Johannesburg - The deal struck for a 0 percent university fee increase this week can probably be covered by a sector education and training authorities (Setas) surplus – of more than R5bn – but any move towards free tertiary education would have to come at the expense of other government programmes or a tax hike.
That was the word from Treasury officials who briefed MPs after Finance Minister Nhlanhla Nene delivered his medium-term budget policy statement last Wednesday while #FeesMustFall protesters clashed with police in the parliamentary precinct.
In normal circumstances, Nene would have been able to draw on the contingency reserve – funds to deal with unforeseen eventualities. But the R5bn Nene had in the kitty has been swallowed up by the public sector wage increase. Although he had pencilled in reserves of R15bn and R45bn for the following two years, these have been slashed to R2.5bn and R9bn.
The minister made it clear that finances were stretched, resulting in a slippage in debt consolidation targets. This has led to concerns that Nene may struggle to meet even the revised time frames to stabilise debt, especially if economic growth disappoints once again.
The free registration next year, no financial exclusion, the clearing of financial debt short-term problem is how to fund the deficit created by the zero percent increase in fees, bearing in mind that university expenses will have risen.
Cutting costs where possible would help. But the figures are not that daunting in the context of projected total government expenditure for 2016/17 of R1.3 trillion.
Business Report columnist Pierre Heistein has calculated that a 0 percent increase would leave Wits University short of about R136m, so the requirement for all the universities is unlikely to run deep into the billions.
Briefing MPs on Thursday, Treasury officials said funds from the national skills levy were being left unspent by Setas, and stood at about R5bn in February.
A task team had been set up even before the #FeesMustFall protests to seek ways of unblocking this “imbalance” in the system. It would require a change to the Skills Development Levies Act, which earmarks 80 percent of skills levy funding for the Setas.
Much harder to accommodate would be a permanent free tertiary education dispensation. This would require a significant shuffling of budget allocations, at the cost of other programmes, or an increase in revenue collection.
This would probably take the form of a tax increase rather than a hike in the skills levy, for example, as the Treasury has an aversion to earmarked taxes because of the imbalances they can create.
The Treasury has instituted a new fiscal “rule of thumb” that limits growth in government spending to the long-term trend for gross domestic product (GDP) growth. This is intended to keep it on an even keel and smooth out the peaks and troughs of the economic cycle.
Head of the Treasury’s budget office, Michael Sacks, said if the principle was applied correctly, government expenditure as a share of GDP would remain stable.
This would imply an increase in the higher education allocation would have to come at the cost of other programmes or, as Nene told MPs, some priorities might have to be placed on the backburner.
Sacks said the fiscal guide would be flexible enough to accommodate policies prioritised in the National Development Plan, which included the expansion of access to tertiary education – not the same thing as free tertiary education – and a national health insurance.
The most likely source of a permanent increase in revenue would be a hike in VAT, considered by the Davis Tax Committee to be the most efficient form of tax, although it would meet with stiff resistance from labour and other sectors.
New taxes are announced only in the Budget in February and Nene has not ruled out the possibility of a VAT increase. But he did sound a cautious note on tax hikes in the face of the weak economy.
“If we do not achieve growth, revenue will not increase,” he said. “If revenue does not increase, expenditure cannot be expanded.”
That leaves the National Development Plan as the state’s long-term strategy to meet the growing demands of the society, with Nene saying the country needed to unite behind its rapid implementation in order to accelerate growth.
If the #FeesMustFall movement is anything to go by, it has become a race against time.
The Sunday Independent
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