Draft Money Bills Amendment Procedure Bill [B75-2008]; Draft Financial Management of Parliament Bill [B74-2008]: deliberations

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Finance Standing Committee

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

The Committee discussed some of the outstanding issues of principle around the Draft Money Bills Amendment Procedure and Related Matters Bill (the Bill). The issues were identified as the nature of amendment powers, including withholding of funds; the process in the House; the Budget Office; and the definition of the fiscal framework. Further issues were the ability of the Minister to move technical amendments through the House, and the Division of Revenue laws.

There had been debate on what should be considered when Parliament amended revenue laws, and what must be taken into account in considering appropriation. It was suggested that the principles of liquidity and harmonisation with the Southern African Development Community, as well as the impact of amendments on economic growth, development and equity, should be stated in the fiscal framework clauses. Members agreed that “special adjustments” did not differ from “adjustments” as mentioned in the Public Finance Management Act and that adjustments should be limited to unforeseen and unavoidable circumstances. Ratification of spending must also be included. Unfunded mandates of departments should be considered by the Budget Office, which should perhaps look at the costing of every Bill. The drafters explained the sequence of events,  and explained also how a money bill could impact upon the division of revenue.

The drafters, in discussing the nature of the amendments, and powers of the Committees, described the situation in other countries. The limitations on amendment sought to balance giving Parliament sufficient powers to bolster the accountability of government departments, and ensuring that Parliament did not interfere with the Executive and acted in the best interests of the country. Members did not support the suggestion that further limits be imposed, and outlined the current limitations on the power to amend, including contractual obligations, the limitation against increasing budgets overall, the ability of the Executive to object, and the number of adjustments that could be made. Members generally agreed that there should not be a totally open-ended situation, that Parliament was bound to the fiscal framework and fiscal responsibility, and that this should be included in clause 8(1) of the Bill. Consideration was to be given to setting up multi-year appropriations in the Bill.  The Budget Office’s role would be critical, to ensure that sufficient information was placed before Committees in the Departmental strategic plans to enable decisions to be taken. Performance would mostly be addressed by Portfolio Committees, so the Bill could be seen as providing a last resort in adjustments by oversight when all else had failed. Members did not reach a final conclusion and the drafters were asked to consider how best to incorporate the points made in a new draft. It was suggested that perhaps the title of the Bill also be amended to reflect oversight.

Members then discussed the process in the House, and agreed that this should not be in the Bill, but in the House Rules. Various suggestions would be incorporated into a Report, with emphasis that the ability of the Minister, the Appropriations Committee and the Portfolio Committee should all be able to express their views. Individual Members could approach Committees or bring a Private Members’ Bill, parties would be represented through their Members, and the Minister would be able, if necessary, to move an amendment from the floor to correct obvious errors. They agreed that it was not necessary to include the phasing in process in the Bill, as the Appropriations Committee should be able to outsource until the necessary infrastructure was in place. The composition of the Budget Office should also be included in the Committee’s report.

Members were asked to check the regulations gazetted for the Cooperative Banks Act and Income Tax Act, as the Committee had thirty days to comment on the draft regulations.

The Committee then discussed briefly the Financial Management of Parliament Bill, noting that there were some references in it to sections of the Public Finance Management Act, but that it might be possible to take out those direct references and rather incorporate the wording from the latter Act. However some Members expressed that there might be a problem with references to accounting and auditing standards, and that a possible option may be to incorporate all references rather by way of schedules or regulation. The drafters would consider the issue. Both of the Bills would be considered on 17 September.

Meeting report

Draft Money Bills Amendment Procedure and Related Matters Bill (the Bill): Deliberations
The Chairperson requested all Members to identify the outstanding matters. He pointed out that the draft dated 22 August 2008 basically had taken on board the comments made at the last meeting.

Ms Alta Folscher, Consultant to Portfolio Committee, noted that one of the main issues was the nature of amendment powers, linked to the withholding of funds, as a restriction that Parliament could place on an appropriation. The second main issue was the process in the House. Thirdly, there were issues around Parliament's Budget Office and what should be in the legislation. The last was around the fiscal framework definition, and whether this must include extra budgetary levies or charges, and expenditure, and how to relate this to the adjustment budget. That was rather more of a technical issue.

