4th Economic and Social Rights Report - SAHRC National Treasury presentation to the Joint Budget Committee 11 November 2003

Overview The SAHRC is empowered by the constitution to monitor and assess observance of economic & social rights National Treasury recognises important role of SAHRC Need to clarify how SAHRC role fits in given oversight role of Parliament and legislatures How do we hold government and its departments to account for their performance

What is stated in chapter 13 Examines role of treasuries – policy, programmatic & legislative – Constitution Challenge treasuries on their role in meeting economic and social rights of SAns Comments on nominal and real values in budget allocations – 1999/00 to 2001/02 Role of treasury in budget allocative process – does it ensure realisation of economic and social rights

Methodology However, data collection methodology is severely limited - should use existing budget documents Existing survey methodology lacks validation While some findings are useful, needs to recognise importance of collective responsibility in Government What is the appropriate role of Treasuries in promoting economic & social rights?

Our response focuses on.. Intergovernmental system and budget decentralisation Role of Treasury Reforms that improve resource allocations MTEF Budget Process Measurable objectives and service delivery targets

Intergovernmental System and Budget Decentralisation Constitution establishes 3 spheres Section 214 divides nationally-raised revenue between 3 spheres Takes account of functions and fiscal capacity of each sphere National govt or departments cannot determine budget of province or municipality Spheres not tiers, with govts not administrations Cannot hold one sphere resp for another Water provision a municipal function, cannot expect a provincial treasury to know what funds are spent on water

Role of Treasuries Constitution PFMA Chapter 13 and section 216 in particular PFMA Manage the budget preparation process Manage implementation of annual national budget Facilitate implementation of the DoRA Coordinate intergovernmental fiscal and financial relations Budget allocations determined by Cabinet, provincial EXCO or mayoral/executive committee Budget reforms to widen participation MINCOMBUD, Cabinet, Budget Council, B Forum

Performance in Government HR report grappling with difficult concept Does not take account of key performance documents in national/provincial govt ENE, IGFR Strategic plans and performance measures Survey methodology is problematic Figures provided are inaccurate Figures cannot be compared btw govts like IGFR Assess a government as a whole Cannot assess every dept to perform every other function Treasuries are a type of “back-office” operation

Outputs and Inputs HR report focuses on inputs rather than outputs Need to focus on outputs Inputs like how money says nothing about performance Key is to assess how resources used Example of school education Budget of R45 bn, but 80% used for personnel Key is to contain personnel expenditure, increase capital and npnc (learner support materials etc) Role of parliament and legislatures in holding executive to account, approving budget etc

Medium Term Expenditure Framework Budget reforms in SA 1997 1998 1999 2000 2001 2002 2003 Accounting standards Procurement reform Plannning, budgeting, reporting link Measurable objectives Strategic plans tabled in Parliament Estimates of National Expenditure Public Finance Management Act Intergovernmental system required all three spheres (national, provincial and local) to develop and adopt their own budgets – decentralised budgeting – led to transfers to provinces and municipalities MTEF – 3 year rolling plan for national and provincial gvernment NES complemented the previous White Book (that contained the budget numbers) by providing both the numbers and service delivery objectives The PFMA eliminates micro-control, giving managers greater flexibility but holding them accountable. Also provides a framework for modernising the financial management of national and provincial departments The ENE replaced the NES as the national budget. Eliminated duplication. Policy developments, legislation and service delivery objectives are presented alongside departmental spending plans. National and provincial departments table their strategic plans in the relevant legislature 7 days before the relevant Minister or MEC presents their budget vote. Measurable objectives for each departmental programme introduced in the 2003 ENE National Expenditure Survey Medium Term Expenditure Framework Intergovernmental System

Medium term policy review Departmental and agency planning & budgeting MTEF budget process Medium term policy review Macroeconomic framework, fiscal policy & DoR Preparation of MTSF Cabinet lekgotla Cabinet lekgotla MTBPS Jan April July Oct 2003 Departmental and agency planning & budgeting Preparing budget submissions ABBREVIATIONS MTBPS: Medium Term Budget Policy Statement Pre-budget statement outlining fiscal and budget policy for the next Budget Tabled four months before Budget Increased transparency Opportunity for Parliament and the Public to engage in proposed spending priorities MTEC – review & recommendations to Cabinet Preparation of Budget Documents May Aug Nov Feb 2004

Medium Term Expenditure Framework Based on four principles Fiscal policy and the budget framework Policy priorities and public expenditure Political oversight of the budget process Budgeting for service delivery Budget is driven by priorities like poverty-alleviation, social services and grants, economic priorities, crime-prevention etc

(1) Factors affecting fiscal policy Level of taxation Rise in tax burden may impede economic growth Slowdown in tax burden may require higher borrowing or less spending Level of borrowing Borrowing for investment may boost longer-term growth Interest costs may crowd out other expenditure in the long term Too much Govt. borrowing pushes up interest rates Balance between capital and recurrent spending

How three-year budgeting works 2003 MTEF Increase to baseline, determined by: Revised macroeconomic framework Draw down on contingincy reserve Policy priorities / alignment with dept. business plans Vertical division of revenue Inflation adjustment in 3rd year. 2003/04 2004 MTEF } 2004/05 baseline 2004/05 2005/06 baseline 2005/06 2006/07

(2) Policy priorities and public expenditure MTEF budget process strengthens link between policy priorities and expenditure Departmental strategic planning aligned with medium-term policy priorities Budget submissions based on strategic plan and policy priorities Budgets evaluated on basis of Government’s priorities – articulated by Political Executive Child support grant extended to indigent children under 14 yrs – phased in over the 2003 MTEF period. Priority is to reduce poverty and vulnerability

(3) Political oversight of budget process Executive responsible for policy and prioritisation – ensured by MTEF budget process Manage the tension between competing policy priorities and budget realities Improve legislative oversight through JBC, SCOPA Trade-off between extending child support grant to children < 14 years or increase spending on school books, or can both be accommodated within approved fiscal framework

(4) Budgeting for service delivery MTEF deepens medium to long-term certainty Budget certainty supports policy for the phasing-in of CSG Allows for medium-term reprioritisation Legislative reforms provide manager with greater flexibility – accountability for use of resources Budget documents contain service delivery commitments: IGFR, ENE, Appropriation Bill, DoRA, Budget Review Measurable objectives and output targets included in national and provincial budgets

Future challenges Better formulation of service delivery objectives, outputs and targets Better use of existing documents Legislatures SAHRC Public Improving monitoring and evaluation systems Strengthening the accountability cycle Aligning strategic plans, budgets and annual reports Performance agreements of line-managers