Media Statement: Adjusted Budget Expresses Wrong Priorities

Posted November 28, 2020

The adjustments process provides an opportunity halfway through a financial year to make changes to the budget in response to events that have affected planned public spending. The C19 People’s Coalition made a submission to Parliament’s Appropriations Committee on the proposed adjustments to the budget and appeared in Parliament on 27 November to present the submission.

In the submission, C19 People’s Coalition highlights that it is proposed that provinces and municipalities will have a massive R17 billion (R17,020,537,000) lopped out of their budget allocations. Where the national sphere largely has a policy and monitoring role, the provincial and local spheres are involved in frontline service delivery. We are therefore seriously concerned about what we see as taking a knife to the provincial government and local government budget allocations.

Once again, State Owned Entities have cut to the front of the queue and various departments were called on to surrender budget allocation that is actually needed in those spending areas. The draft adjustments appropriations bill proposes that South African Airways receive a R10.5 billion rand bail out to fund its business rescue plan and to pay its debt and interest on debt. This is over and above the R16.5 billion that, in February of this year, has already been promised to SAA for the next three years to repay its debt. The impacts of the state capture at SAA are being visited on all the budget votes that had their allocations adjusted. These adjustments will have deleterious implications for people who rely on public services and the social wage.

At the same time as the allocations to the National Health Insurance grant, the HIV, TB, malaria and community outreach grant: HIV and AIDS component and Health Facility Revitalisation grant were among the allocations that took a hit due to State Owned Entity asks, the system of medical aid tax credits has continued unabated. This is an annual subsidy of more than R20 billion to the middle classes.

Tax revenue is expected to be R313 billion less than the February 2020 forecast. That is a serious revenue gap. It is not only a direct consequence of the sharp economic contraction, but also a result of increasing illicit financial flows. SARS Commissioner Edward Kieswetter has called attention to concerning levels of offshore transfers of South African funds in the form of base erosion and profit shifting together with increased trade misinvoicing. Yet the adjusted budget indicates that SARS will receive R238 million less in its budget allocation this year.

There are 800 critical vacancies in SARS. If these vacancies are not filled with competent and highly skilled individuals, the capacity of the state to aggressively reduce illicit financial flows and grow the tax base will be further weakened. Addressing illicit financial flows by reversing budget cuts to SARS and significantly increasing its resources. Allocating sufficient budget to strengthen the country’s tax administration is an investment in the long-term financial stability of the country. It is a non-negotiable component of prudent fiscal policy.

C19 People’s Coalition is disturbed that defence spending has increased by R1.8 billion from R52.4 billion to R54.2 billion. This prioritisation of defence spending has occurred at the same time as the proposed budget deprioritises key social programmes in education, science and technology, health, land reform, public works and infrastructure. C19 People’s Coalition would like to see government deprioritising spending on defence in order to free up funds for deepening social policy and strengthening public administration.

The institutions required for making informed decisions about sound public administration, such as Statistics South Africa, have seen dramatic budget cuts. And in some cases, such as Basic Education, decreased spending on the wage bill has been accompanied by plans to increase spending on consultants and outsourced services.

The proposed budget cuts are therefore not solely a function of reduced national revenue. They also reflect a political programme of investing in guns over schools and subsidising the middle class at the expense of rural and working class families. This political programme prioritises outsourced services over the development of dedicated and professionalised civil servants, and weakens the institutions required to improve revenue collection and public administration.

C19 People’s Coalition made the following recommendations:

Address illicit financial flows by reversing budget cuts to SARS and significantly increasing its resources. Allocating sufficient budget to strengthen the country’s tax administration is an investment in the long-term financial stability of the country.
Significantly reduce the use of consultants and outsourced services while consolidating and investing in a dedicated professional civil service.
Deprioritise spending on defence in order to free up funds for deepening social policy and strengthening public administration.
Reverse cuts to the education cluster and reclassify Basic Education as a frontline service.
Reverse cuts to healthcare, remove medical aid tax credits, and prioritise resources for implementing the NHI.
Provide adequate budgets for Community Healthcare Worker compensation as legally agreed upon in 2016. Universal Healthcare can only be successful if CHWs receive adequate training, infection prevention, protective equipment and remuneration to provide frontline healthcare.
Members of Parliament must ask suitably rigorous questions about the cost implications of large energy projects.
Recognize that OR Tambo District Municipality has been hit by a tornado and nearly 400 people have been left homeless. Disaster relief measures in line with the attendant budgetary processes to enable these need to be effected.

C19 People’s Coalition would like to see government putting people first.

ENDS

C19 People’s Coalition is committed to ensuring that the South African response to the COVID-19 virus is effective, just, equitable, and meets the needs of the most marginal in our unequal country. We are an alliance of social movements, trade unions, community organisations and NGOs united by the Programme of Action we’ve all endorsed. 379 organisations have endorsed the Coalition. The list of organisations that have endorsed the Programme of Action is available here. Read more about the Coalition on our website.