Adv Frank Jenkins, Parliamentary Legal Adviser, noted that the Committee might still want to consider the "rainy day"  provision that was in the original Bill, and that allowed the Minister to move technical amendments through the House; to cater for situations where there were technical errors.
The Budget Office had not yet been discussed, and who would bring it into operation, whether this would be done on a date determined by Executive, or whether the legislation could be brought in piecemeal, especially if the Budget Office must first be established. Other issues around the wording could be discussed when the Committee commenced its clause by clause deliberations.

Mr Naran Singh (IFP) asked whether this was a Section 76 Bill.

The Chairperson said that this should be left to the Joint tagging Mechanism, depending on what was eventually in the Bill.

Mr K Moloto (ANC) said that the issue of the revenue laws had not yet been debated.

The Chairperson agreed that the discussion on this had not been concluded. He suggested that this should first be done, and then the outstanding issues should afterwards be dealt with.

Mr Moloto said that there had been a debate on what should be considered when Parliament amended revenue laws, and what must be taken into account when considering appropriation.  He proposed that Parliament should follow principles of good tax systems, with special reference to issues of liquidity and the like. At one stage the Committee had had a debate with National Treasury (NT) about reaching a proper balance, and it was indicated that the Organisation of Economic Cooperation and Development (OECD) countries placed more reliance on indirect taxation. NT had at the time responded that this was not appropriate for South Africa, as indirect taxes would tend to be consumption-based, and this would impact negatively on the poor.

Mr Moloto said that other issues were around macro-economic conversion. Southern African Development Community (SADC) had a project of tax coordination and harmonisation. When Parliament amended revenue laws, it should take these issues into consideration. Parliament should not be taking decisions contrary to what had been agreed upon at SADC.

Mr Moloto also mentioned international tax trends, which Parliament should be considering, although he was not necessarily suggesting that it be bound by them. Mr Moloto thought that Parliament should consider the impacts of amendments on economic growth, development and equity.

The Chairperson said that perhaps some of this belonged to the fiscal framework, as it had to do with not undermining the entire framework. He agreed that these should be taken into consideration.

Ms Folscher and Mr Jenkins noted that they would look at the fiscal framework clauses, to check that the comments of Mr Moloto were incorporated.

Mr Moloto said, on the issue of national adjustments to the budget, that Members had expressed concern that the adjustment appropriations should be qualified in terms of the Public Finance Management Act (PFMA). He was not sure whether this should be left open or strengthened. Some had argued that these matters were foreseeable, and that Parliament should perhaps take a stance and say that the practice was not acceptable.

The Chairperson asked, in the event that the Committee did agree to that, what should then be included. He noted that the Minister was to table an adjustments budget.

Ms Folscher noted that she had been reading up on special adjustments. The PFMA made provision simply for “adjustments” and this would include the special adjustments. She therefore felt it was sufficient simply to speak to “the adjustment” budget. “Special adjustments” were not a separate legal being under the PFMA, but this was merely the tag attached to a certain type of adjustment by National Treasury. She noted that the PFMA contained certain conditions for the bringing of an adjustment budget. The Committee could repeat them, or simply establish a link (as the clause already did) by saying that the Executive should bring an adjustment budget in accordance with the PFMA. That would limit adjustments to unforeseen and unavoidable circumstances.

Ms B Hogan (ANC) asked whether, when the Standing Committee on Public Accounts (SCOPA) and other Committees ratified spending, that was considered as an appropriation.

Mr Jenkins said that it was.

Ms Hogan suggested that then this must be included under the authority of the Appropriations Committee (AC).

The Chairperson agreed this would be logical. SCOPA was essentially condoning what had been spent.

Ms Hogan questioned whether this was in fact so. She asked whether SCOPA could only condone expenditure that had already taken place.

Adv Jenkins said that SCOPA would receive an audit report saying that certain amounts were not authorised, but had been spent. SCOPA would recommend to the House whether to authorise this spending after the fact. If it did, it would be included in the Appropriations Bill. He noted that a further example of special spending on pensions, was also in the Appropriations Bill, but this was done in advance, prior to spending. He said that the House would be authorising the spending, but perhaps this would be a duplication.

The Chairperson said that it should go to the Appropriations Committee. SCOPA would condone, the Executive would draw up the Bill, and it would then be referred to the AC.

