Money Bills Amendment Procedure Bill: briefing & public hearing; Financial Management of Parliament Bill: public hearing

Meeting report

Money Bills Amendment Procedure and Related Matters Bill (the Bill)
Adv Frank Jenkins, Parliamentary Legal Advisor, briefed the Committee on the constitutional context of the Bill. Section 73(2) stipulated that only the Cabinet member responsible for national financial matters might introduce a Money Bill or a Division of Revenue Bill. A Money Bill was further defined in section 77(1) of the Constitution and a Division of Revenue Bill in section 214. Section 77(3) of the Constitution stipulated that an Act of Parliament must provide for a procedure to amend Money Bills before Parliament. This Bill gave effect to Section 77(3) of the Constitution. He pointed out that the “procedure to amend” Money Bills must be additional to – and not change - the Section 75 procedure.

Adv Jenkins described the development of the Bill within Parliament from the initial task team to the Bill’s most recent amendments. He discussed the principles informing the Bill such as co-operative government, oversight of executive action and the protection of public participation.

He explained that Clause 4 provided for the powers and functions of the two committees in each House currently identified as the Committee on Finance and the Committee on Appropriations. The functions of the Committee on Finance were similar to that of the Portfolio Committee on Finance and the Joint Budget Committee. The Committee on Appropriations was to consider Section 32 expenditure reports under the Public Finance Management Act (PFMA). Clause 5 dealt with the procedure prior to the introduction of the national budget.

His briefing on the Bill then progressed under the following headings: Treatment of the Medium Term Budget Policy Statement (MTBPS), the Introduction of the Division of Revenue Bill, the National Budget and the Appropriations Bill, Adoption of the fiscal framework and the revenue proposals.

He then looked at the Division of Revenue Bill, Appropriations Bill, Revenue Bills, National Adjustment Budget, and other Money Bills processes.

The issue of supporting the procedure was then dealt with in the form of the provision for a Parliamentary Budget Office (Clause 15). The envisaged structure and functions of the Parliamentary Budget Office were discussed. The priority committees for the Parliamentary Budget Office were the four committees established by the Bill, that is, the two Committees on Finance and the two Committees on Appropriations. This was important as they wanted to avoid a situation where there was a lack of capacity for the Office when timeframes were very strict legislation.

The Bill provides for the appointment, conditions of service and removal of the Director of the Parliamentary Budget Office. The provisions for dismissal of the Director would be similar to the provisions for the removal of directors of Chapter 9 institutions. The outsourcing provision was of particular interest as it allowed for additional capacity by contract, because the budget process was critical.

The Parliamentary Budget Office idea was derived from the Congressional Budget Office in the USA. This model has been followed in Canada, South Korea and African countries such as Kenya and Uganda. One could look at the possibility of Parliamentary Services providing this service, but the idea of a separate and strong Budget Office had been followed in other jurisdictions and was what the Portfolio Committee on Finance had in mind when they drafted this Bill.

Discussion
Mr E Sogoni (ANC) asked why Clause 5 referred exclusively to committees of the National Assembly (NA) when there were similar committees in the National Council of Provinces (NCOP) to deal with financial matters.

Adv Jenkins responded that this question was considered by the Portfolio Committee on Finance and the debate was that annual reports of organs of state were currently dealt with by the NA committees. He added that this was an explanation of how the current process worked in Parliament and it did not mean the process could not be changed.

Mr Sogoni noted that the way committees were currently structured in the NCOP was that there was a committee that dealt with particular annual reports as well as clusters that looked at them. He added that NCOP committees do look at the annual reports. He was concerned about Clause 5 stipulating that only the members in the NA should have this responsibility. He was not aware of discussions between the Houses that stated that only the NA should deal with the annual reports.

The Chairperson noted the NCOP must always take into account the interests of the provinces and expressed concern that these issues related only to the national sphere of government. Referring to Division of Revenue Bill, considered only by the NA, he asked if provinces should start looking at their own Bill in that regard. This was a critical matter.

