The People’s Budget Coalition, which brings together COSATU, the SACC and SANGOCO, welcomes the modestly expansionary stance of the Medium-Term Budget Policy announced today, but feels it is still inadequate to meet the broader goals of alleviating poverty, creating employment and ensuring economic growth. It is certainly an improvement on the budgets of recent years, and goes much further toward meeting social and economic needs. Still, in real terms, per-person spending has not yet caught up with 1996 levels.

We are pleased to note that the government has responded to public pressure for a more expansionary and generous fiscal policy. The People’s Budget Coalition presented its ideas on the budget to the public at the time of the annual buget this year. We regret, however, that government has never seen fit to engage formally with this important initiative, which is the most broad-based public work on the budget.

The new fiscal policy modifies the GEAR’s unnecessarily strict restraints on taxes and government borrowing, and by extension on government spending. Together with lower interest payments, primarily as a result of lower interest rates, this has permitted a welcome increase in spending on social services and infrastructure.

These shifts permit substantial real per capita growth in spending on health and welfare. We welcome the commitment to protecting the real value of welfare grants in future, after several years of real cuts. We do note, however, that the health and welfare budgets will not be sufficient to support the introduction of a National Health Insurance, Basic Income Grant, or of other elements of a comprehensive social security system. The "integrated HIV/AIDS strategy", and its funding, is inadequate.

Education spending overall is expected to fall slightly on a per capita basis. This is of concern given the widespread acknowledgement of the need for increased investment in education and skills development.

In terms of economic services, we endorse the commitment to increased infrastructure spending and the real growth in the agriculture and transport/communication functions. However, we are very worried that the water budget is being cut in real terms, with no reason given. Water is an absolute basic need and is critical for health as well as for any type of productive activity.

Government’s commitment to the implementation of free lifeline services, funded through progressive block tariffs and national funding, is yet to be implemented on a significant scale. The Medium Term Budget Policy Statement (MTBPS) intends to deliver these only "in the medium term." We are concerned that adequate funding does not seem to have been set aside.

On the revenue side, despite the welcome, although modest, increase in the revenue:GDP ratio, the proposed level still well below South Africa’s taxable capacity. This unnecessarily limits the resources available for spending. We are also unclear how the government’s pledge to weight tax cuts to middle and lower income households is to be reconciled with its policy of closing the gap between the top individual marginal tax rate (42%) and the corporate tax rate (30%).

We reiterate our concern that privatisation revenues are being built into the budget’s revenue expectations, as this can cause short-sighted decisions on restructuring state assets.

The People’s Budget Campaign will be making a more detailed submission to the public hearings on the MTBPS before the new Joint Committee on the Budget in Parliament next week.