked if they would consider measurable outputs against strategic objectives. She suggested that they include performances assessments.
The Chairperson agreed that performance assessments be included.
Ms Hogan commented that “in view” of performance allowed a broader range.
Mr Marais pointed to 10(6)(c)(b) and asked if the recommendations carried any weight. In other words, would they be obliged to do that. He requested that this be looked at objectively.
Mr Moloto agreed with Mr Marais that they should define under which circumstances they would ask the National Treasury to withhold money and added that this might need to be referred to the Constitution.
Mr Singh pointed to the use of the word “proposed” and stated that it was the House that would eventually decide, not the Appropriations Committee.
Ms Hogan, on an issue of language, asked about when a Committee considered amendments to a Bill, would this then be referred to as proposed amendments or as amendments to the Bill.
Adv Jenkins responded to the question of treasury control and the stopping of funds and commented that in light of Chapter 13 of the Constitution specifically section 216(2) they must comply with the measures and may stop transfers. Parliament could not force the National Treasury. They could only recommend to the National Treasury and the Treasury could then take action or not. As custodians of the PFMA, one could ask that the Treasury take this responsibility seriously - if there was a serious breach of the PFMA.
Ms Folscher suggested that they could ask the Minister of Finance at the tabling of the budget in February to respond to how recommendations of the Committee have been implemented. On the issue of treasury control, she commented that it looked like quite a narrow scope for the National Treasury but with the support of Parliament this provision could become quite strong. Proof of the usefulness of this could be seen in SCOPAs persistent qualifications of certain departments.
Mr Moloto referred to section 216 of the Constitution and stated that the provisions were too narrow and added that the provisions had nothing to do with the system.
The Chairperson suggested that they flag the issue of section 216.
Ms Hogan point out that one of the recommendations the Appropriations Committee could make was to strengthen the hand of the National Treasury through the issue of qualification of frozen funds, pending investigations. This was a matter of making strong statements. She asked what the effective powers to recommend were, that Parliament would want to use.
Ms Fubbs referred to the problem of policy prioritization. She raised the issue that certain priorities in line function were not adequately funded. She suggested that they should have a higher regard for the separation of powers as it was tightly linked to the allocation of funds. She asked if this could be resolved by leaving it at the recommendations arising from the report of the Committee on Appropriations.
She referred to Clause 10(8), the use of the word “must” which specified that the Appropriations Committee must provide reasons for every amendment. She said that it might be a problem sourcing all the necessary information and that they should not set themselves up for failure.
Regarding 10(9), she took the Committee back to 10(6)(e), regarding the Minister or affected member of Cabinet. She questioned the use of the term “adequately” in relation to the use of “empower”. She wanted to know what was meant here. Was this training capacity or authority on who amends: the Committee or the House?
Adv Jenkins responded that the wording of the Constitution used amendments and proposed amendments in terms of what Houses may do. This was found in the Section 75 and 76 legislation and spoke specifically of committees reporting amendments to the House.
Ms Hogan remarked that she preferred that formulation as it could be untidy otherwise.
On the Appropriations Committee and amendments to the House on the vote, she suggested that there also be debates in the Portfolio Committees as they each have to produce a budget report that has to be tabled prior to the National Assembly debate session on the relevant budget vote. They should try to sort out what gets debated in the House for when the Appropriations Committee reports to the House.
Next, she queried the role of opposition political parties and commented that it seemed that the Chairperson drove the process very much. She asked if the NA would be open for further amendments to be tabled.
Ms Fubbs pointed to the current situation where the Portfolio Committee would actually focus on policy aspects and then report to Parliament and asked if this would not only talk to policy priorities but would go beyond the issue of the allocation of funds. On the issue of separation, she suggested that the Appropriations Committee did not report on policy. She was sure that they did not need to be bound by international practice generally.
Ms Hogan suggested that the Portfolio Committees would be obliged to report on the budget and the department’s annual report, with a view to influencing the budget coming in February and allow the National Treasury to be aware of the issues that were of concern to Parliament. The Portfolio Committees could then have discussions and hearings to engage with the Appropriations Committee.
Ms Hogan asked what would happen in the House regarding the Portfolio Committees and opposition political parties.
Mr Singh discussed the United States congressional budget office. He highlighted that the CBO reports contained no policy recommendations and emphasized the impartiality in the CBO. There was no political debate and he did not see any reason why this should be disputed.
Mr Moloto agreed, adding that this was complex and needed discussion.
Ms Mokoto commented on the amending powers of the legislature. She stated that the Constitution and the PFMA provisions on interventions had limits. She said that there was a vacuum at national level due to the narrow approach of the Constitution.
Ms Hogan commented on the tabling of documents wondered if this was a reference to the Appropriations Bill.
Ms Folscher responded that the Appropriations Bill was the main document specified in the Bill and that others could be added.
