-----Original Message-----
From: [email protected] On
Behalf Of Patrick Craven
Sent: 20 February 2002 16:28
To: [email protected]
Subject: People's budget response

----------------------------------------

Press statement issued by the Congress of South African Trade Unions.

To receive future press statements go to
http://gate.cosatu.org.za/mailman/listinfo/press

----------------------------------------

PEOPLE’S BUDGET:
IMMEDIATE RESPONSE TO BUDGET
SPEECH

- SACC, SANGOCO, COSATU -

The budget announced by the Minster of Finance this
afternoon appears to be moderately expansionary;
however, it comes with a very low deficit, and tax cuts
biased to middle to upper income earners. The
expenditure growth falls short of what is required to
address backlogs and put South Africa on a new
developmental growth path.

The budget deficit fell to 1.4% of GDP in 2001 – the
lowest in South Africa’s recent history – and between
1.7% and 2% over the forthcoming MTEF period. The
People’s Budget views this as completely inappropriate
for South Africa, given the massive social and
infrastructural backlogs we face. This year’s deficit
target is extremely low even in comparison with
developed countries facing fewer such challenges – for
example, it is reportedly about half of Germany’s budget
deficit: GDP ratio for this year. This emphasis on fiscal
austerity and the ruthless cutting of the budget deficit,
even way below previously targeted levels, deprives
South Africa of much-needed resources which could be
channelled to delivery. The People’s Budget believes
that a deficit: GDP ratio of up to 4%, if spent
appropriately, would be more conducive to growth and
development.

EXPENDITURE

Overall real expenditure growth is 4.1%, meaning
around 2% in per capita terms (after population growth).
While this growth is welcome, it is still inadequate in the
face of the massive backlogs and recovering the lost
ground of the extreme fiscal austerity of the late 1990’s.

While the Minister paid lip service in his speech to job
creation, this was not matched in the budget by any
major new interventions which would have any significant
new impact on the unemployment crisis.

In terms of social services, while noting the increases in
social grants above CPIX this year, we would have liked
to hear some signals from the Minister around the
introduction of a comprehensive social security system
for South Africa. MTEF projections will need to be
revised upwards to fund this, pending the conclusion of
the process around the report of the Commission of
Enquiry. In particular, the People’s Budget has
proposed the introduction of a Basic Income Grant for all
South Africans, as the most effective social security
measure in alleviating poverty.

We are very concerned that the education allocation is
lagging behind and will be inadequate to meet South
Africa’s skills needs. The health expenditure does not
appear sufficient to fund key health initiatives which the
People’s Budget has proposed, such as the National
Health Insurance System and a comprehensive
HIV/AIDS strategy.

The water budget appears far too low. We are also
concerned about the cuts in the land budget, given the
massive demand for redistribution of land.

We would have hoped to see an announcement that
government will decline further options on the arms deal.
This would have diverted unnecessary military
expenditure into areas where it is badly needed.
Instead, the costs continue to rise, going up by 14% this
year. We note that this year, government will be
spending more on the military than on police.

We welcome the commitment to job creation in sections
of the public service such as health and police. We also
welcome the allocation of R3.3b from the contingency
fund to meet shortfalls in the public service wage bill.

REVENUE

The People’s Budget notes that revenue projections
have once again been overshot. We welcome the
success in raising more tax revenues. We believe that
these resources should be channelled into social
spending and infrastructure, where huge backlogs still
need to be addressed. We are concerned that the
consistent underestimating of revenue year after year
means that revenue end up being channelled into deficit
reduction rather than being spent where it is needed.

In terms of income tax cuts, while we welcome tax relief
for lower-middle income earners, we are concerned that
the wealthy have once again benefited from undeserved
tax cuts. This deprives the fiscus of resources for
national economic development. We are disappointed
that the bottom marginal income tax rate is unchanged
at 18%, whereas South Africa’s top income earners will
benefit from a tax cut from 42% down to 40%. We do,
however, welcome the raising of the income tax
threshold from R23 000 to R27 000.

Given that income tax cuts only benefit about a fifth of the
population, we would have wanted to see more broadly
based tax relief through the VAT system, given that this
is a highly regressive tax. In particular, we have called
for the extension of VAT zero-rating to all basic
foodstuffs and other goods predominantly consumed by
the poor, and the introduction of a higher VAT rate on
luxury goods.

The People’s Budget is very concerned that privatisation
revenues are again being factored in to the budget.
R12.2b is projected for this year, to be channelled into
debt reduction rather than infrastructure development.
This will place undue pressure to accelerate the
privatisation process to meet fiscal aims, rather than
looking at a more appropriate and developmental state
asset restructuring strategy.

We will be studying the budget in more detail and
making further comments in due course.

Patrick Craven and Moloto Mothapo
Acting COSATU Spokespersons
011 339 4911 0r 082 821 7456

[email protected]
082-821-7456
339-4911

*********************************************************

Visit the COSATU web site at http://www.cosatu.org.za/press/latest.html for
copies of our most recent press statements.

Get free e-mail for union members. Visit www.union.org.za and sign up now!
It's free!

COSATU takes steps to ensure that any attachments are free from
viruses. You should, however, carry out your own virus check before
opening any attachment. COSATU accepts no liability for loss or
damage caused by software viruses.

***********************************************************

----------------------------------------

Contact 082-821-7456 Patrick Craven or Moloto Mothapo for further comment.

Visit the COSATU web site at http://www.cosatu.org.za/press/latest.html for
copies of our most recent press statements. For the full archive go to:
http://www.cosatu.org.za/press/archive.html.

Get free e-mail for union members. Visit http://www.union.org.za and sign
up now! It's free!

COSATU takes steps to ensure that any attachments are free from viruses.
You should, however, carry out your own virus check before opening any
attachment. COSATU accepts no liability for loss or damage caused by
software viruses.

----------------------------------------

Press mailing list
[email protected]
http://gate.cosatu.org.za/mailman/listinfo/press