Presentation on amendment of money bills National Treasury 6 August 2008

Introduction Treasury strongly supports and welcomes greater role of Parliament in –Greater accountability and oversight over current and past budgets –Influencing future budgets Treasury supports underlying objectives of the proposed bill to empower parliament by –Enabling Parliament to amend money bills, by giving effect to section 77 of the Constitution Hard conceptual issues around the role and functioning of Parliament must be resolved to prevent further delays in this Bill –11 year delay in giving effect to s77 of Constitution due to lack of clarity –Minister of Finance published a draft Bill in 1997, when Parliament decided to draft it’s own Bill instead No. of technical problems in the Bill require conceptual clarification

Range of possibilities

Summary of proposals on the bill The bill should contain a fiscal responsibility clause The bill should facilitate greater involvement in the budget process The bill should differentiate between different types of money bills and provide for different procedures for each type There should be a sequence of decisions on the budget so that each decision defines the parameters within which subsequent decisions must be made

Structure of the budget The budget consists of: –Fiscal framework –Division of revenue bill –Taxation legislation –Appropriation bills –Adjustments appropriation bills and special appropriation bills –Statutory appropriations –Standing appropriations Amending money bills impacts on the entire budget process and this must be factored into the legislation The bill must differentiate between different types of money bills

Fiscal responsibility Given that the proposed bill implicitly provides for the fiscal framework to be amended, it is recommended that the bill include a fiscal responsibility clause –Parliament must be obliged to consider the impact of any changes on the economy in the short, medium and long term –Parliament must strive to keep government debt and debt interest costs reasonable –Parliament must ensure that there is adequate capital and maintenance spending and that costs are not artificially deferred –Cyclical factors are taken into account in any proposed changes to the fiscal framework Such clauses should not include any numerical limitations, but just the obligation to consider macroeconomic stability and long term cost implications

Steps to facilitate involvement in the budget process Once MTBPS is tabled, parliament may suggest changes to the framework, division of revenue and budget priorities Executive must explain in a memorandum: –Any changes to the fiscal framework between the MTBPS and the budget –How the recommendations were taken into account in preparing the main budget After budget is approved, Parliament should make recommendations on outer years (forward estimates) –Executive must submit memorandum explaining how these recommendations have been taken into account in preparing the main appropriation

Different types of money bills The bill should differentiate between different types of money bills There should be different procedures and timeframes for each type In general, present approach to taxation legislation and statutory appropriations should be formalised Main and adjustments appropriations require different timeframes

Parliament already amends tax money bills Present process: –Minister publishes draft legislation –PCOF manages a process whereby the legislation is amended Including the conducting of public hearings –Final bill is a result of consensus reached in the Committee and in discussions with Treasury Taxation legislation has been amended in this way for years For tax legislation, this process should be formalised, either in the legislation or through parliamentary rules

Budget cycle Budget provides three year estimates –Only first year is appropriated MTBPS sets out: –Economic outlook and assumptions –Fiscal framework and policy –Revenue estimates –Proposed division of revenue –Budget priorities –Key allocations to sub-national governments Joint budget committee considers MTBPS and submits a report on the statement Cabinet approves final allocations early December Allocation letters sent out in December

Budget cycle (2) Departments prepare the ENE chapters and budget database Appropriation bill prepared in January Final changes to fiscal framework made based on: –Updated macroeconomic data (only released in Nov) –Updated revenue estimates (based on end December data) Minor adjustments to spending items Budget tabled 3 rd Wednesday in February –Revised fiscal framework –Division of revenue bill –Taxation laws amendment bill (deal with immediate excise and other rate changes) –Appropriation bill –Revenue laws amendment bill (tabled a few months later and deals with major revenue proposals) Adjustment appropriation bill (usually tabled in October)

Sequence of decisions The fiscal framework should be adopted 10 days after tabling, including the possibility of amendment The division of revenue bill should then be processed but any changes must be consistent the approved fiscal framework Tax and appropriation legislation dealt with simultaneously Any changes to tax or appropriation bills must be consistent with approved fiscal framework and division of revenue bill Such a process provides the parameters for subsequent changes to money bills

Amendments to proposed bill After clause 5, no mention is made of the draft budget allocations in the bill No mention is made of adjustments to appropriation bills –The procedure to amend might be slightly different (and will require different timeframes)

Conclusion Treasury supports the objectives of the proposed bill Parliament has a choice of what to include in the bill and what to deal with through the Rules The bill will require some changes to the present budget cycle… –… as well as a greater focus on getting the programme structure in each vote right Treasury looks forward to working with the Committee to finalise the bill Treasury pledges support to build the proposed budget office in parliament and to build capacity in parliament in general