Published by the People’s Budget Campaign, a coalition of Cosatu, the SA Council of Churches (Sacc) and the SA NGO Coalition (Sangoco), the 2004/5 People’s Budget presents key proposals for improving South Africa’s budget. The campaign aims to locate fiscal policy within an integrated development perspective, explain its proposals for job creation and rapid poverty eradication, and provide revenue and expenditure proposals that translate its vision into practice.

This year’s People’s Budget contends that one of South Africa’s greatest current challenges is high unemployment, and that the problems of HIV/Aids, poverty and inequality must also be seen as areas for priority action.

Attributing rising unemployment and slow growth to systemic distortions left by colonialism and apartheid, the campaign holds that the budget and fiscal policy have a central role to play in tackling these problems. For example, it believes that public spending can increase the resource base of the poor through land reform, provision of infrastructure and skills, programmes to support SMEs and cooperatives, and the introduction of a comprehensive social security system. At the same time, it believes that the government can direct spending in ways that support the growth of relatively labour-intensive industries in the formal sector, including the service sector and light manufacturing, and that a more expansionary fiscal policy can stimulate overall economic growth. The People’s Budget Campaign maintains that support should be shifted from a one-sided focus on exports to include industries and services that meet local needs and create jobs. Its specific proposals focus on three key areas for tackling poverty and growing employment, namely, land reform, infrastructure and housing, and social security. The land reform programmes, it says, must be substantially expanded and accelerated to meet the ministry’s target of redistributing 30% of land by 2015. In addition, it notes that to settle even half the outstanding restitution claims by 2010 would require that the programme’s budget be more than doubled, to R1,7 billion. The People’s Budget also proposes increasing the housing budget to 5% of the total budget to permit a substantial increase in subsidies. This action, combined with measures to accelerate land release, could permit more densification. Further, it maintains that housing projects must be situated in overall development strategies to ensure they are economically, socially and environmentally sustainable, while they must also be accessible to lower income households who have previously been excluded from access to financial sector support. Moving on, while the campaign has long supported the national policy of free basic water and electricity, it points to the need, first, to ensure that all municipalities have the resources they need to provide free basic services. Second, free basic services must be provided as a universal minimum, recovered through higher tariffs on large consumers of electricity or water. On social security, the campaign agrees with the government’s committee of inquiry into a comprehensive social security system (known as the Taylor Committee) on the need to introduce a basic income grant, or BIG. The BIG would provide a small amount of cash to each adult South African every month, providing some protection against poverty for all people, and enabling them to engage more effectively with the economy. It also points to a comprehensive study by four well-known economists on financing the BIG, who concluded that the BIG is both affordable and necessary. As regards building participation in the budget, currently, despite efforts at transparency, the budget process is still driven by the executive. The People’s Budget proposes ways to ensure greater participation by parliament and civil society. In particular, it recommends rapid action to give parliament power to amend the budget, as required by the constitution, and it proposes measures to improve interaction around fiscal policy through structured debates on the MTBPS, and to enhance parliament’s technical capacity. Moreover, the campaign calls for civil society organisations to have greater opportunities to take part in budget debates through Nedlac, as well as through a system of public hearings. On financing an integrated development strategy, the People’s Budget campaign observes that government has not reformed VAT, even though VAT has a regressive impact – that is, it requires poor people to pay a larger share of their income. To deal with this problem, the People’s Budget proposes a 1% cut in VAT, together with the introduction of a tiered VAT system, with higher rates on luxuries and exemption of more necessities. The campaign maintains that, to release more funds for expenditure on people’s needs, government should review its monetary policy to promote sustainable reductions in interest rates.

It should reintroduce requirements that financial institutions invest a prescribed portion of investments in relatively low-interest government bonds and do more to support unions’ efforts to identify developmental investments for pension funds.

It would also like to see government ringfence apartheid-era debt and negotiate cheaper ways of financing it, while it holds that government should decline the option to buy 19 more fighter planes as part of the 1999 arms deal and redirect the R8 billion saved to more socially desirable programmes.