DA leader John Steenhuisen has rejected an analyst’s criticism that the budget upset on Wednesday could partly be attributed to the failure of the DA and smaller parties in the government of national unity (GNU), to demand details of the proposed tax increases much earlier than the day it was being delivered, to allow for negotiations.
The tabling of the budget was postponed to March 12 because of strong opposition by the DA and other parties to a proposed two percentage point increase in the VAT rate from 15% to 17%, which was disclosed during a cabinet meeting on the day.
UCT professor of political studies Anthony Butler questioned how the junior parties of the GNU could allow themselves to be in a position on budget day to not know that there was going to be a two percentage point VAT increase, and then act enraged.
“That makes me wonder whether we are not in a period of political theatrics,” Butler said. If it was truly a GNU, then the partners of the government had to be involved in the budget process throughout.
Butler participated in a Cape Town Press Club discussion with Richard Calland, emeritus associate professor of public law at UCT and director of the Cambridge Institute for Sustainability Leadership, on Wednesday’s budget developments,
Calland said the big, strategic choices of the budget should have been made by the GNU some time ago, especially the choice between borrowing more, taxing more and cutting expenditure. It would then be up to the Treasury to work out the detail and the fiscal plan to execute the choices.
Calland said that from the DA’s point of view, the ANC had not fully digested the fact that it was no longer a majority government and shifted its approach to power and how decisions were taken.
Steenhuisen said in an interview that the DA and other parties had made it clear during a final budget presentation two weeks ago that it would not support any tax increases.
“Of course we had had input and discussions on the budget, but a fortnight ago a special meeting was called and the outcome of the SRD (social relief of distress grant) court case and the projected under-collection were cited as now a major new problem, and the funding hole had to be dealt with.
“So that was only brought to our attention two weeks ago. That presentation did not have a VAT increase, it was looking at various options. We expressed at that meeting that we could not burden people more with more tax increases but had to look creatively at how we could make some cuts and some big bold announcements about growth. That budget was not a growth budget, it was a cut and tax budget,” Steenhuisen said.
“We had been participating in the budget until then and things looked fine and we were pretty comfortable where things were heading. It was only two days later (after the presentation two weeks ago) that the minister of finance came to see us about a VAT increase. That was the first time we heard about a VAT increase and it was obviously a no-go for us and we said so at every subsequent meeting. I don’t know if the minister thought we were bluffing or were not serious about it but it was our position right from the beginning that we don’t accept a VAT increase, its an absolutely no go,” the DA leader said.
“So it wasn’t us who left it to the last minute. We made our position abundantly clear from the beginning that we would not support a VAT increase and would not support a budget that had that in it. There were other parties including the ANC that said they did not support that and argued vehemently against tax increases,” Steenhuisen said.
Calland noted there had been strong voices within the ANC who were opposed to tax increases, which indicated the extent of the power wielded by the Treasury for so long within government. It had become very accustomed to making the final choices. The Treasury, he said, had been a government within a government and tended to have extraordinary power.
“This may be a shake-up [of that], which may be a good thing but when you talk to investors and market analysts, one of the things that has maintained their confidence in the country is, in fact, the stability of the Reserve Bank and Treasury. If the word out there is that Treasury is weakened and its credibility is undermined, that could be a very unhealthy signal against the grain of much of the good news and good sentiment of the last seven or eight months,” he said.
Calland said the budget crisis would be a real test of the political leadership in the GNU, of whether they could resist the temptation to only think about their own short-term political interests rather than about the collective responsibilities of the GNU government to put the longer-term interests of the economy and SA first.
“That is going to be the primary test over the next few days and weeks,” he said.
Butler said it was natural in a coalition government, especially ahead of the local government elections, for parties to want to define their independent positions, to demonstrate that they had power and were not submerged into a larger entity.
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