LABOUR’S APPROACH TO THE 1997/8 BUDGET

Statement by Mbhazima Shilowa, COSATU General Secretary

March 11 1997

The test to be applied to tomorrows budget, and indeed future budgets, is the extent to which it is being used as an instrument for transformation. The budget is not an event, nor a technical accounting exercise, but part of an ongoing attempt to shift the social and economic priorities in our country. It is in this context that the budget will be assessed, not through a narrow examination of statistics and figures. It is not only the issue of `how much', but the real question is `for what', and `how effectively' the resources are being deployed.

On 23 March 1995 in a submission to the Parliamentary Joint Standing Committee on finance, COSATU had this to say about the 1995/6 budget: "When compared to previous apartheid budgets, the 1995/6 budget does have a number of positive features. Judged in terms of the fundamental shift required by the RDP, however, the budget fails to deliver. At best the budget can be described as a transitional budget. We have yet to see our first RDP budget".

The previous budgets as presented by Derek Keys and Chris Liebenberg had one thing in common. Their credentials while acceptable to the business community, were questionable within the broad progressive movement. While they took their mandate from the cabinet, they had very little or no political authority.

In that sense, the 1997/8 budget is different. The Finance Minister is part of the majority party in the GNU. Labour and the majority of people expect a different budget from him which should underpin the government's commitment to RDP goals and objectives, taking into account the prevailing situation.

Previous budgets particularly prior to 1990, were characterised by mismanagement by the National Party. Of course that is my view. They would argue otherwise. What is the evidence? The experience of our people are:

- Huge inequalities in society: in wealth, income, basic services, infrastructure. - Expenditure was used to entrench minority rule. - Public utilities and parastatals provided services and jobs primarily for whites. - The army and police budgets grew. Not for real law and order situations, but to deny basic political, social and economic rights to the majority, and hence maintain apartheid. - The tax burden was consistently shifted from the rich to the poor.

While I do not agree with the National Party philosophy, one thing is clear: They demonstrated beyond any reasonable doubt that the budget is an important instrument for policy implementation at various levels. That is what we would want to see this Government demonstrate rather than merely perform an accounting exercise.

The current debate on the budget, have tended to focus on the size of the budget deficit. Targets which were arbitrarily set are then used as yard sticks of success or otherwise of the budget. Constraints on the new government are then used to define our new approach. In my view, while not dismissing the constraints as inherited, I believe that we can develop a different approach. This approach seeks to redefine the debates as focusing on challenges, possibilities and opportunities. In other words, we should acknowledge the existing constraints, but should not allow them to paralyse our approach.

What therefore is our approach to this year's budget? We need to set out clear yard sticks to measure the progressiveness or otherwise of the budget. These should include its approach to:

- Employment creation - Allocation of resources to social needs - Elimination of inequalities within society - Housing - Land Reform - Redistribution of wealth and income - Developing Human Capital

More important, we should judge the relationship between revenue and expenditure. The government can choose to move forward in a progressive way, retain the status quo or regress. Some points on Revenue and Expenditure:

Revenue

Progressiveness would entail a relook at the taxation regime.

- More zero rating for basic goods including water, medicines and foodstuffs - Multiple VAT rating - Introduce capital gains tax - Shift the tax burden away from the poor to the rich and corporations We all know what the consequences of retaining the status quo and regressive taxation will be since this is what we are already sitting with. Inequalities will continue and even widen. The

poor will continue to bear the brunt of transformation and subsidise the rich. This is something we should avoid.

Expenditure

In this area, progressiveness would entail an increase in social spending, public works, projects for employment creation rather than a cut. Furthermore there needs to be redistribution and reallocation across provinces particularly the rural areas.

Let me now give two of the critical tests we will apply on the budget, to determine whether it is appropriate for our times and our society's needs or not.

Employment Creation

There is a view that budgets or governments don't create jobs.

- We challenge that view. We accept that Governments are not the only player in the job creation process but it is a very critical player in employment creation. Not only are Government the largest employer, but the way in which they allocate resources can determine whether or not we boost the economy and thereby create jobs.

There are two elements to this, which we will test:

a) Firstly does the budget create new jobs - we have put forward proposals on housing and public works programmes, which in our view will stimulate the creation of more than 500 000 jobs. This requires that money be made available though a new housing parastatal. We will look at whether the rolled over funds, and additional funds set aside for 1997/8 starts to address both the quality of public resources, and also the institutional arrangement. We will look at whether a special 3 year levy on the profits of corporations set at say 5% will be introduced, to help finance the housing / public works programme. We are willing to look at a set timespan of say 2-3 years for its implementation.