The South African Council of Churches welcomes the moderately expansionary nature of the 2002/2003 national budget unveiled by the Minister of Finance this week. Real consolidated expenditure on services (excluding interest payments on the debt) will rise by 5.4% in the coming year, reflecting a slight relaxation of the extremely tight fiscal control of the late 1990s. However, we believe that even more can and should be done to increase the total amount available to the state for development and investment. Furthermore, we are disappointed that the budget does not envision a substantial shift of resources into anti-poverty and developmental measures, as the Medium Term Budget Policy Statement and the President's address to the opening of Parliament seemed to suggest it would. Once again, the government has failed to grasp the nettle of poverty by announcing bold new initiatives to close the gap between rich and poor and to improve substantially the lives of the poor majority of South Africans.

Social security

We welcome the increase in the amount of social grants and the advancement of the date of introduction of the increase from 1 July to 1 April. However, we are disappointed both with the modest size of the increases. The increase in the old age pension by R50 from R570 to R620 represents a real growth of only 2,3%. This is insufficient, following on several years where pensions failed to keep pace with inflation. Similarly, the R20 rise in the Child Support Grant to R130 means that the CSG has grown, on average, by 5,4% per year in its five-year existence. This, too, is below the rate of inflation.. In fact, even if the government reaches its target of registering a further 1,2 million eligible children for the CSG, spending on the old age pension and child support grant combined will increase by less than R2 billion in the coming financial year. Set against a tax break of R15 billion for comparatively affluent South Africans, this seems inadequate. Once again, the government is putting more money into the pockets of the rich than the poor.

We are even more dismayed that the government has given no signal that it intends to extend the social security safety net. Currently, 13,8 million South Africans living in poverty have no direct access to social security grants. Given the growing challenges of HIV/AIDS and chronic unemployment, it is imperative that we ensure that all of our people have access to sufficient resources to live with dignity. Whilst we recognise that the Cabinet is still considering the report of the Committee of Inquiry into Comprehensive Social Security, we would have hoped to see the Medium Term Expenditure Framework anticipating a substantial increase in the welfare budget to accommodate the phasing-in of a Basic Income Grant. Instead, after a 13% real increase in 2002/2003 (which is due in part to the shift of National Development Agency funds to this vote), the welfare budget is expected to grow by only 4,5% in 2003/2004 - a real decline.

Land and rural development

The December 2001 SACC/National Land Committee Land Indaba concluded that the budget allocations for land reform were inadequate. It also found that redistribution of land was being hampered by a lack of capacity within the Department of Land Affairs which resulted in underspending. As a result, we would have hoped to see more money allocated to land affairs to finance accelerated acquisition of land, capacitation of staff and provision of infrastructure to support sustainable use and development of redistributed land. We are therefore alarmed to find that the land affairs budget will decrease next year by 1% in nominal terms, or close to 8% in real terms. Over the next three years, it increases at an average nominal rate of 5,5%, or less than the expected rate of inflation. This does not seem to suggest a renewed commitment to land reform.

Prevention and Treatment of HIV/AIDS

The fivefold increase in the budget for HIV/AIDS and TB prevention and treatment over the next three years is encouraging. We are especially pleased to see more money being devoted to the support of home-based care, the promotion of voluntary testing and the roll out of the mother-to-child transmission prevention programme. However, we believe that the amounts involved remain completely inadequate to deal with the magnitude of the challenge facing South Africa. We call for the provision, where indicated, of free anti-retroviral drugs through the public health system for people living with HIV, including the provision of Nevirapine to pregnant women and newborn children.

Taxation

Once again, the Minister of Finance has announced a major reduction in personal income tax, emphasising that the bulk of the benefits of this tax break will accrue to those earning between R27 000 and R150 000 per year. However, this ignores the fact that the vast majority of South Africans earn so little that they are not eligible for income tax - and hence realise no benefit from income tax cuts. Indeed, insofar as these cuts diminish the total amount available to the government for social spending and delivery, they are actually detrimental to the interests of the poor. Even those taxpayers who benefit least - those earning between R27 000 and R35 000 a year - will see R720 more next year, or R100 more than the additional support given to pensioners.

If the Minister of Finance really wanted to use tax cuts as an anti-poverty measure, he would have addressed the regressive impact of VAT by increasing the number of zero-rated basic commodities. Such a move should be coupled with legislation to prevent profiteering by merchants at the expense of the poor.

Military spending

The cost of the strategic defence procurement package has risen by R9 billion over the past year to an estimated R52,7 billion. This year, we will spend more money on defence than on police. The cost of the arms deal is clearly spiralling out of control. Once again, we urge the government to decline immediately the options associated with the arms package. These were originally valued at R6,6 billion in 1999, but are now likely to cost close to twice this amount.