1. MTBPS workshop 16 September 2014

2. Outline  Introduction  Legislative mandate  Responsibilities of Parliament  Technical check  Macroeconomic outlook  Revised fiscal framework  Fiscal policy position  Spending priorities  Division of revenue  Consolidated government expenditure  Summary 2

3. Introduction In 1997 the medium term budgeting system was introduced, which includes:  The publication of a Medium Term Budget Policy Statement (MTBPS), to enable Parliament and institutions of civil society to participate meaningfully in the budget debate.  The MTBPS includes the Fiscal policy which contains the framework of government to adjust its spending levels and tax rates to monitor and influence a nation's economy. 3

4. Legislative mandate  The Money Bills Amendment Procedure and Related Matters Act, 2009:  In terms of Sec 6(1) the Minister must submit to Parliament a Medium Term Budget Policy Statement at least three months prior to the introduction of the national budget.  Each committee on finance and appropriations must 30 days after the tabling of the Medium Term Budget Policy Statement report to the National Assembly or the National Council of Provinces, as the case may be, on the proposed fiscal framework for the next three financial years and on the proposed division of revenue and the conditional grant allocations to provinces and local governments respectively. 4

5. Legislative mandate (cont.)  The Money Bills Amendment Procedure and Related Matters Act, 2009:  In terms of sec 15 (2) the core function of the Parliamentary Budget Office is to support the implementation of the money Bills Act by undertaking research and analysis for the committees.  In terms of sec 15 (2)(b) PBO must provide advice and analysis on proposed amendments to the fiscal framework, the Division of Revenue Bill and money Bills and on policy proposals with budgetary implications. 5

6. Responsibilities of Parliament In terms of the Money Bills Act:  Committees must report to the House 30 days after the tabling of the MTBPS.  The committees may consult with any other committee in considering the MTBPS.  Committees must, as the case may be, report on:  The proposed fiscal framework (recommend amendments if materially unchanged when submitted with the budget);  The spending priorities of national government for the next three years;  The proposed division of revenue between the spheres of government and between arms of government;  The proposed substantial adjustments to conditional grant allocations to provinces and local governments. 6

7. Technical check In terms of section 6 of the Money Bills Act: The medium term budget policy statement must include: YesNoComments 1.a revised fiscal framework for the present financial year and the proposed fiscal framework for the next three years; √ Comparison with macroeconomic indicators could assist 2.an explanation of the macro-economic position and macro-economic projections; √ Additional tables could assist to monitor the structural changes 3.an explanation of the fiscal policy position, and the assumptions underpinning the fiscal framework; √ Revenue and expenditure 4.the spending priorities of national government for the next three years; √ Monitoring system? 5.the proposed division of revenue between the spheres of government over the next three years; √ 6.the proposed division of revenue between the arms of government within a sphere for the next three years; √ Not on provincial level 7.the proposed substantial adjustments to conditional grant allocations to provinces and local governments, if any; √ Only totals 8.a review of actual spending by each national department and each provincial government between 1 April and 30 September of the current fiscal year. √ Ann A 7

8. The macro-economic outlook (Chapter 2:Economic Outlook) 8

9.  Comprehensive  Additional information that could assist the Committees:  The assumptions underlying growth projections  Compare GDP forecasts (NT with Banks, IMF etc.)  Information on all sectors contributing to the GDP to show the structural changes over time  A comparison of growth estimates to potential growth  Match identified constraints to growth with the developments that address them eg:  Labour  Electricity  Business confidence and  The widening current account 9

10. Revised fiscal framework (Chapter 3: Fiscal policy and trends)  SA Fiscal policy is rooted in the principles of counter cyclicality  Debt/fiscal sustainability  Intergenerational equity  Public spending is shifting towards:  NDP  Improving infrastructure allocations  Efforts to combat waste, inefficiency and corruption 10

11. Revised fiscal framework (Chapter 3: Fiscal policy and trends) Link to the adjustments 11

12. Revised fiscal framework (Chapter 3: Fiscal policy and trends) 12

13. The fiscal policy position (Chapter 3: Fiscal policy and trends)  For the committees to make recommendations on amending the fiscal framework should it remain materially unchanged when submitted with the national budget the Committees need to:  Determine the changes from the previous fiscal framework  Analyse the sustainability of the fiscal framework  Assess intergenerational equity  Ensure a shift in spending patterns towards the implementation of the NDP/MTSF  Ensure spending on infrastructure  Managing risks to safeguard the sustainability  Ensure reduction in waste and inefficiency in government spending and revenue collection 13