Adv Jenkins responded that one had to look at how the Bill envisaged procedure when the Medium Term Budget Policy Statement (MTBPS) was introduced, it was clear that the Select Committees would interact with the Committee on Finance and the Committee on Appropriations of the NCOP. One would then have to ask how this would be possible if the Select Committees did not have cyclical insight into the annual reports. He would therefore not interpret the Bill as excluding the role of Select Committees in considering annual reports.

The Chairperson responded that they had had a terrible experience in the past as a Committee and as the the NCOP, with many people saying that the Constitution was silent on Ministers accounting to the NCOP. It was problematic to assume that the NCOP would be taken care of. He asked if perhaps the reference could be broadly to "committees of parliament" - instead of separating the NA and NCOP committees.

Adv Jenkins responded that, as he saw South Africa’s constitutional make-up, it was not federalism. In South Africa, the National Departments were merely conduits to distribute money to provinces, therefore it was difficult to envisage a functional procedure that excluded the NCOP as provincial interests had to be represented at national level.

The Chairperson recounted instances where the Select Committee on Finance had to struggle to have people appear before them because the Constitution did not compel that

Mr Sogoni agreed with the Chair. The Bill - once passed - would be interpreted as written. There would be no assumptions in law. There was no provision to compel the consideration of annual reports by the NCOP. He added that he was of the opinion that the exclusion was not accidental and was done on purpose. He asked that the issue be flagged for a later meeting.

Adv Jenkins said that Clause 5 would be flagged and that they should create certainty on that issue and change the wording accordingly. Provinces had to provide their own procedure to amend Money Bills. One province had done this but even this was in response to a mistake in the budget and lacked detail. Some other provinces were currently in the process of drafting such legislation. This Bill would affect the provinces indirectly.

Mr M Robertson (ANC; Eastern Cape) asked for clarity on the process followed on the Division of Revenue Bill, Appropriations Bill and the National Budget. The way he understood it was that the National Budget, tabled in terms of the PFMA, must contain additional documentation required by the Money Bills Amendment Procedure and Related Matters Bill. Did that mean that they still had to put the required additional documentation into the PFMA, including the multi year fiscal framework? None of those documents existed in the PFMA currently.

Adv Jenkins replied that it was not necessary to amend the PFMA in the Bill. This was Parliament's request for the addition of additional documentation to Parliament. Adv Jenkins had consulted with colleagues on whether the Bill did, in fact, amend the PFMA. If this was the case, they would need to discuss that with the Minister of Finance. Personally, he did not feel that they were amending the PFMA. Rather the Bill created additional documentation requirements.

Mr Robertson responded that if they amend the Money Bills Amendment Procedure and Related Matters Bill, surely these changes would affect would affect the PFMA. He asked how would that work and if the Money Bills Amendment Procedure Bill and the PFMA had to be read together.

Adv Jenkins agreed that they should be read together.

Mr Robertson responded that, in his opinion, the PFMA would have to be changed. If not, the PFMA would not comply with the requirements of the Money Bills Amendment Procedure Bill.

Adv Jenkins responded that there were instances where pieces of legislation had to be read together. This was certainly something they needed to look at. The Portfolio Committee on Finance felt that this was not an amendment to the PFMA and that Parliament was merely fulfilling its mandate in terms of the Constitution. There was a way to amend the PFMA which had to be done in consultation with the Minister of Finance.

Mr Robertson said that unless they sorted out these niggling issues, the outcome might be undesirable. He noted the number of cases that had gone to court against government due to legislation being pushed through too quickly. They should not rush this.

