Chairperson, hon members, the Minister of Finance tabled the Medium-Term Budget Policy Statement, MTBPS, on 27 October, outlining the Budget priorities of government for the medium-term estimates. The MTBPS spending issues portion was referred to the Select Committee on Appropriations to consider and report on in accordance with their mandate, as outlined in the Money Bills Amendment Procedure and Related Matters Act, Act 9 of 2009.
Among its responsibilities and as per section 6(1) of the Act in respect of the MTBPS, the committee is required to consider and report on the following issues: the spending priorities of national government for the next three years; the proposed division of revenue between spheres of government and between arms of government within a sphere for the next three years; and the proposed substantial adjustments to conditional grant allocations to provinces and local government, if any.
With regard to medium-term spending priorities, the government prioritised its resources in the following areas: job creation initiatives, enhancing the quality of education and skills development, improving the provision of quality health care, driving a more comprehensive rural development strategy and, finally, intensifying the fight against crime and corruption.
The MTBPS reflects Public Service delivery commitment as informed by an agreed set of development and transformation goals. In making strategic choices over the medium term, the government will focus on outcomes that have the greatest potential to impact on economic growth and development. The overall increase over the medium-term period is R7,3 billion for the 2010-11 financial year, and R67 billion over the following three years.
With regard to amendments to the Division of Revenue Bill, the total allocation to national departments decreased by R7 billion; the allocation to provinces increased by R4,2 billion; and the allocation to local government increased by R0,4 billion. Furthermore, the further education and training college grant is the only grant that received an additional allocation during the 2010 adjustment period. Its allocation increased by R31,297 million.
With regard to Schedule 5 grants, the following new allocations and amendments were noted in respect of specific purpose grants to provinces. A sum of R50 million, which forms part of an agricultural disaster management grant, was allocated to the Western Cape province for expenses related to agricultural disasters such as drought. This grant is allocated as the need arises.
Furthermore, a sum of R214,398 million was allocated to KwaZulu-Natal for the rehabilitation of infrastructure destroyed by flooding. This forms part of the provincial infrastructure disaster relief grant, which is allocated as the need arises.
The comprehensive HIV/Aids grant increased by R40 million; the human settlement development grant increased by an amount of R15 million; and the devolution of property rates fund grant increased by R769,035 million.
With regard to Schedule 6 grants, the following amendments were noted in respect of specific purpose grants to municipalities. The water services operating subsidy grant increased by R8,399 million, and the municipal drought relief grant also increased by R92 million.
In accordance with Schedule 7 grants, the following amendments were noted in respect of allocations in kind to municipalities designated for special programmes. The integrated national electrification programme grant was adjusted downwards by R31,97 million, and the water services operating subsidy grant increased by R13,678 million.
Coming to public hearings, after considering the 2010 MTBPS and engaging extensively with the following stakeholders, the Financial and Fiscal Commission, the Department of Co-operative Governance and Traditional Affairs, the SA Local Government Association, the Human Science Research Council and the People's Budget Coalition, the Select Committee on Appropriations noted the following key concerns.
Firstly, government is cautioned against the potential negative effects resulting from its approach of focusing on targeted funding for poorer municipalities to the detriment of the middle-income municipalities.
Secondly, it was highlighted that the current practice that is used to determine the local equitable share is unconstitutional in respect of the revenue-raising component.
Thirdly, the availability of credible data on key variables relating to the socioeconomic, demographic and special profiles of municipalities needs to be addressed, not only to update the data underpinning the local government equitable share formula, but also to enable a more fundamental review of the structure of the formula itself.
Fourthly, concerns were raised regarding whether the proposed minor adjustments to the local government equitable share formula to allocate more funding to poorer municipalities are substantive enough to address institutional challenges such as the need to appoint skilled personnel to manage finances, the human resources service delivery function and core administrative functions.
Fifthly, government's efforts to chart a new, inclusive growth path that serves as an agenda for collective action is applauded. However, government is required to provide more details on the proposed new growth path or economic policy direction of the country. Sixthly, it was further highlighted that government, at the provincial level, seems to be spending more funds on the compensation of employees rather than on programmes.
Lastly, government is not doing well with respect to health spending and, therefore, the downward revision is justifiable.
After meeting and considering all these things, the committee recommended the following. Firstly, the overall expenditure of government at the end of the second quarter of each financial year needs to be at 50%. This will most likely lead to an improved quality of spending and reduce the level of unauthorised spending and fiscal dumping at the end of a financial year.
Secondly, the Department of Co-operative Governance and Traditional Affairs should consult government and other relevant stakeholders with respect to the proposed special vehicle unit to avoid duplication of government programmes.
Lastly, we recommend that the Department of Health should investigate reasons for the underspending of grants and discourage the tendency of returning funds to National Treasury as this works against the plans to transform our health institutions. We therefore move for the adoption of the report by this House. I thank you.
Debate concluded. Question put: That the Report be adopted.
IN FAVOUR: Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, Northern Cape, North West, Western Cape.
Report accordingly adopted in accordance with section 65 of the Constitution.