The MTBPS primary aim is to state the policy direction that government has taken. However, as part of the MTBPS there are adjustments made to budgets which provide us with an indication of how government uses these adjustments to support its objectives. Here is the run down of the major adjustments to the 2011/12 budget.
Government will spend about 9 billion less than anticipated
The National Treasury notes that
Taking into account funding set aside in the contingency reserve at the time of the 2011 Budget, projected underspending, savings declared by departments and the adjusted state debt cost estimate, the revised estimate of total expenditure in 2011/12 is R888.0 billion. In February 2011 at the tabling of the budget, provision was made for expenditure of R888.9 billion for 2011/12. (Page 34, MTBPS, 2012)
Under spending by government departments has largely come under control, but with local government’s still struggling to spend funds on infrastructure and other projects. Spending performance by government has however improved over the years, but this remains an area that needs to be urgently tackled. In an environment of low economic growth, there could have been a range of ways to spend all or part of the R 9 billion budgeted. For instance, additional funding could have been provided to the Jobs Creation Trust or to a number of other programmes.
Salary negotiations and the budget
Amongst the adjustments undertaken, are the following related to the alignment of collective bargaining and the budget process. These are:
- R1.2 billion to cover the costs of higher-than-expected salary adjustments in national departments
- R3.2 billion added to the provincial equitable share for higher-than-anticipated salary costs under the wage settlement
- R49.3 million to the FET colleges grant to cover the cost of wage agreements
Just under R 5 billion is thus committed to meet salary adjustments. There are two ways different ways to view this. On the one hand, the National Treasury has deliberately underestimated envisaged salary costs as part of a bargaining strategy. On the other hand, bargaining outcomes are so high that the National Treasury is unable to accurately budget for this. Whatever one’s take on the underlying reasons for the discrepancies, there remains an important challenge. The challenge is to align the budget with collective bargaining, primarily because it will permit better forecasting, and in so doing ensure that every additional source of revenue is spent in the right area. More to the point, the National Treasury estimates provide for projected increases that are most unlikely to be reached through collective bargaining.
The costs that could be avoided
There are some areas that are grudge payments – they simply have to be made – but potentially could have been avoided. Two areas arise.
- Cancellation of an aircraft contract. The National Treasury and Department of Defence had in previous years cancelled a contract to procure a A400M aircraft. The penalties amount to R 16.3 million which will be paid to Denel Saab Aerostructures. The cancellation saved the taxpayer significant sums of money, but the decision to sign the contract in the first place was the wrong decision, and way in access of the needs of defence force.
- Gratuity to local councillors. R266.3 million has been allocated for a once-off gratuity for non-returning councillors following the 2011 municipal elections. This is due to the absence of a pension system for councillors. Changes to employment conditions for councillors should be changed to provide a regular, predictable and fair contribution to a pension fund.
The ominous support to the National Nuclear Regulator
R21.2 million has been allocated to help the National Nuclear Regulator meet its commitments under the Integrated Resource Plan and to retain experts. In the context of Minister Peters confirming a planned tender worth R 1 trillion the allocation is significant. It is an indication that government is attempting to have in place regulatory capacity to manage the construction of nuclear power plants. The decision to build nuclear power plants must still be subjected to public scrutiny, and will hopefully be overturned.
In several areas, the National Treasury has made the correct decisions including by allocating additional resources for acid mine drainage, water supply and repair to infrastructure. These are areas that are supported.
The full list of amendments are listed below:
The Adjustments Appropriation Bill and the Division of Revenue Amendment Bill deal with necessary
amendments in the current financial year. The bills propose the following changes:
· R3.7 billion in rollovers arising from commitments related to unspent balances in 2010/11
· R1.2 billion to cover the costs of higher-than-expected salary adjustments in national departments
· R185.8 million for natural disasters and the outbreak of animal diseases
· R40.6 million to cover a portion of the costs incurred by the Independent Electoral Commission to extend
· the casting of special votes in the local government elections
· R116.3 million for contractual penalties incurred by Denel Saab Aerostructures related to the A400M
· aircraft contracts
· R81.4 million to deploy resources for joint anti-piracy operations in the Mozambican Channel
· R21.2 million to help the National Nuclear Regulator meet its commitments under the Integrated
· Resource Plan and to retain experts
· R208 million for the management of acid mine drainage in the Witwatersrand area
· R838.1 million refunded to departments for monies paid directly into the National Revenue Fund from
· department-specific activities
· R266.3 million for a once-off gratuity for non-returning councillors following the 2011 municipal elections.
Revised provincial allocations
· R3.2 billion added to the provincial equitable share for higher-than-anticipated salary costs under the wage settlement
· R49.3 million to the FET colleges grant to cover the cost of wage agreements
· R752 million to various provincial conditional grants, including grants for the repair of infrastructure
· damaged by floods in December 2010 and January 2011.
Revised local government allocations
· R3.2 million rolled over on the water services operating subsidy grant
· R28.5 million to the indirect water services operating subsidy grant
· R11 million declared as savings from the local government financial management grant.