The Chairperson agreed. He had initially thought that they would pass the Money Bills Amendment Procedure and Related Matters Bill in that meeting. Part of the problem was the treatment of the role of provinces and the NCOP in the Bill. This could compromise the budgets of provinces as well as the macro-economic stance. He then invited comments from the Deputy Chairperson of the FFC

Mr Bongani Khumalo, Deputy Chairperson: Financial and Fiscal Commission, stated that the finding of the FFC was that there was no co-ordination in how the legislation was crafted and the issues did not seem to relate to each other. This view had been submitted at the public hearing on the original draft Bill. Even when he re-read this version of the Bill, new issues still arose. The process was a bit fragmented. The Bill did not make specific reference to the FFC recommendations. There were quite a lot of other issues, specifically related to the processes referred to the NA that did not reference the NCOP. This created a problem

Ms A Mchunu (IFP) suggested that they use "committees of Parliament" so as not to create concurrencies with what happened in provinces.

Mr Sogoni noted that the issue raised by the Committee was echoed by the FFC. It was important. The Bill was a fulfillment of a constitutional requirement and they could not miss the boat here. He accepted that the provinces would have to establish their own Money Bill amendment procedures but there had to be references to the NCOP and the provinces in the Bill. He found it interesting that this had been tagged as a Section 75 Bill, so that provinces would not have an opportunity to comment. There was an operational issue in Clause 4, which established the Committees on Finance, noting that it was unclear how these committees would relate to the existing Portfolio Committee on Finance and the Joint Budget Committee. He asked if this was operationally sound.

Adv Jenkins responded that Clause 4 was an issue for debate. One approach would be to leave that issue to Parliamentary rules. The Portfolio Committee on Finance felt that there had been problems with that approach in the past and had chosen to use Parliament's operational powers and solidify that in the legislation. The public submissions had also looked at the consolidation of the Portfolio Committee on Finance and the Joint Budget Committee as it led to the duplication of powers.

The Chairperson replied that the more they had gotten into the discussion, the bigger the problem became. He ruled that they would not pass the legislation that year. He also thought it a good idea to have State Law Advisors in the next meeting to reinforce some of the issues raised by Adv Jenkins. They would also take cognisance of the FFC submission on the Bill. He noted concern about the lack of norms and standards for the provinces in terms of the Bill. The Committee did not intend to compromise the macro-economy and to this end, he requested that the National Treasury also make a submission on the Bill at the next meeting.

Adv Jenkins responded that he had been asked to assist the Portfolio Committee on Finance as well as being part of the task team as a drafter. He was not acting as a departmental lawyer. There were many things in the Bill that went against his advice - that had been the outcome of the submissions at the public consultations. He had highlighted points relevant to the questions asked. The first was that they should look at whether the participation of the NCOP committees was necessary. The second was the issue of norms and standards for provinces.

Mr Sogoni interrupted and referred to an earlier comment by Adv Jenkins - that the Bill would affect the provinces indirectly. He was of the view that this was incorrect as the provinces' legislatures had to pass their budget allocation from the National Treasury and had to appropriate funds as well.

The Chairperson agreed and added that this was the broader issue as provinces had refused to pass budgets in the past. This did not affect onely legislatures, but also the greater province and the communities in that province. He supported Mr Sogoni's correction.

Mr Z Kolweni (ANC; North-West) referred to the timelines specified in the presentation and asked if these details were deliberately left out of the Memorandum on the Objects of the Bill.

Adv Jenkins responded that he had not meant to hide the timelines and that they were critical. The Memorandum was indeed very short and he would advise the Committee to consider this.
 
The Chairperson concluded that the Committee would defer the consideration of the Money Bills Amendment Procedure and Related Matters Bill until the resumption of Parliament in 2009. The other issues that were raised were the danger of passing legislation piecemeal and not considering the links between related legislation and the references in the Bill to the current financial year and the following two years, under the Medium Term Expenditure Framework (MTEF)

The Chairperson then invited the People's Budget Campaign to present their submission on the Bill.

