Presentation on amendment of money bills

1. Presentation on amendment of money bills National Treasury 6 August 2008

2. 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

3. Range of possibilities

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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 3rd 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)

12. 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

13. 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)

14. 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