Ms Hogan said that there might be other matters that the Committee had not looked at, including unfunded mandates. Where Parliament passed certain legislation, municipalities may be landed with unfunded mandates emanating from provincial and national level. The United States (US) Congressional Budget Office, when passing its legislation, had said that one of the standing tasks of the Budget Office was to present a report on unfunded mandates. She wondered if that was an appropriate route to take with this Bill.

The Chairperson asked where the unfunded mandates would be located.

Ms Folscher said this was part of the bigger issue around the money implications of Bills that were in themselves not money bills as such. The question was whether this legislation should include a clause requiring unfunded mandates to be considered by the AC.

Mr Singh said that every Bill had a section dealing with financial implications. He pointed out that, despite the fact that many said “no financial implications” there were always implications arising from implementation. He suggested that the Departments should always be obliged to work those out, and the AC should make it their duty to ensure that that was done.

Ms Folscher said that something to this effect might be included in the responsibilities of the Budget Office. It should perhaps look at the costing of every Bill and advise the AC if there seemed to be a problem, to avoid the AC having to consider every routine piece of legislation.

Ms Hogan said that there was also another area of the relationship between policy and its funding. There might be legislation passed requiring, by way of example, the establishment of community forums, for which no funding was given. When the legislation was being discussed, this was not an appropriation, but the question was how Parliament should intelligently engage with the financial implications. She felt it was the Portfolio Committee (PC) who should be grappling with these issues.

The Chairperson felt that the Budget Office should also identify a Committee to take up such issues. He pointed out that the Budget Committee should operate on behalf of the whole of Parliament, although it would work mostly with the AC.

Adv Jenkins said that it was necessary to sequence the events The Division of Revenue Bill would be the point where the Budget Office was helping the Appropriations Committee. Provinces and local government were already included in the Bill. Perhaps there should be a wider scope, so that they could raise comments if concerned that they would not be able to implement, to allow Parliament to attend to amendments. However, if there was new legislation in the next year, then the Budget Office should advise independently on costing, despite what the Department might have done. A Budget Office could suddenly become the whole new administration of Parliament, especially if it performed well, and would doubtless be in high demand. That must be borne in mind when drafting their functions and setting the resourcing. In Canada, the Budget Office’s primary responsibility was to the equivalent of the AC, but on request it could advise other committees of Parliament.

The Chairperson called for comments on the passing of money bills.

Ms Folscher noted that currently the Bill said that the passing of other money bills must be within the fiscal framework and that meant the definition must be broader to include extra budget revenue and expenditure.

Mr S Marais (DA) said that this would be a more inclusive process. When looking at the fiscal framework, it was necessary to consider everything that would impact upon it.

Ms Hogan asked how would a money bill impact on the division of revenue, if it was collecting money.

Adv Jenkins said that some royalties would go to a public entity. Constitutional institutions' money did not get turned over to the National Revenue Fund. Provincial legislatures did not return unspent funds and these went through as own resources.

The Chairperson commented that the establishment of the Budget Office seemed to have been dealt with. 

The Chairperson asked the Committee to consider the nature of amendments, and what powers there were. He asked what some of the other models included.

Ms Folscher said that countries had choices as to how they would limit or empower Parliament in the budget process. One option was that there could be no changes to the fiscal framework, so that the total balance did not change. The current wording of this Bill did not put such limits, so that Parliament would have the power to change the budget, from the fiscal framework to revenue. However, it did put significant procedural limits on amendments. In this way the Bill did discipline Parliament to look firstly at the fiscal framework, and Division of Revenue Act (DORA), and only then could it look at changing the revenue. This amounted to a “pay as you go” system. The classic danger with Parliament was that once it had power to change, there would suddenly be a host of projects, or parliamentarians would be lobbied on certain causes, and the budget could grow until it amounted to the country being in fiscal trouble, as had happened in Sweden in the late 1990s. This Bill guarded against that danger by imposing procedural limits. If parliament did want to add to the budget, then the process was centralised so that each request would be weighed up against the others.  An increase in one area would require a balancing decrease in another. In addition, every request must be motivated against specific factors set out in the Bill. The question was whether the limitations were achieving the right balance between giving Parliament sufficient powers to bolster the accountability of government departments in using public funds, and disciplining Parliament to ensure that it was acting in the best interests of the country.

The Chairperson summarised that the Bill did contain provisions relating to these powers.

