Solly Phetoe

Workers cannot afford for Parliament not to pass a progressive Budget. Whilst there have been previous minor delays in the formal passing of budgetary legislation, South Africa has never ventured into the current impasse where society and government are not sure when and in what form the Budget will be passed. The National Assembly is scheduled to vote on the Fiscal Framework and Revenue Proposals, the key foundations for the Budget, on April 2 with the remaining legislative components to be adopted afterwards.

The law provides various provisions in the event of further delays to adopting the Budget, including a prohibition on new expenditure items and an expenditure restriction for a limited period of time to 45% of previously approved allocations. This would mean new relief items contained in the proposed Budget, e.g. expanding the basket of VAT exempted items, adjusting social grants for above inflation increases, filling of 1 800 doctors and 4 000 police officer posts or even the recently signed wage agreement helping nurses, teachers and other highly indebted public servants, cannot be implemented until a new Budget is adopted.

While the 45% limit for a short period on existing spending can help ensure the public servants’ salaries and social grants are paid, government in effect would grind to a halt. This is something public services battling to deliver after years of ill-considered austerity budget cuts, high numbers of vacancies and ageing infrastructure cannot afford, neither can 19 million social grant recipients struggling to cope with the rising costs of living. Nor can South Africa sustain the type of budget impasse often experienced in the US where government is required to shut down with non-essential public services suspended and public servants sent home unpaid.

Cosatu is deeply dismayed that Cabinet was not able to resolve differences over the Budget and has now placed Parliament in the unprecedented space of having to forge a consensus to these with very little time to spare. What is needed is a sober common-sense approach that avoids extremes. Working-class communities cannot afford a return to short-sighted budget cuts that weaken public services, deny the economy the stimulus it needs to grow or relief for the poor and unemployed. Nor can workers afford to suffer further pain with tax hikes depleting already meager and overstretched wages.

While Cosatu has vociferously disagreed with Treasury’s neo-liberal budgetary approaches over many years, we applaud the many progressive gains we have secured in the proposed Budget, in particular the public service wage agreement that will give relief to struggling public servants, allocations to rebuild frontline services, and filling essential posts e.g. doctors and police officers. These will help begin rebuilding the state’s capacity to deliver the quality public services working-class communities and the economy depend upon. We are pleased that Cosatu’s calls to expand relief for the poor through exempting key food items from VAT, above inflation increases for social grants, further fuel taxes’ freeze, and expanding public employment programs to help the unemployed have been provided for in the Budget.

Cosatu is, however, deeply dismayed by government’s callous failure to provide a simple inflationary adjustment for the 8 million SRD Grant recipients. In a R2.4 trillion Budget, there is more than enough space to find R1.5 billion needed to protect these most vulnerable recipients from inflation. Cosatu’s fundamental disagreements with the proposed Budget are its revenue proposals. Taxation must be premised upon protecting the poor and ensure that those who have the least pay the least, and those who have the most, pay the most.

However, VAT treats all as equals, when they are not. It is impossible to tell the poor, who cannot afford to buy food, that these items will now become even more expensive. It is insensitive to tell workers who spend 60% of their salaries on electricity and transport and are forced to live off credit card debt, to cut expenses further. It is a false premise to claim there are no alternatives. It is irresponsible to threaten the functions of public services because politicians and bureaucrats cannot find the R14.5bn the 0.5% VAT would raise in a budget of R2.4trl.

Cosatu has submitted to the government and Parliament several sober alternatives that could easily bridge this gap as well as that of not adjusting income tax brackets for inflation, without further squeezing workers or the economy. These include reducing tax loopholes and rebates for the top tax bracket and raising wealth taxes through inheritance, estate and luxury imports duties. Similarly, revenue can be raised from large corporations.

The Development Bank, Industrial Development and the Public Investment Corporations can be asked to take over some economic infrastructure projects, e.g. building 13 000 university beds and investments in rail, ports, electricity, water and roads.

Equally the SETAs, National Skills Fund and the Public Investment Corporation could be engaged to do likewise for some public employment programs. The SA Reserve Bank can be asked for a modest increase to the allocation from its currency reserves to the fiscus. All of these could bridge the gap the R14.5bn and R18.5bn that the VAT and PIT (personal income tax) bracket non-adjustments are expected to raise. These would be far more humane options than imposing further hardships upon working and middle-class families whilst simultaneously ensuring the state has the resources needed to rebuild public services, stimulate growth and slash unemployment.

While we are opposed to a VAT hike and not adjusting tax brackets for inflation, we are pleased that government has heeded Cosatu’s call for a R7.5bn boost to support SA Revenue Service’s efforts to tackle tax evasion and ensure public services have the resources they need to fulfill their constitutional mandates.

Given time, these will avoid the need for tax hikes that place an unfair burden upon workers. We hope Parliament will resist the temptation to plunge the state and society into an unprecedented crisis by not passing a Budget, and equally that they will adopt Cosatu’s proposals to ensure a more progressive Budget is adopted.