Ms Hogan queried the role of opposition parties in relation to the role of the portfolio committees and the opportunities for representation on the Appropriations Committee. She said that the budget was the flagship of a government and suggested that the leaders of opposition parties table it ‘contrary’ budget. She added that surely the composite report tabled by the Appropriations Committee would be comprehensive as Parliament’s statement on the budget. Opposition parties should be able to respond to the report and have a public moment to state their views on the report.
The Chairperson pointed out that there were 13 opposition parties and suggested that this was a matter for the Rules Committee.
Ms Folscher presented the draft proposals on the new sections, beginning with the passing of Revenue Bills. She commented that whether attached to the budget or not, all revenue bills would fall under this section.
Ms Fubbs referred to 11(4) on the public hearings. She asked if there would be two sets of hearings as this was not very clear.
Mr Singh also referred to 11(4) and the use of the word ‘rules’ and asked if this should not state ‘standing rules’.
Ms Folscher responded that the hearings issue would be up to the Committee. She would think that there should be one. The Portfolio Committee would have to discuss this.
Mr Asiya also referring to the public hearings, and time constraints, suggested the public hearings be only on the draft and if the Committees required more, they could arrange for that.
Ms Hogan asked why they would have to have hearings on the draft and suggested that the hearings should be on the bill.
Ms Fubbs responded that in the past, many public hearings where necessary as Parliament did not have the powers they were now seeking and suggested that the public hearings be held on the bill and possible amendments.
Ms Mokoto responded that they should retain it as public hearings on the draft to solicit views and final outcomes.
Mr Singh did not know if they could leave it at the draft. In his view it should stay as public hearings on the draft revenue bills and that everything after revenue bills be deleted.
Ms Fubbs said that the only reason it was a draft in the past was that they did not have the power to amend money bills. Once the bill was tabled, Parliament would be able to make proposals on allocation priorities and make proposals for amendments, subject to public hearings, thereby giving everyone a bite at the cherry.
Mr Swart agreed that everything after revenue bills be deleted.
Adv Jenkins responded that the Constitution guaranteed effective public participation. He would go with the option of having public hearings on the bill.
Mr Asiya responded that if you legislate the amendments, you would open up the Constitution for litigation.
The Chairperson suggested that they have hearings on the bill and if amendments came forth, they would have hearings on them as well. He asked the Committee if they agreed.
Ms Mokoto stated that for the purposes of consistency, they should go with what Ms Folscher suggested.
The Chairperson asked if the Committee was an agreement.
Adv Jenkins responded that they were trying to get rid of surprises in the language and should indicate what happened later on. They should be clear about what they want and whether they would make amendments without public hearings.
Ms Hogan pointed to the additional amendments of the Minister of Finance and asked why they should have a second round of hearings on the amendments, bearing in mind that it was a tax schedule.
Ms Fubbs suggested that they have one set of hearings.
Mr Moloto referred to the revenue laws being tabled and asked if the Committee could amend this schedule of the Appropriations Bill. For example, could they cut company tax by 2%.
Ms Folscher wanted to check if the thinking was correct on procedure. As it stood, Parliament could make those amendments. It was required by the fiscal framework that they ensure an appropriate balance and consider the Fiscal Responsibility clause as to the impact on the tax base. She asked if they wanted to make it more onerous for the Committee to amend.
Mr Mnguni pointed to the fact that adjusting the Appropriations Bill would have an impact on the Fiscal Responsibility clause.
Ms Fubbs commented on the need for the Executive not to have a monopoly on what they perceive as the right configuration of the Revenue Laws. She commented that the time would come when Parliament had the expertise and resources to be able to reconfigure the Revenue Laws and she questioned whether they should have that power.
Ms Folscher responded that the Committee had indicated that the Fiscal Framework was adequate for passing the Budget Bill. However, it had not indicated if it was adequate for passing other types of money bills.
Mr Moloto remarked that he had the impression that the Fiscal Responsibility clause would apply to the whole Bill but that he was not sure on the revenue side, as this might be open. He referred to the example of perhaps wanting to reduce VAT, that those types of changes could not be made willy nilly as they had many implications. He was not sure that onerous processes need to be put into place on the revenue side.
Mr Asiya referred to the German system and asked if they would have the resources to persuade the National Treasury to decrease VAT and increase company tax and said that this went back to the point about Committee resources.
Mr Marais commented that if one followed the rules of the Fiscal Responsibility clause, everything referred to had already been provided for there. Thus they should not try to reinvent the wheel.
Mr Mnguni responded that when they were legislating now, they were trying to influence the outcomes and the Fiscal Responsibility clause placed limits on how far to go in changing policy.
Ms Hogan responded that once the DORA had been passed that was final and they could not then start raising revenue. In other words, they were already limited by DORA. She referred to the instance where the income tax schedule was amended early in the sitting and added that whenever the income tax schedule was tabled, the National Treasury would be careful to highlight the impact. Parliament had been helpful in raising these issues in the past. She agreed with her colleagues that DORA limited their ability to tinker with the figures. They should not be too panicked about amending the tax schedule and needed the Minister of Finance to comment on whether a more onerous procedure was needed.
