Speaker, the Medium-Term Budget Policy Statement details government policy that will inform the national Budget to be announced in February next year. It also sets out the macroeconomic fiscal framework for the next three years, and Budget priorities in the division of revenue between national, provincial and local government.
The numbers on the revised fiscal framework reveal the extent to which our economy was negatively affected by the world financial crisis that started in 2007 and has not yet worked its way through economies across the world, including our own.
Although projections have improved since February - most notably, an upward revision of expected GDP growth from 2,3% to 3% - the rate of revenue increase, given the tax-to-GDP ratio, is lagging. This reflects a possible underestimation of projected revenue. Given successive revenue overruns in the past few years, there appears to be a trend in the estimation of national revenue that results in collection targets being exceeded.
Although projected government expenditure as a percentage of GDP has only increased by 0,1%, this number should be decreasing, and not increasing. As GDP grows, government expenditure as a percentage of GDP should move in the opposite direction. Although the deficit has been reduced, if the projected rate of revenue increase and expenditure decrease as a percentage of GDP remains constant beyond the current three-year projection, our economy will remain in deficit until the 2018-19 financial year. Given government commitment to countercyclical fiscal policy, this is too slow given likely economic uncertainties beyond the medium term. Government debt continues to climb and will reach 41% of GDP in 2012. Relative to many other economies, this does not appear to be excessive, but government debt reflected in the projections does not include municipal debt which would significantly and negatively impact on the overall picture.
Following its deliberations on the fiscal framework, the Standing Committee on Finance recommended that the rate of decline in expenditure should be accelerated, the issues regarding the SA Customs Union revenue-sharing formula should be resolved, and the National Treasury should provide a detailed report on the impact of a zero-rating of VAT on books on the fiscal framework.
The rules of the game have changed significantly under the Money Bills Amendment Procedure and Related Matters Act that enables Parliament to amend the fiscal framework within various parameters. Although Parliament has not yet exercised this power, the time for this to happen is fast approaching. If this Parliament intends to become the active Parliament which it aspires to be, it needs to take the necessary bold and pioneering steps to amend the Budget in a carefully considered and appropriate way. The Act was passed to empower Parliament to not only hear the people's voice, but to also enable us to demonstrate that we are listening, and can and will act in order to exercise our mandate.
In his introduction of the Medium-Term Budget Policy Statement, the Minister of Finance indicated that firm measures would be taken to counter the creeping culture of corruption that has infected our public financial system, especially the procurement process. The DA welcomes this commitment. There has been much talk about apprehending the criminals who feast at the expense of the most vulnerable members of our society. Yet, little, if any, political will has been demonstrated to date.
We look forward to comprehensive details of legislation that will be introduced or amended to implement this commitment. We also look forward to timeframes within which the people can expect to receive the promised protection from the parasites who feed off the leaking bucket into which hardworking South Africans pour significant amounts of their very scarce financial resources.
The Minister was silent on further details of the youth wage subsidy proposals that he promised to table by the end of March 2010. At his subsequent appearance before the committee, the Minister assured members that the proposal had not been shelved, and that a discussion paper was in progress. We know, Minister, that Cosatu is opposed to the youth wage subsidy. They said so during their presentation to the committee. Their argument is that young people aged 15 to 24 should be acquiring education, training and skills, rather than be employed in a workplace where they learn nothing.
When the DA designed its wage subsidy, we targeted it more widely at new entrants to the job market because previously marginalised youth are no longer young, and should not be excluded from incentives to uplift them into economic activity. There is no reason why a wage subsidy cannot be complemented by a programme to encourage remedial skills development.
The DA believes that, instead of funding dysfunctional sector education and training authorities, Setas, employers should be encouraged to provide meaningful training and development on the job. A wage subsidy will attract new entrants into the workplace and improve their future mobility and marketability through skills acquisition. The solution to the current stalemate on the youth wage subsidy lies in the benefit design. The DA, especially the DA Youth, welcomes the Minister's commitment to a wage subsidy and will pursue a programme of action to ensure that his commitment is honoured.
On the subject of mixed signals, the ANC has announced that independent researchers will be employed to report on various models applied to the nationalisation of mines. This is intended to assure investors that the matter will be thoroughly considered before any policy decisions are made. The problem with washing garbage is that it remains garbage.
No matter how the message is packaged, it still simply remains that property rights are under threat and that the ANC seeks to relentlessly extend the role of the state in our economy. If investors doubt the security of their ownership rights, they will simply factor the risk into the price of the transaction or not participate at all, making our economy even less efficient and less attractive to long-term productive investment than it is now. South African taxpayers need an assurance that their hard- earned money will not be wasted on unnecessary research into an unnecessary policy that generates unnecessary uncertainty.
On Monday, following his return from a meeting of the G20, the Minister of Finance announced that a stimulus package would be introduced. It has been reported that this will feature in the national Budget to be announced in February.
Our Budget tip to the Minister is that government intervention should aim at increasing economic activity by easing individual entry to the economy, expanding individual choice, and increasing private-sector participation in our economy - and not the size and influence of government and its associated cronies.
The most important lesson from the world financial crisis is that appropriate regulation is required to ensure that an economy remains as functional and efficient as possible, especially under turbulent conditions. Our economy is now experiencing severe turbulence as developed economies struggle to emerge from recession and the emerging market group: Brazil, Russia, India and China - the so-called Bric economies that we aspire to join - surge ahead. Our growth lags far behind and we grapple with an appreciating currency that restrains our ability to export.
The Monetary Policy Committee of the South African Reserve Bank began its meeting today and all indications point to a reduction in interest rates. We cannot, however, rely on the monetary policy to resolve this imbalance. Quantitative easing will not work but will merely feed inflation. Fiscal policy needs to complement monetary policy and steps need to be taken to cushion the impact of a lower interest rate cycle on the net savers in our economy, especially pensioners who rely on income from interest-bearing investments. Steps are also required to facilitate a more competitive and productive economic environment.
Poverty and unemployment remain by far the greatest problems we face in South Africa today. The DA's vision of an open opportunity society for all, where everybody, irrespective of their circumstances at birth, can achieve their full potential and become everything that they are capable of being, can be achieved.
We need to support those who are already in poverty and develop a road that will enable all our people to emerge from poverty. By so doing, the vicious cycle can be broken and the lives of our people continually improved from this generation to the next, until we are the great, leading nation that we are capable of becoming, given the right policy choices. We just need to make them. Thank you, Speaker. [Applause.]