The People's Budget Coalition - comprised of COSATU, the South African Council of Churches (SACC) and the South African NGO Coalition (SANGOCO) - is pleased to release its third annual People's Budget.

In response to government's emphasis on the need for public comment to take account of the MTEF cycle, these proposals relate to the fiscal year 2004/05.

The People's Budget puts forward a developmental framework for government spending. It starts with the recognition that mass poverty and extreme economic inequalities form the major obstacle to economic growth, since they both stifle domestic demand and reduce productivity. By extension, an improved and stronger social wage is critical for sustainable economic and social development.

Specifically, the People's Budget calls for:

• Massively expanded investment in employment creation. This requires active and co-ordinated state intervention to promote employment in key areas which are currently neglected, including production of basic necessities for the poor, provision of public services, and development of the services and tertiary sector, manufacturing based on our agriculture and mining, and programmes to assist micro enterprise, not only formal SMME's. We need a strategy to ensure job creation, including programmes to build up the productive assets of the poor, measures to promote investment in employment creating sectors, accelerated programmes for skills development, and massively expanded community services and public works.
• Substantial improvements in the system of social grants. In this context, the People's Budget has called for introduction of a Basic Income Grant. The government's current proposals for extending the Child Support Grant (CSG) fall short of the proposals of the Committee on Comprehensive Social Security. In particular, even with the proposed phasing in of the CSG to 14 years olds by 2006, they continue to leave the bulk of the poor - those between the ages of 14 and 60 - without access to the appropriate social assistance promised by the Constitution. Furthermore, the continued use of a means test to achieve targeting will inhibit access to social security for those most in need.
• Establishment of a National Health Insurance system, which would provide a single, state-administered source of payments for health-care providers. The government's proposals for a Social Health Insurance programme will, instead, just drive up the cost of health care for the working poor to unacceptable levels.
• A substantial improvement in spending for HIV/AIDS, including provision of anti-retroviral treatment in the public sector, greatly expanded programmes for prevention, and enhanced support for people with HIV.
• Reform of user charges for basic services such as water, electricity and education, to ensure that they have a progressive impact; and improved integration of housing provision with economic and social development strategies.
• Increased funding to accelerate land redistribution and agrarian reform.

These proposals of the Peoples Budget Coalition are mainly targeted at the 2004/5 budget, since there is no possibility to influence this year's budget. However the Coalition will judge the 2003 budget by the extent to which it makes decisive steps in promoting realisation of these key objectives.

These programmes will require a major increase in government spending and, by extension, some relaxation in current targets for taxation and borrowing relative to GDP. Research for the People's Budget demonstrates that, if targeted to the proposed new programmes, the additional resources mobilised would substantially improve economic growth. That, in turn, would ultimately lead to a reduction in the ratio of government spending, borrowing and taxes to the GDP, as well as more rapid job creation and a more dramatic improvement in overall living standards.

In addition, funds could be released for the social wage through more efficient funding of the Government Employees Pension Fund and reduced military spending. We commend the morally courageous decision by the Brazilian government to cancel key areas of military expenditure to address issues of poverty in that country.

The Coalition has also proposed that the burden of taxation needs to be reduced on those who are living in poverty. We reiterate our call for the restructuring of the VAT system, as the best method of cutting taxes for the poor. In particular, we propose the introduction of multiple rates for VAT. Currently, the VAT takes a higher percentage of income from the poor than the rich. The People's Budget calls for reversal of this situation, with higher VAT on luxuries and an expansion in zero-rating on basic necessities. That is the system most countries have adopted worldwide.

Finally the Constitution (at Section 77) requires legislation to empower Parliament to amend money bills, including the budget. The ANC Election Manifesto also contained a commitment to ensure that elected representatives in national, provincial and local spheres have the power to shape budgets. However, Parliament still cannot amend the budget, but only vote it up or down. Limiting opportunities for Parliamentary comment also reduces the role of civil society, which would normally seek to influence the process principally through interactions with Parliament. We therefore reiterate the call we have made since 1997 for the necessary legislation to be introduced as a matter of urgency.

With the People's Budget, the People's Budget Coalition is releasing an educational booklet to assist groups and individuals to engage with the budget. Over the coming year, the organisations in the Coalition will be using the booklet for broad training campaigns.

The People's Budget Coalition is one of the few mass-based structures to engage seriously with the budget. As such, we expect the government to respond with equal seriousness to our proposals. We have invited representatives of the Executive and Parliamentary structures primarily responsible for oversight of the budgeting process to be present today to receive formally our proposals. We look forward to a fruitful interaction with these structures over the coming year, leading to a greater national consensus around the spending and financing strategies articulated in the 2004/05 budget.

For more information:
Mark Sweet (NEHAWU) - 083 600 7092 or 021 462 5310/1
Doug Tilton (SACC) - 021 423 4261

Read the People's Budget