Madam Deputy Speaker, the Medium-Term Budget Policy Statement confirms what the average South African household already knows: The job market has declined sharply; disposable income has fallen; indebtedness remains high; and government excess has been exposed. There is no doubt that the global financial crisis has hit home and has had a far worse impact on our fiscal framework than anticipated only a few months ago. Conditions have deteriorated very quickly. The steady progress made over the past 15 years to develop a robust economy capable of withstanding constantly changing globally integrated markets, has been reversed. The Budget deficit, at 7,6% of Gross Domestic Product, GDP, or R184 billion, will need to be financed by the people.
Government plans to expand its debt from a current 29% of GDP to 41% in 2012-13, mostly sourced on the domestic credit market. This will impact on the availability and price of credit for other participants in the economy. This 12 percentage point increase is a significant expansion in rand terms, given that the GDP is expected to grow from next year. The room left to manoeuvre is getting tighter, especially given that assumptions underlining the fiscal framework may well prove to be optimistic. If our economy does not grow as expected, we are heading for debt servicing expenditure that will slow down service delivery even further.
Given the service delivery protests that have erupted recently, it is clear that the people are growing restless over the absence of delivery caused by government's failure and inability to efficiently spend the money that is available. Matters will be far worse when money is not available.
Although the tax revenue shortfall amounts to R70,3 billion, a further R10,8 billion shortfall arises from sources in the provinces, social security funds and state-owned enterprises. This reduces government revenue to 27,3% of GDP. Government expenditure, however, increased nearly 5 percentage points from last year, to 35% of GDP. The numbers point to the emergence of a dysfunctional developmental state. The size of government participation in the economy is increasing, but government functionality and service delivery output is not.
The DA supports the counter-cyclical fiscal stance adopted by government. This does mean that government will be spending more at a time when its revenue is shrinking and the result will be a deficit and an increase in borrowing. The crucial issue, however, is that an increase in government spending during a recession should benefit the economy in the longer term and yield maximum post-recession benefits. Increased spending to fund government inefficiency and luxury lifestyles for the government lite is not acceptable and defeats the purpose.
The preliminary report by the Government Task Team to Effect Savings makes bold and welcome statements. We also welcome the Minister's firm commitment to not tolerate corruption; act forcibly against wastage; insist on value for money; and act against those who feed selfishly off the state.
Increases in government spending do not demonstrate this commitment. The R589 million set aside for new government departments and the appointment of additional Ministers and Deputy Ministers appears to be little more than a political exercise to appease the various factions within the government alliance with the perks and privileges of executive office. Ten thousand RDP houses could have been built instead. That would have represented a real and tangible impact on the lives of ordinary South Africans.
The R1 billion recapitalisation of the Land Bank would not be necessary if government had taken steps to prevent deployed cadres from infecting the institution with a culture of kleptocracy that is extremely difficult to eradicate, given that it is widen-spread across the state-owned enterprises. These entities are funded with taxpayers' money intended to improve the lives of the poor. We expect the Minister to do as he says he will do and ensure that the parasites who steal the people's money are identified and prosecuted.
The R12 billion increase in the state payroll - not provided for in the main Budget - demonstrates that government does not manage its human capital effectively. There are too many public servants in unproductive jobs within a bloated bureaucracy, and too few in critical service delivery areas. The state payroll is steadily increasing, without tangible benefits to taxpayers and service recipients. This is not value for money. Not long ago in a place not far away, a government forgot that it exists to serve its people. It adopted unworkable policies that brought a once- thriving economy to collapse; it violated property rights; it ignored its constitution; it spent more than it received; it used the people's money to fund luxury lifestyles for some; it printed money to fund its debts and rendered it currency worthless. And now, Zimbabwe awaits financial rescue. We must prevent this from happening to us.
Now that Minister Manuel has vacated his position as Minister of Finance, the public will no longer have an opportunity to offer their "Tips for Trevor" in the lead up to the annual Budget. It therefore seems likely that this would be replaced by "pointers" for the present Minister. The DA would like to offer the first one to the Minister: The social contract between government and taxpayers is already strained because taxpayers must fund inefficient government spending and luxury lifestyles for some while they struggle daily to put food in their children's stomachs and a roof over their heads. Tax increases will not be necessary if government spends the people's money wisely. Thank you. [Applause.]