Ms Folscher, on the projections of revenue, commented that SARS did consult with the National Treasury on the revenue figures but do not release that information. This was a significant benefit to the Executive due to this access. She inquired as to whether Parliament would want similar access.
Dr George responded that that depended on the source of the revenue and they would have to bear in mind the source of the revenue, when making amendments.
Ms Fubbs queried if that was not what was meant by amendment, with reference to the income tax schedule and VAT. In trying to put forward an amendment of the money bill, they were trying to open the door to revenue laws in a responsible manner. It would be disadvantageous to take that power away from themselves. Thus, it was her proposal that they not close the door but recognise that they did not, at the present time have the resources. They could possibly have a review of this in four years. There would come a time when an appropriate revenue bill would not be on the table but Parliament would have locked itself out.
Mr Singh responded by asking if they were not straight-jacketing themselves by looking only at passing money bills. He asked if the Portfolio Committee had a responsibility for how revenue was sourced in the outer years. He commented that this was a work in progress for the Portfolio Committee. They must not shut Parliament out of bills.
Mr Moloto remarked that the Fiscal Responsibility clause, as a guide, may not be sufficient. In view of (2)(a), (b) and (c) of Clause 12, perhaps they should have a sub-clause (d) which would stipulate that they must consider the long-term macro economic implications when amending revenue laws and its impact on the different classes of taxpayers.
Ms Hogan stated that she followed Mr Singh's view that they would already have fought through those issues in the budget review and that trying to bring in many amendments as late as February would be destabilizing for any government. They were not trying to create another budget.
She referred to the relationship the revenue laws set up with the company tax, income tax and VAT for the individual citizen, the companies, and various income groups. That would be the heart of the debate. She asked if there was not an opportunity for the Portfolio Committee on Finance to have a hearing on the income tax schedule.
Ms Folscher responded that the draft income schedule was only finalized after the December numbers were in. There was a longstanding requirement for secrecy, so as not to influence the markets with the information. The schedule came into effect upon announcement. She stated that they would look into the new policy by way of Parliament making its wishes known before the income tax schedule was tabled in October to link with the MTBPS process.
Ms Hogan responded that in effect, DORA did that. She commented that one also included borrowing – it was not just tax.
Mr Moloto responded that Ms Folscher’s proposal would help a lot as DORA put a ceiling on the allocations.
The Chairperson remarked that aspects of the Fiscal Responsibility clause did not allow for this.
Mr Moloto responded that DORA was adequate for expenditure but for the revenue side the Fiscal Framework could assist in closing that ceiling.
Ms Fubbs commented that they were talking about policy configurations and that would adequately cover them.
Mr Marais asked if this was purely a discussion or would there be income tax schedule policy consultations.
On the expanded section of the National Adjustments Budget a more fleshed out version was presented. Of particular interest was Clause 12(8)(b) and on this they should compare and isolate changes to be made.
Ms Fubbs commented on 8(b) and stated that it should include the concept of transfers. She also thought it inadvisable to reject what another Committee was saying. She asked if the Division of Revenue Bill would be reported in both Houses simultaneously and specifically asked for a closer look at the technicality linked to special adjustments. Would there be time?
Mr Singh remarked that he did not want any surprises, referring to the unfinished sub-clause 7 on the adjustment appropriation bill. In sub-clause 6, he referred to the time frame mentioned as being nine days he commented on this being an effective two-day window. He asked if this was two working days. Furthermore he did not think that two working days was fair.
Ms Folscher responded that they would have to consult the PFMA on the adjustment bill and special adjustments. They no longer had supplementary bills and wanted a proper process around adjustment bills.
Ms Fubbs pointed out that there was nothing in the law that precluded that happening in December. She added that it was better not to leave much to chance in terms of the working days. They wanted to a clear rule that this would not happen in December.
Clause 13: Passing of Other Money Bills.
Ms Folscher reported that 13(4)(a) meant that if the Executive planned to introduce the money bill during the year they would have to take account of the Fiscal Framework proposed at the beginning of the year. She added that all the inputs on standing rules would be included. As to the procedure in the House and amendment of powers, these would be issues for further discussion.
Ms Fubbs remarked that this could have a serious impact on the Fiscal Framework in light of all the ring-fencing of funds. For instance, the fuel levy could have an impact and they had not included such a reference.
The Chairperson flagged that issue.
The Chairperson brought the attention of the Committee to the committee progress report on this Bill that would have to be tabled by the 15 August. It was clear that they would not be able to finalize the Bill by the 15th. He asked the Committee how long they would need to finalise the Bill.
Mr Moloto suggested that they would need a maximum of two weeks and there was consensus on that amongst the Committee members.
The meeting was adjourned.
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