FFC’s RESPONSE TO MTBS 2001 ----------------------------------------------------------------

1. FFC’s RESPONSE TO MTBS 2001 ---------------------------------------------------------------- BUDGET COMMITTEE 09 NOVEMBER 2001

2. INTRODUCTION • FFC’s overall response to MTBS • General Comments per Category • Revenue Assignment • Expenditure • Education Sector • Health Sector • Welfare Sector • Local Government • LG Revenue • Provincial Infrastructure • Analysis of Provincial Expenditure as per IGFR expenditure 1997-2001 for CMBS • Analysis of MTBS 2001-2004 Macro Trends and Projections

3. GENERAL COMMENTS • Real growth in nationally budgeted expenditure – stimulatory fiscal policy • Tax: GDP ratio projected to remain constant but increased room for deficit financing for municipal and provincial spheres • Contingency reserves

4. SOCIAL SERVICES • Real increases enable progressive realization but shift towards infrastructure in allocations. • Provinces spending on CMBS increases to 72% of PES • HIV/AIDS and ECDP conditional grants

5. LOCAL GOVERNMENT • Significant increases in LES and conditional grants for municipal basic services.Own revenue raising potential high but threatened by electricity restructuring.Personnel spending could rise disproportionately with amalgamations and function shifts.

6. ANALYSIS OF THE NATIONAL BUDGET Financing the National BudgetCounter-cyclical fiscal and monetary policyTax: GDP ratio projected constant. Deficit financing to rise. Debt-servicing costs decline over short- to medium-term.Contingency reserves for risk management Vertical Division of Revenue Relative shift to local and national government infrastructure programs

7. ANALYSIS OF PROVINCIAL BUDGETS Financing Provincial BudgetsProvincial surpluses continueReliance on transfers from nationally-raised revenues increasing Expenditure TrendsReal growth in all sectors but relative shift to infrastructure and welfare Constitutionally Mandated Basic Services

8. ANALYSIS OF MUNICIPAL BUDGETS • Metropolitan municipalities most self-sufficient. Other urban and especially rural municipalities are most reliant on LES and conditional grant transfers. • Sharp real increase in LES and conditional grant transfers.

9. 1997-2001 TRENDS IN THE PROVINCIAL EQUITABLE SHARE CONSTITUTIONALLY MANDATED BASIC SERVICES (CMBS)

10. Basic Education = Public Ordinary School Education and Education in • specialised schools, Independent ordinary school education • Basic Social Welfare = Social Security and • Primary Health care = District health care services CAPTURING CMBS

11. INTER PROVINCIAL CMBS SPENDING

13. BASIC EDUCATION

14. PRIMARY HEALTH CARE

15. SOCIAL SECURITY