14. The fiscal policy position (Chapter 3: Fiscal policy and trends)  To assess fiscal sustainability an assessment of the following indicators are required:  The budget balance measured in terms of a deficit or surplus  Trend analysis on revenue, expenditure and the budget balance over time  Compare trends with the GDP and CPI to indicate the alignment of the revenue and expenditure decisions with the macroeconomic indicators underpinning the numbers  Evaluate debt levels of the country and compare with other countries  Trend analysis on sector spending  Evaluate the current account balance  Monitor the risks to safeguard fiscal sustainability 14

15. The fiscal policy position (Chapter 3: Fiscal policy and trends)  Assess intergenerational equity  Generations are tied together through humanity and inheritance  Intergenerational equity is a values-based concept that future generations have certain rights  It is the belief that what is done today impacts future generations and that assets and resources belong to those generations  This idea covers many areas, including natural resources and financial security  Future generations should not have to suffer because the current generation did not properly take care of resources  There is a need to determine whether government debt will be a burden for future generations or not 15

16. The fiscal policy position (Chapter 3: Fiscal policy and trends) Monitor the management of risks to safeguard the sustainability of the budget  Current risks as identified in the 2013 MTBPS are:  Public sector wage bill  Debt  Balance sheets of SOC 16

17. The fiscal policy position (Chapter 3: Fiscal policy and trends)  The following comparison could also assist Committees:  Summary of the consolidated fiscal framework including:  Including growth rates  Including real GDP growth rates  Including CPI inflation  It would be useful for MP's to receive additional information on how expected changes in growth impact on revenue 17

18. The fiscal policy position (Chapter 3: Fiscal policy and trends)  Possible additional information that could assist Committees:  Monitoring the risks around the increasing wage bill:  A complete break down of current and 3-year estimates of personnel numbers in terms of sectors as well as managerial and administrative staffing across government  Progress on the enforcement of discipline in hiring new personnel.  Monitoring the Debt portfolio:  It would be interesting to compare SA long term projections of net debt with other countries  Compare the composition of SA net debt (foreign/local, inflation linkers/normal bonds, maturities) with its peers  Monitoring the balance sheets of public entities and SOC 18

19. Spending priorities: National (Chapter 1: Securing inclusive growth)  Public spending are shifting towards:  NDP (fully incorporated into the MTSF)  Improving infrastructure allocations  Efforts to combat waste, inefficiency and corruption  Additional information that could assist Committees:  The MTSF targets  The specific departments responsible for the MTSF outputs  The level of expenditure per output (if possible)  Progress on achieving outputs and outcomes of the MTSF 19

20. Spending priorities: Provincial (Chapter 4: MTEF and division of revenue)  A narrative presents:  Proposed changes to provincial funding  Proposed changes to provincial conditional grants  Proposed changes to local government grants  Additional information that will assist Committees:  Current spending on Conditional grants, per grant  Estimated spending over the MTEF on Conditional grants 20

21. Division of revenue (Chapter 4: MTEF and division of revenue) Changes from the previous FF 21

22. Division of revenue (Chapter 4: MTEF and division of revenue) 22

23. Division of revenue (Chapter 4: MTEF and division of revenue) 23

24. Division of revenue (Chapter 4: MTEF and division of revenue) 24

25. Division of revenue (Chapter 4: MTEF and division of revenue) 25

26. Consolidated government expenditure (Chapter 4: MTEF and division of revenue)  The distribution of resources over the MTEF is shown according to the functional groups showing how responsibilities are shared across government  The following analysis could assist the committees to evaluate the implementation of the NDP/MTSF and other government priorities:  Calculation of percentage shares allocated per function/economic classification indicates relative priorities at a point in time  Trends of expenditure shares per functional group over time indicates the direction of expenditure priorities  The evaluation of the trends will also inform the committee of the speed or the cost of the implementation of policies and plans 26

27. Summary  The MTBPS enables Parliament and institutions of civil society to participate meaningfully in the budget debate  An analysis of the MTBPS and other in-year reports could assist committees to provide a review and recommendations for the budget  The role of the PBO is to assist the committees by undertaking research and analysis for the committees 27

28. Thank You

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