People's Budget Campaign (PBC) submission
Mr Mfanafuthi Tsela, Research Co-ordinator: People's Budget Campaign, reported that while some of their concerns had been addressed in the revised Bill, other concerns raised in their initial submission on the draft Bill had not been addressed. Under the heading of adopting the fiscal framework and revenue proposals, the PBC highlighted the use of the word "balance" in relation to the Budget in Clause 8(5)(a). Their concern was that this created the danger of constraining the most efficient use of the budget by not allowing for a deficit and this was not in keeping with South Africa's developmental objectives. Clause 8(5)(c) required Parliament to “ensure that the cost of recurrent spending is not deferred to future generations”. This clause could severely constrain Parliament’s ability to alter the budget. He stated that the PBC believed that the Bill should provide for flexibility when amending the Fiscal Framework to enable government to respond in cases of economic shocks. Other issues raised were those related to time-frames and the limited time for public participation in the process. The passing of the Revenue Bill was highlighted in relation to Clause 11(3)(e). The PBC considered it preferable to include distribution decisions as part of the considerations.

Mr Tsela concluded that, on the whole, the concerns were linked to the potential for the Bill to unduly constrain Parliament in fulfilling its constitutional mandate, as well as its failure to provide adequately for meaningful public consultation.

Discussion
Mr Sogoni stated that the choice of words in the submission were of concern to him - words like neo-liberalism. He asked if the PBC thought that the developmental agenda of South Africa was best served if the country was to run on debt. Would one then have to be dependent on aid like Zanzibar where the country was so indebted that the people providing the aid also ran the government? The developing world was unable to have a strong voice in the World Trade Organisation due to the fact that they were running budget deficits and lived on aid. Given the effect of the global economic crisis, he agreed with the current budgetary system in South Africa. It had been policy that South Africa should run a budget surplus. Where would South Africa be now if the National Treasury had not done so? He asked if the PBC thought that South Africa would be able to retain their independence if they had a deficit and had to use foreign aid.

Mr Sogoni commented that the references to the limited timeframes for public participation were an ongoing theme and added that the MTBPS was not the final budget. People could submit suggestions to the National Treasury via "Tips for Trevor". He stressed that public participation should be seen as an ongoing process, not an event. He agreed that a lack of skills was a glaring issue, however, his big issue with the PBC submission was the suggestion that South Africa should have a bigger budget deficit.

Mr Robertson stated that the skills problem was worldwide. The balanced budget was a difficult issue as the cake was only so big. He agreed that they should not borrow and thus let someone else dictate.

Ms D Robinson (DA; Eastern Cape) responded that she could not agree more that a deficit was not the answer. She agreed that they needed better service delivery. The real problem was that spending was inefficient. She also agreed that lack of skills was a problem and they should be looking at a systematic improvement. The under-spending was a problem. They should look at how policy is carried out at the departmental level. Lack of money was not the problem.

Ms Mchunu indicated that the PBC had some good ideas about the balanced budget issue and perhaps they could look at how the Canada Labour Movement had succeeded in saving money. Referring to the proposal concerning borrowing, she stated that they to take note of the economic environment. Borrowing in this climate was not safe. One should look at what one has and it was perhaps better to start from small beginnings. Pertaining to the extension of timelines, they had to be proactive when planning for money.

The Chairperson reiterated that they would take this discussion forward in 2009. The PBC’s comments on the budget balance “perception” was a bit problematic. He wondered whose perception was being referred to. He noted that the PBC had provided no alternative proposal for the time-frames and indicated the budget was about certainty and engaging with the budget should not be an exercise in surprise.

He was of the opinion that the contingency reserves of the National Treasury spoke to the issue of flexibility.
On their suggested budget deficit, he noted his colleague’s mention of the debt trap where they had to face the twin problems of the percentage of debt servicing required and the accompanying interest rates. COSATU had recently argued for a lower interest rate and borrowing from the perspective of changes in the interest rate was a big issue. A recent development was that South Africa’s credit rating had gone down and this meant that borrowing would now be more expensive in the international market. Municipal under-spending was also a problem issue and before they venture into the matter raised by the PBC, they would have to deal with the basics. He added that the MTEF related exactly to this that kind of planning. The Chairperson indicated that he would like to see a beefed-up version of the PBC submission at the next meeting on the Bill.

