Evaluating Budgets and Identifying Budget Priorities

1. Evaluating Budgets and Identifying Budget Priorities Ways of analysing budgets to establish whether they reflect the department’s stated priorities

2. Stated priorities • Priorities set out in the narrative that accompanies the budget • should link to priorities set out in strategic plan • A stated priority that does not enjoy priority in the allocation of funds is clearly not a priority • Unfunded stated priorities often included in documents to placate a particular audience • Actual allocations and trends in these allocations reflect the true priorities of a department ‘put your money where your mouth is’

3. Strategic objectives of Labour2004 – 2009 • See Chapter 6 of the Strategic Plan • Contribute to employment creation • Enhance skills development • Protect vulnerable workers • Promote equity in the labour market • Strengthen multi-lateral and bi-lateral relations • Strengthen social protection • Promote labour relations • Monitor the impact of legislation on broad government policy • Strengthen the Department’s institutional capacity to improve services provided. • Are these priorities reflected in the budget

4. Voted funds for 2005/06

5. PR 2: Service Delivery 2005/06

6. Entities reporting to the Minister

7. Transfers to outside entities

8. Budget information on SETAs

9. Percentage of total budget • What percentage of the total budget has each programme and subprogramme been allocated? • Depends on existing priorities and the nature of activities • Look at changes in percentages of total budgets to identify new priorities and reprioritisation • Changes in percentage share of the total budget may be due to: • changes in the relative demand for services • the programme is succeeding in or achieving its objectives • a decision to reprioritise the programme relative to other programmes

10. % of Total Departmental Budget

11. Allocation of new funds • Strongest indicator of a government’s new priorities is reflected in the way new funds are allocated in the budget • If new funds are allocated in proportion to existing allocations this reflects no change in prioritisation. • If most goes to a particular programme it is being given priority • These changes usually result in changes to the MTEF baseline allocations • To identify changes in the allocation of new funds one needs to compare the MTEF allocations for the preceding two years to the current year’s budget.

12. Allocation of new funds

13. Year-on-year changes in budgets • If priorities remain unchanged, changes to programme budgets should be in line with changes to the total budget • Need to take into account: • relative changes in demand for services • success of activity • changes in the relative price of non-personnel inputs • If a programmes budget does not change in line with increasing demand for services it is not being prioritised

14. Year-on-year growth (nominal)

15. PR 2: Service Delivery

16. Nominal versus real changes in budgets • Compare the nominal growth rate of budget to the CPI inflation rate • Are budgets keeping pace with inflation? • if yes – positive prioritisation • Most common method of de-prioritising programmes is to: • keep nominal value of budgets constant • give below inflation increases to budget • this gives the impression that the programme is being prioritised when the it is not • Need to be aware of demand trends • if demand grows more strongly than the budget (even if the increase is real) this may still reflect de-prioritisation

17. Method used to allocate funds • The method used to allocate funds often indicates the priority given to the different programmes: • programmes funded by top-slicing the budget enjoy first priority • the payment of the national debt • allocations for 2010 infrastructure • programmes funded from the residual have lowest priority • if the activity or service is fully funded, it indicates high priority • if the department only subsidises an activity, this may indicate it enjoys lower priority • the lower the subsidy relative to the cost of the service the lower the priority. • Conditional grants may be used to top-slice provincial budgets to give priority to national priorities • The method used to compile budgets is often not obvious, as process is closed

18. Price paid for goods and services • When a departments delivers service itself it pays the full cost of service • When a department buys services from the private sector it pays the full cost plus a profit margin • the higher the profit margin government is prepared to pay the higher the priority • When government subsidises the provision of a service by the NGO sector it rarely pays the full cost of the service which suggests such services enjoy lower priority

19. Provincial comparisons • Inter-provincial comparisons of allocations for different services indicates relative prioritisation across provinces • percentage of total provincial budget • relative growth in similar programmes across provinces • per capita comparisons • Need to take into consideration • historical expenditure trends • demographic differences and trends • geographic and economic differences

20. International comparisons • International benchmarks can give a rough indication of the priority the South African government is giving to an issue compared to other countries • Only useful when dealing with services that are comparable between countries, such as education, health, policing and defence