Mr B Mnguni (ANC) noted that there must be fiscal responsibility and limitation through the fiscal framework. There would have to be considerations of macro-economic stability. He asked if it might not be useful to include a clause limiting any changes to within a certain percentage of Gross Domestic Product (GDP).

Mr Moloto said that he felt the Bill was adequate, as it did give the full range of powers. If Parliament was to adjust the budget upwards, it would have to reject the fiscal framework and then ensure that the adjustments were taken into consideration. He felt that imposing limits could become too complex.

Ms Hogan agreed that the initial decisions on the Division of Revenue (DOR) and the fiscal framework did impose some limitations on parliament’s ability to amend. She would like to consider departmental budgets. There could be a temptation not to increase expenditure overall, but to shift funds between projects, or try to take money from other portfolios. She would suggest that the Bill include wording to the effect that Parliament, whilst having powers to amend the Money Bill, would still recognise the prerogative of the Executive to implement legislation and policies and its authority to govern. In other words, there should be an understanding that the amending powers would not rival this authority but to correct the Executive on matters that were pertinent. Otherwise Directors General might end up in the situation where they would not be able to implement.

Ms Hogan added that the ability to amend was limited, because there were some contractual obligations; most of the budgets were intended for salaries infrastructure commitments. Some countries asked that any change of any line item by more than a certain percentage would require scrutiny by the AC. She would not be happy with a totally open-ended situation.

Mr Singh wondered if this was not in fact already included in the safeguards. If a Director General or Minister felt that parliament was making unnecessary demands, they would have the opportunity to object, and the AC would decide on it.

Mr Marais agreed. He said that the definition of a fiscal framework was a framework for a year, which gave effect to a macro economic policy, and included a number of items. He thought that this was already implied, and the reference to the PFMA would also pick up on this point. In respect of the limitations, he agreed with the suggestion by Ms Hogan as an open-ended provision carried the danger of misuse. He asked what the approach was in other jurisdictions.

Adv Jenkins noted that in Canada the Committees could not increase the levels of estimate on a particular item, but they could reduce it and change the priorities. There was a distinction between the Presidential and Parliamentary systems. If a President refused to spend, this would given rise to a Budget In Parliament Act to counter the actions of the President. Under some Parliamentary systems, amendment of the budget amounted to a vote of no confidence. Canada took this further, saying that there could be amendment, but gave effect to Parliamentary powers.

Adv Jenkins noted that amendments would be made at macro levels, or in divisions between departments, or between programmes of one department. The Bill was not yet clear on this. Parliament was bound to the fiscal framework and fiscal responsibility. When the Medium Term Budget Policy Statement (MTBPS) was introduced, there should be a proposed fiscal framework for the next two years, and he would suggest that it was the outer two years that must be adopted. The middle one would effectively be the fiscal framework for the next year. If this included estimates, then Parliament would not be able to shift funds, and would bind itself to the programmes. Whatever was in that fiscal framework would be binding, and the Bill had not yet made it clear what should be in it. The Committee would need to consider whether it wanted to specify this in regulations, so that it could be more easily changed, or to set a standard of being able to move funds between departments, but not to increase the total.

Ms Folscher was not totally in agreement. She noted that the current draft of the Bill said that Parliament would look at the fiscal framework at the time of the MTBPS, and provide recommendations as to what the situation was likely to be the following February. The fiscal framework being adopted at that point was the aggregate amount. It would not be adopting the Division of Revenue or departmental ceilings. The reason for separating this out was that the fiscal framework would look at spending issues, but based on macro-economic considerations, and not on departmental issues. That would be left to the AC. She would regard the fiscal framework as aggregate spending and borrowing for the financial year, adopted this year, but with a projection for the following two years.

Ms Hogan said her understanding matched Ms Folscher’s. The MTBPS was not being adopted, but a report was being provided, so that recommendations could be made.  

Adv Jenkins clarified that he had been saying that there was a clause on the DOR and introduction of the national budget. There was not yet anything to specify that this was the fiscal framework being adopted. If the Committee wanted there to be inclusion of the fiscal framework, then it must put this in, in terms.

Ms Folscher suggested that this could be included in clause 8(1).

Ms Hogan said that, when talking of limitation of powers or inclusion of more conditions, the Committee must consider the shape of the Appropriation Bill’s line items and programmes.

