Nene: It’s not austerity, but...
Cape Town - It’s not austerity but it’s yet another round of cuts in government spending and hints of big tax increases next year.
This afternoon’s mid-term Budget statement, the first by Finance Minister Nhlanhla Nene, makes it clear that the government must cut all unnecessary spending in order to deal with the ongoing problem of state indebtedness and a lower than expected tax revenue.
“Fiscal consolidation can no longer be postponed,” he said.
It’s already started. This year’s spending is expected to come in at R6bn less than planned due to projected under-spending and taking the unallocated reserve into account.
The proposals include:
* A lower spending ceiling, with some running costs capped at this year’s levels for the next two years;
* Reduced government consumption spending; and Increases in revenue. Posts that have been vacant for some time will be frozen, funding for state-owned entities will be reduced, advertising budgets are cut, and consultants are capped.
The reduced government consumption spending means capping pay increases for public servants at 6.6 percent a year - enough to deal with inflation but not offer any further increase. The increases in revenue for government means increasing taxes.
Nene said he needs another R15bn a year.
No details of the tax increases were available, as these will be provided for only in next year’s Budget.
Nene emphasised that the poor would be protected with social delivery programmes prioritised, that infrastructure spending would remain intact, and that public employment programmes would continue.
He said it was not austerity, but rather cutting of unnecessary expenditure to focus on delivery priorities.
Nene explained that forecasts for economic growth were down from the 2.7 percent expected to 1.4 percent, although the National Treasury believes this will recover to 3 percent in 2017.
He said government’s debt was continuing to rise and tax revenue was lower than expected, so the focus was on getting the nation’s finances back on balance.
Nene said education and health would remain top priorities.
Extra money in the adjusted Budget tabled today included: R620 million for digital broadcast migration;
* R350m to International Relations and Cooperation to compensate for the depreciation of the rand;
* R157m to Cooperative Governance for infrastructure damaged by disasters;
* R35m for emergency water and sanitation interventions; and
* R33m for Ebola prevention including support to other countries.