Chairperson, hon members, section 214 of the Constitution requires that the government ensures a transparent and equitable system to divide nationally raised revenue between the three spheres. The Constitution also enjoins our three spheres of government to co-operate.
The Division of Revenue Bill we tabled in this House last Wednesday is an expression of the co-operative relations between the three spheres of government. By setting out three allocations for the equitable shares and conditional grants for provinces and local government, the Division of Revenue Bill further entrenches the transparency and accountability in our intergovernmental fiscal system.
It allows all spheres to plan ahead and get down to the business of delivering services to our people. Provinces and municipalities will budget for these allocations, each determining how its share of funds will be used to give effect to the policy priorities that have been agreed on through the Minmecs, the Budget Council, the Budget Forum and the extended Cabinet.
From 1 March of last year, our country's municipal and provincial boundaries were redemarcated. The resource allocation aspect of these changes were introduced in the municipalities from 1 July of last year, while the changes for provinces will only take effect from 1 April this year.
I am pleased to advise this House that all allocations contained in the 2007 Division of Revenue Bill have been determined on the basis of the new boundaries. The division of revenue set out in this year's Bill gives further impetus to accelerating economic growth, modernising our public services and infrastructure, and reducing poverty and inequality.
The Budget framework allocates R89,5 billion in additional spending over the next three years. National departments will receive R32,3 billion of this, provinces R39,2 billion, and municipalities R18,1 billion.
True to our commitment to fighting poverty and vulnerability, the shares of provincial and local government rise by one percentage point each over the Medium-Term Expenditure Framework period. Schedule 1 of the Bill provides the summary of the allocation of funds for the three spheres. After setting aside R52,9 billion for debt service costs, this Bill allocates R289 billion to national departments and their agencies, R171,3 billion to provinces, and R20 billion to local government in the 2007-08 financial year.
Including a contingency reserve of R3 billion, total government spending amounts to R533,9 billion, growing by a whopping 7,7% in real terms to R650,3 last year. Transfers to provinces grow by 12,7% a year, with the bulk of additional resources going towards education and health personnel, social welfare services, and provincial infrastructure. An additional R8,1 billion is allocated for the hiring of teachers, teaching assistants, support staff in schools and districts to improve remuneration levels of teachers.
Together with resources set aside in the provincial equitable share for the implementation of no-fee schools and a substantial increase in resources for classroom building and provision of water, electricity and sanitation in schools, these resources should go a long way to improving the quality of teaching and learning in public schools, where the majority of South African children learn.
This should accelerate the process of closing the gap between spending per learner and spending per learner between private and public schools, thus giving meaning to the theme of this year's Budget, that human life has equal worth.
Provincial budgets will reinforce the strengthening of the health sectors, so that South Africans who do not have medical insurance can also enjoy good quality health care.
In respect of local government, over the next three years, municipalities will receive R129,2 billion, including R7,4 billion in allocations in kind or an additional R20,4 billion of the 2006 baselines.
The Municipal Infrastructure Grant receives R400 million more to speed up the completion of the eradication of bucket sanitation; a further R600 million for the electrification programme; R1,4 billion for bulk water and sanitation infrastructure, and R950 million to deliver water and electricity to schools and clinics. This was one of the questions asked earlier today.
The public transport infrastructure and systems grants, and the local neighbourhood development partnership grant are allocated R6,7 and R3,7 billion over the 2007 MTEF period.
Turning to the Financial and Fiscal Commission, the division of revenue set out in the Bill before this House today takes account of the recommendations we received from the FFC. The explanatory memorandum to the Bill contains government's response to the FFC's recommendations, and this is set out between pages 53 and 90 of the Division of Revenue Bill.
As the response indicates, we are in broad agreement with most of the recommendations that are contained in the FFC's original submission. The differences are, firstly, in the proposal from the FFC that we roll the Hospital Revitalisation Grant into the Infrastructure Grant for Provinces. We respectfully disagree with this proposal, because we would like to maintain the momentum that the Hospital Revitalisation Programme has gathered to date.
Secondly, the FFC proposes that we merge the Land Care Grants and the Comprehensive Agricultural Support Programme. Again, we respectfully disagree with the FFC in this regard, because we are of the view that the two grants serve very different purposes. The Land Care Grant funds land rehabilitation and restoration, while CASP provides targeted support to beneficiaries of the Redistribution for Agricultural Development Programme. In their submission to the Portfolio Committee on Finance on 22 February, the FFC tabled an entirely new proposal suggesting, and I quote, that our:
... economic assumptions ... verified by an independent, competent public authority.
Because this proposal was not part of the original submission, we have not had the opportunity to comment on or respond to it until now. Without derogating from the constitutional independence of the FFC ... [Interjections.]