Ms Folscher said that the Bill had two objectives for the amendment powers. One was concerned with bolstering the accountability system of government, which was what PCs would do when amending the budget. The second had to do with consideration of macro economic issues and policy. It was intended that the Bill should allow Parliament to adjust the fiscal framework where it felt that the proposed framework of the Executive was not in line with its responsibilities. If there had been an appropriation for a department that was not fiscally sound, then Parliament should be able to reject it and motivate the rejection.

Ms Folscher said that there was a need to look at accountability, and to ensure that the Committees did not start to micro-manage. The Bill already contained the safeguard that all amendments must be motivated, bearing in mind the performance reports that would be placed before the Committees in October. The current situation was that funds were allocated to programmes. Within the programmes there would not be a distinction between capital and recurrent spending and transfers. Transfers for public entities were allocated and funded within the Department’s vote. Because of the nature of the Appropriations Bill, any amendment would move funds only between programmes. he PFMA already allowed Departments to move up to 8% from one programme to another. Technically, the Committee must ask, when it wished to make a Department more accountable, what the Department would be able to amend, and the Committee would have the power to exceed that 8% movement between programmes. However, the more significant amendment was likely to be the shift of funding between financial years, if it became apparent that a Department would not be able to spend funds in the current year – for instance if infrastructure was not in place. The problem was that there were no multi-year appropriations, and this was something that the Bill should set up. The question was whether the performance reports to the PCs were sufficient to set up the accountability. There were two limitations in the best practice. One was that the Committee could only decrease allocations, and by a certain percentage only. The second was that any Committee could make only five amendments, so there would have to be a “trade off” to stay within these limitations. The allocations to programmes made it unlikely that many amendments would follow. 

Mr Moloto said that there might be the situation where nothing could be amended if the information was not sufficiently detailed. He was not sure whether the information would be in the strategic plan. For example, a Department might list a generic programme for “child care” with no details about personnel or sub-projects. He asked what could be amended. The Departments, knowing what was contained in the broad statement, could change matters through virements, but this knowledge was not available to the Parliamentary committees.

The Chairperson said that this was why the Budget Office would be so critical, to ensure that information was available and placed before the Committees.

Ms Hogan said that the Budget Office could only deal with information available to the Committees. The main issue was what kind of amendments a PC would want to make. Different departments had different structures. National Treasury programmes, for instance, were very well defined and separate entities and amendments would occur only within programmes, and not between them. Perhaps attention must be paid to the Estimates of National Expenditure (ENEs) and the programmes, although if there were only six programmes, this did not give much room for manoeuvre. The information on the strategic plan would be tabled after the ENEs.

Mr Singh pointed out that Department of Foreign Affairs used suspense accounts. This Bill did not talk about the discretion of the accounting officer to do virements of funds.

Ms Folscher said that currently Parliament would pass the Appropriations Bill, then accounting officers would have the authority to vire up to 8% within the overall allocation. They would still have the ability to shift the 8% back, but this was not likely as it would make their budgets more difficult in the next years. It was envisaged that in October the Committee would deal with existing documentation, which would be updated in February when the new Estimates of Expenditure came around. The strategic plan spanned a number of years. There was a rolling system within which the PCs operated. ENEs were currently mentioned in the Bill together with the consideration of the strategic plan, prior to the tabling of the national budget. It might be possible to describe what information must be in the ENE before Parliament. The question was whether the powers to amend the budget, given the form of the Appropriations Bill and the PFMA, were sufficiently meaningful to strengthen accountability. In addition the Committee should consider whether there were other qualifications, or requirements that funds be placed in reserve before they were spent, or another consideration.
 
The Chairperson said that it did not seem that the Committee was able to reach any conclusions at this point.

Mr Mnguni said that Committees should be able to move funds between departments, but he suggested that the percentage remain at 8% for departments to do virements between programmes.

The Chairperson said that the 8% was for the accounting officer as essentially an intra-Department matter. The question was rather whether in this period Committees should be able to amend the entire budget vote.

Mr Marais said that hypothetically it would be possible, if a Portfolio Committee changed the whole budget, to come back to the Appropriation Committee who could say the PC had not applied itself properly as the fiscal framework and objectives had not been interpreted correctly. He would think that this would leave the system open to abuse or huge conflict between committees, and that would be undesirable.

The Chairperson said that if there was a strong Budget Office, this situation could be averted. Its expertise was very important in determining whether the fiscal framework had been taken into account.