Financial Management of Parliament Bill
Financial & Fiscal Commission (FFC) submission
Mr Bethuel Setai, FFC Chairperson, reported that while the FFC understood the rationale and intentions of the Bill, it remained unclear why the Financial Management of Parliament Bill was necessary. It was unclear why the review of the PMFA should not of necessity address issues pertaining to Parliament to ensure that there is completeness and consistency in the Public Finance Management system. He pointed out that Chapter 9 and Chapter 13 institutions, such as the FFC, were supposed to be independent yet were governed by the PFMA. It was unclear why they had not been dealt with in a similar manner to Parliament. Chapter 9 and Chapter 13 institution budgets were often under the direct control of the Executive.

He submitted that the separation of powers rationale for separate legislation was weak and set a precedent. The FFC’s general recommendation was that there were not sufficient reasons to justify the enactment of a separate piece of legislation outside the ambit of the PFMA to regulate the management of Parliament’s finances. They submitted that a "sphere of government" would include both executive and legislative arms. It should borne in mind that the PFMA was currently under review and this review should address issues pertaining to Parliament to ensure that there is completeness and consistency in the public finance management system.
 

The FFC noted specific concerns with Clause 5: Apportion of Financial Management Responsibilities, Clause 23: Dealing with Under and Over-expenditure, Clause 30: Asset Management Systems, Clause 35: Dealing with Transfers and Clause 36: Monitoring and Reporting. If a sufficient case for the Bill was made, the Commission made recommendations on these clauses (see document).

Discussion
Mr Robertson asked if these recommendations did not mean that money would be taken away from Parliament

The Chairperson clarified that the money became part of Parliament’s revenue. He was not of the opinion that this was fair. He added that Parliament should lead from the front.

Mr Sogoni referred to the comparison between Parliament and Chapter 9 and 13 institutions. He asked if these institutions enjoyed the same status as Parliament in the Constitution.

The Chairperson stated that he had been shown a letter from National Treasury. In the letter, the National Treasury remained of the opinion that Parliament did not need to surrender surplus voted funds for deposit into the National Revenue Fund (NRF). As to a specific exclusion in the PFMA, they were talking about under-spending. Surely that was not revenue. He was unclear as whether they were referring to under-spent funds or revenue. Whilst this was a matter for follow-up, for the National Treasury to clarify, he felt that the FFC point was adequate and that Parliament should lead by example.

The Committee then looked over the submissions on the Financial Management of Parliament Bill.

Office of the Auditor-General (A-G) submission
The Chairperson reported that the submission raised the issue of norms and standards for provincial legislatures in terms of the Bill. It was unclear how parity would be obtained on a provincial level. Executive authority was queried on the basis that it was unclear how joint accountability of the Speaker of the National Assembly and the Chairperson of the National Council of Provinces would be achieved. Comments were made about the general financial management functions of the Accounting Officer in Clause 7(c). Clause 23 on the treatment of unspent funds was highlighted as a big issue. Other points raised by the submission were on revenue management, regulations on support for members and political parties and supply chain management.

National Treasury submission
The Chairperson noted that there were many similarities with the FFC submission. The National Treasury concerns were that the Bill appeared to be founded on a misunderstanding of the PFMA in that the independence of the legislature was not compromised by common financial norms and standards. The Constitution required a single national Revenue Fund and an integrated treasury and that separate legislation could not sidestep the requirement for agreement between Presiding Officers and Minister of Finance over budget allocations.

Practical difficulties noted were the unnecessary duplication of the PFMA and that complications would arise over time as the PFMA was amended, national norms & standards would be subject to separate interpretations, implications for provinces were unclear and it set a problematic precedent for the other bodies of the state.

