House Chairperson, the DA welcomes the "spending freeze" in the Medium-Term Budget Policy Statement. This means that for the first time since 1998 government will not increase overall spending in October. This is the main reason why we support the statement. The Minister gets sensitive when I refer to "fiscal gymnastics", but I have to point out again that this reduction depends not only on savings, but also on the R3,5-billion in underspending by departments and the full use of the contingency reserve of R5,7 billion. Nevertheless, however one gets to it, reduced spending was urgently required because our expanded budget deficit is now 4,8% of GDP, much higher than the emerging market average of 1,9%.
The deficit has been pushed higher by a reduction in tax revenue, plus an additional R5,5 billion required to settle the public sector wage bill. This is because that settlement breached the 5% cap imposed by the Finance Minister in February. Therefore, we note that the statement claims that "Government will take a more deliberate approach to managing overall employment and curtail growth in personnel numbers." We look forward to more detail on how this will happen.
Deficits drive government debt, and our debt has tripled in the past five years. Alarmingly, it continues to increase in this Medium-Term Budget Policy Statement right up to 43% of GDP at the end of the Medium-Term Expenditure Framework period. As far as we project in this budget, our debt will be increasing.
The Minister enjoys comparing South Africa's debt to that of the European economies that are currently in fiscal crisis, but the more accurate comparison should be between us and other emerging markets whose debt now averages at only 35%. Clearly, we are out of step there too.
But we are also out of step in terms of economic growth. Our growth in 2012 will be 2,5% according to Treasury's forecast. On average, emerging markets will all manage twice, thus 5,3%. This rising debt and slow growth show that the Minister had very little choice but to embark on budget tightening.
These factors also highlight the damage that the adoption of populist policies at Mangaung could cause for our economy. The damage is just as likely to be caused if sensible policies continue to be blocked by the Congress of South African Trade Unions, Cosatu, on ideological grounds, or by the capacity of the ANC government to implement them.
For example, there is still no sign of the implementation of the youth wage subsidy announced by Treasury two and half years ago. Even though they acknowledge that one million people have given up looking for work in the past three years, the National Treasury seems to have run out of ideas on how to create jobs. In the statement the focus is mainly on the Commission for Conciliation, Mediation and Arbitration, the CCMA, and on the Expanded Public Works Programme.
But there is one small silver lining in the cloud of ideological deadlock in this government, and this is the commitment to the National Development Plan in this statement. Minister Manuel will be pleased to note that the plan is mentioned 14 times in the statement, with a general commitment to implementing its programmes and policies. We think that this is a serious snub for the Minister of Economic Development, Ebrahim Patel, and his New Growth Path, which is mentioned only twice and only in passing.
In the statement Treasury has chosen sides. This is something that we welcome. But, unfortunately, while the statement shows that Treasury is in charge of finances, it may not be in charge of economic policy. Active labour-market policies like the youth wage subsidy, reducing the cost of regulatory compliance, and removing trade barriers are in the statement. But unless Treasury sees them implemented, then 2012 will remain another year when they kept a firm hand on the finances, but were unable to turn their policy proposals into action. I thank you. [Applause.]