Adv Jenkins commented that virements were the responsibility of National Treasury, who oversaw them under the PFMA and could direct that they should not apply.

Adv Jenkins also said that analysis by departments when dealing with legislation were also falling under NT, and he suggested that the powers of the Budget Office should include getting full information on financial implications of Bills, which Departments in turn should be obliged to give, subject to certain protection of sensitive information.

Mr Mnguni believed that if PCs had powers to change programme funding, then there should be a threshold to avoid undue interference with the Executive.

The Chairperson said that there was a percentage in the special adjustments where concerns arose from previous years. There must be a point at which incorrect actions could be stopped. 

Ms Hogan said that one aspect of looking at strategic priorities involved an assessment of whether sufficient resources were allocated to the departments to do the job. She noted that domestic violence was hugely under-funded, hence the programmes were not up to speed. Insufficient funding on well-managed government programmes was one aspect. However, where there was persistent under-performance from government departments arising from delivery and output issues, this was quite another. Even when there was under-delivery, this might be a smaller matter within a larger one. There should be consideration of performance against targets, not just the final output.

Mr Mnguni thought that under-performance was being partially addressed by this Bill, but that this was really the function of the PCs.

The Chairperson said that the Bill was supposed to be an oversight tool, as oversight could not be adequately implemented without it. However, adjustments as part of oversight would be a last resort,  when Departments had not done their work and the PCs had been unable to produce improvements. He asked that the drafters take on board all these suggestions and think how best to address them in the Bill.

Ms Folscher said that the Committee had previously been cautious not to interfere in NT’s ability to withhold funds, and to keep the separation of powers in mind. The powers given to NT were not related to performance, as NT could withhold only in cases of financial mismanagement or breaches of requirements. Withholding on account of poor performance fell squarely into the functions of Parliament or Cabinet, as keeper of the purse, and then the funds would be put in reserve, which would not interfere with the Executive. Departments would have to convince Parliament of their ability to spend. This was a tool used most effectively in the European Parliament.

Ms Hogan said that essentially this was about censuring of departments. Amending a government department’s budget amounted to criticism of the department, and giving effect to the serious light in which it was held. This was in the line of oversight. She suggested that perhaps the title of the Bill should be changed to reflect the powers of oversight.

The Chairperson suggested that perhaps the drafters would lie to look at other instruments in respect of these powers and their qualification.

The Chairperson asked Members then to consider the process in the Houses.

Ms Hogan suggested hat this should not be included in the legislation, but rather in the House Rules. However, she did believe that a report should be sent to the House giving recommendations for a process in the House. So far this Committee had only spoken of amending powers of Committees, and had not spoken to whether individual members could propose an amendment in the House.

The Chairperson thought that for money bills there must be a procedure. He asked how a person who had not followed the procedure would be allowed to override it.

Mr Singh said that a member could bring a proposal for a Private Member’s Bill. He thought that anyone could send a proposal to the AC, who would then report in the normal course.

Mr Moloto said that individual members could also approach committees. He did not think this could be done in the house.

The Chairperson said that this process in the House should be provided for in the Rules

Adv Jenkins said that in the parliamentary system that South African had followed, the amendment powers of Parliament, in respect of a budget falling outside of an issue of no confidence, was to balance around a point where there would be consultation with the Executive. (This would not happen in the Presidential system.) He wondered if the Minister should be able to move an amendment from the floor, or alternatively to the Committee, but he hastened to add that this was not for amending the budget, but for technical errors such as an incorrect reference (as had happened in the past) to a District rather than a Local Municipality. This could be stated in terms, or there could be inclusion of a miscellaneous clause worded along the lines of “nothing in this Bill shall prevent the Minister from moving an amendment to the House”.

Ms Hogan queried whether political parties, or only individuals, would be able to come with a motivation to an AC.

Adv Jenkins said that the issue was around where the Budget Office would offer support. In the Canadian system, this Office would first prioritise its time to the AC, then other committees, then individual senators or members. Perhaps other Parliamentary structures such as Joint Whip Forums could be included in the process. A political party would bring an amendment through a Member of that party, in the House. He thought that perhaps an all-encompassing clause might be used.

Ms Hogan asked if civil society could come through to the AC.

The Chairperson said that there would probably be nothing to prevent the AC from calling for public submissions.