The Chair reviewed the alternative approach suggested by the National Treasury and their specific concerns with Clauses 16, 17, 18, 19, 28, 35, 43, 44, 46, 50 and 56. The National Treasury concluded that the Bill was subject to constitutional challenge as Chapter 13 of the Constitution envisaged a single treasury. Practical difficulties would arise in alignment with the PFMA. The fragmentation of the regulation of public finances set up an unfortunate precedent in respect of provinces and the judiciary. The determination of amounts to be appropriated for Parliament would remain a potential source of conflict and separate legislation would effectively exclude Parliament from the wider provisions of the PFMA, such as borrowing, public-private partnerships (PPPs), guarantees and public entity oversight.

Discussion
Mr Sogoni said that he was not sure that Adv Jenkins as a parliamentary legal advisor was the right person to answer the questions raised in the submissions as the issues went beyond his field of legal expertise. It was problematic that the people who made the submissions were not present to address the concerns fully.

The Chairperson responded that part of problem was that certain submissions, such as the submission by the Secretary of Parliament, were not being properly explained. The Secretary of Parliament needed to give his own input as he had stated that certain clauses should be deleted. These people must persuade the Committee of the matters that they saw as critical.

Adv Jenkins appreciated the protection from Mr Sogoni. On the legal matter, he stated that the idea of a separate bill was a policy matter and remained a political question. The Bill was not primarily informed by the principle of the separation of powers. The decision in 1999/2000 was that there was nothing wrong with making Parliament subject to a chapter in the PFMA. He noted that the PFMA did set out that the Speaker and the NCOP Chairperson would perform the regulatory function jointly that the Treasury would perform, so it would not infringe the separation of powers generally. This was a policy issue and must be answered at that level.

On the concern of the National Treasury on the constitutionality of the Bill, he volunteered a legal opinion (by Senior Counsel, Prof David Unterhalter). Parliament and the National Treasury had agreed that senior counsel formulate a legal opinion. This opinion, which could be distributed to the Committee, found that section 216 of the Constitution should be read in conjunction with the provisions for provincial and national legislatures to determine their own internal arrangements.

Mr Robertson agreed with Mr Sogoni. He also referred to the three critical concerns raised by the Secretary of Parliament.

Mr Sogoni noted that they needed direction on this. Adv Jenkins could answer certain questions but they were still talking principles and had not reached the stage of a clause by clause consideration. He had also seen things he thought should not be included. He did not think they could proceed unless these people were there to discuss their submissions. He found it difficult to continue unless all were there to respond.

Mr Robertson stated that the Committee must rule. Although they appreciated Adv Jenkins' presence, he proposed that they do the same as had been done with the Money Bills Amendment Procedure and Related Matters Bill. They wait until everyone was present for them to get a clearer picture.

The Chairperson said that this was making their work difficult. The members needed to go and brief their provinces and he wondered how they could do that. That was what they were supposed to be doing that day, to be followed by negotiating mandates and final mandates in the following week. He noted that there were very fundamental issues in the Secretary of Parliament submission. Although Adv Jenkins was a parliamentary lawyer and accountable to the Secretary of Parliament, he did not have the mandate to speak on this submission.

Ms Robinson asked how the members could brief provinces until they sorted out all these issues. They did not want to rubber stamp the Bill but needed to speak to the particular issues of provinces.

Ms Mchunu suggested that they needed to meet and clarify matters first so that there was clarity when briefing the provinces. On the policy issues raised, she hoped that the legal opinion also made reference to Chapter 9 and 13 institutions. What would the response be if they want this kind of legislation, taking into account issues of consistency.

Mr Sogoni agreed that all concerned should be present to brief members on what to say to provinces. This was a fundamental Bill. They should not rush and pass a Bill they could not be proud of. The legislatures have been adjourned and there were many other difficulties. He agreed that they should return in 2009.

The Chairperson concluded that they could not proceed as there were very serious fundamental issues and the Committee could not ignore these.

The meeting was adjourned.