Ms Hogan said that PCs would be backed up by the research departments, and the AC and Finance Committees would be backed up by the budget office. She asked what report and what recommendations should be allowed in the House. The role of the Ministers had not been fully worked out. They could comment on amendments, and there was a process where they could speak to their budgets. She asked if these procedures were to be retained. The Ministers would not know what the amendments were to be until the House had finalised the appropriations, and therefore perhaps should be given the opportunity to argue in the House.

Adv Jenkins said that in the past where a Bill had been substantially amended, the Minister was given the opportunity to respond at the end, after the report was introduced. Perhaps the same procedures could apply here. Within the Rules, Ministers must accept the amendments by Parliament, as they were themselves members of the House. The budget should not be amended to the extent where the Minister was forced to resign because he could no longer perform as certain functions had been shifted. He would speak to some of the experts, as clearly a procedure that created discord must be avoided.

Ms Hogan said that the AC was not the final body as matters would still need to be put before the House, who would have to be persuaded that the AC was making acceptable suggestions. It would be necessary to know who should lead the debate. She wondered if the Minister should not have a last attempt to come before the House and indicate that she or he did not agree.

Mr Jenkins said that the Minister would introduce the budget in the first reading. The Committees could amend, and then the Chairperson of the Committee must motivate the amendments. The Minister would have the chance to respond, and the House would vote. Certainly it could be specified that the Minister should have the opportunity to respond.

Ms Folscher said that the PC's “moment in the house” was in October, when the report must be adopted, for the Executive to respond in February.

Mr Moloto asked that in the event that the AC did not come through with any amendments, the PC would still get the chance to speak. He pointed out that there were two processes – the budget votes, and a decision on the whole budget.

The Chairperson said that the PC could not be excluded.

Ms Hogan said that consideration must be given to what should be done with the current process. She agreed the PCs must not be excluded. The MTBPS should be a chance for the Portfolio Committee Chairpersons to say what they wanted to see, and she believed that this should be elevated to a more substantive debate, although she agreed that it should not become “unseemly” if the PC and AC did not agree. The principles of what the House must consider were yet to be set. 

Mr Singh said that the decision making on the budget did not take place at PC level, but in the House, which was why the AC recommendations would feature more prominently.

Adv Jenkins said that at the moment the process worked on the figures. This would be taken over by the ACs. So far the Bill suggested consultations between the PC and the AC. Nothing would prevent a PC to move an amendment through to the AC, but the AC would then report that the amendment was proposed, and on whether it agreed with it. This must be seen as an opportunity over and above the process of the Fiscal Recommendation Report in October. The Minister would have time to respond and the comments would be included in the report. The Minister should also have the opportunity to speak in Parliament. He agreed that the PC must have the opportunity to state its view. Other members could not be excluded if the issues had to do with performance.

The Chairperson said that PCs had a number of opportunities to engage with Departments and oversight was ongoing. He was not sure whether this should be specified. It would be necessary to examine how the different levels of process would come to the House.

Mr Marais referred to the Minister's opportunity to respond in the House, and noted that the AC and Minister should have the opportunity to discuss matters prior to that, so that the House was not the opportunity to “mud-sling”. That earlier contact should be built in to the process as well.

The Chairperson noted that several issues surrounding the Budget Office had already come out of the preceding discussions, and he did not think it was necessary to deal with more.

The Chairperson said that similarly the fiscal framework had been covered in earlier discussions, and the “rainy day” amendments that Adv Jenkins had referred to would be accommodated in textual amendments. He noted that there would have to be a phasing in, as the establishment could not be set up overnight.

Mr Marais said , in respect of phasing in, that there must be appropriation of funds for establishing the Budget Office, as it would have to be properly managed and well structured.

Mr M Swart (DA) said that the enabling legislation to form this Budget Office must be in place, in order to make the appointments.

Mr Moloto did not think that it was necessary to include the phasing in process in the Bill. He thought that it should be left to the AC to say what it could deal with, given its capacity.

Ms Hogan noted that the AC could also outsource research in the initial phases, until the Budget Office was running.

Mr M Mahlahlela (ANC) said that the Secretary of parliament could establish the Budget Office. He agreed there was no need to have details in the legislation.

The Chairperson agreed, as long as the terms of reference were included.

Ms Hogan said that there was a Task Team on accountability, which had suggested the setting up of a Budget Office under the three Chairs of Chairs. She asked if it would be possible to get a further report of how far that process had gone.

Adv Jenkins would follow up on this.

Mr Moloto said that this was an important decision. It would be undesirable to have ad hoc arrangements, and perhaps the Committee should say something in its report.

Ms Hogan added that the composition of the Budget Office could also be included in the report.

Adv Jenkins said that the American legislation said such an Office should be independent from Treasury, but only specified the structure. Canada was quite specific, and the Budget Office received support from various divisions, including library and research. The level of service could be problematic, and stipulating this in legislation would not solve the problem. It was important to set out the functions, where it would be located, who it would report to, and, if it was a different structure from divisional sections, how it would then be established, as it would no longer fall under the accounting officer. The time lines must be set. The wording would have to reflect the intention. The current wording was actually incorrect.

Mr Moloto suggested that perhaps two alternative clauses should be suggested by the drafters, setting out the advantages and disadvantages of both.

Dr L George (DA) said that if the Budget Office was separated from NT, it would be necessary to consider what would happen if it came up with a different conclusion from NT.

The Chairperson said that the critical point was that a Budget Office must exist. He was not sure that they should be told how to work

The Chairperson asked the drafters to incorporate all these comments into the draft. The Committee could then, at its next meeting, go through the Bill clause by clause. The Committee had been due to report by 29 August. He suggested that the Committee should perhaps request another extension. it would set aside 17 September for an all-day meeting, and so would request such extension to end-September.

Regulations gazetted for Cooperative Banks, and Income tax Acts: GGs 31292 and 31332: Deliberations
The Chairperson noted that when regulations were gazetted, the Committee had thirty days to comment. He asked Members to check whether they were satisfied with the draft Regulations.

Financial Management of Parliament Bill: Deliberations
The Chairperson noted that the Minister had made some recommendations, on which the Committee agreed. He suggested that this Bill should be considered also on 17 September.

Adv Jenkins said that the Minister's comments had been incorporated into the latest draft of the Bill. He noted that political issues had been raised by the Secretary to Parliament. There had been some discussions at the Speaker's Forum about the role of provinces, but he was not sure how far this had gone. This might be an issue for the NCOP to consider.

The Chairperson noted that there were some areas where there was reference to the PFMA. The Committee had suggested that the wording of the PFMA should be incorporated into the Bill directly, rather than it referring to the PFMA.
 
Adv Jenkins said that the four areas where the references were brought back- namely, clauses 16(2)(h), 45, 50, and 56(1). He said that it would be possible to bring in the wording, but this might have to include considerable detail to cover all the points. Alternatively, he suggested that perhaps the regulation powers in these four areas should be allocated to the regulatory authorities. Accounting practice, for instance, in the PFMA was set by the Accounting Standards Board, and wording could be to the effect that “accounting practice in this Bill must be in accordance with that prescribed by the Accounting Standards Board, and must include….(followed by a list)”.

Ms Hogan said that, speaking from her experience as a member of that Accounting Standards Board, it would be extremely difficult to include accounting standards in the legislation, as they covered how every issue in accounting must be handled. The documents relating to accounting standards included international standards, and she thought that it would probably be sufficient simply to make reference to the Accounting Standards Board, and leave it at that. She noted that if the Auditor General was to audit the financial records of Parliament, he would need to know what framework of recognised standards was used. Consideration must also be given to what auditing standards were to be used. The Auditor General must report on compliance by every institution with the PFMA or MFMA, and if there were no accounting or auditing standards adopted, and no Treasury norms, he could not audit. She cautioned against Parliament setting its own norms.

Mr Moloto proposed that the Bill, with the proposed amendments, should perhaps be given to the Auditor General for comment. He asked why it would be necessary to use a standard other than that of the Accounting Standards Board.

Dr George said that the references to the PFMA had attempted to ensure that certain accounting standards were being included. As the PFMA evolved, there might be disjuncture with what was in that Act and what Parliament was doing. Certainly some of the good parts of the PFMA should be replicated, and he felt that there should be dovetailing of the two pieces of legislation. 

Ms Hogan suggested that if the Committee preferred not to mention “PFMA” then one way might be to have all the PFMA regulations attached as schedules or regulations. The Treasury norms and standards could also be passed by the Speaker as regulations.

The Chairperson asked Adv Jenkins to prepare a draft taking these concerns on board.

The meeting was adjourned.

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