Two institutions created by statute have slammed the budget’s proposed fuel levy increase as a regressive tax that will harm the poor.
The constitutionally enshrined Financial and Fiscal Commission (FFC), which advises government on intergovernmental fiscal relations, and the Parliamentary Budget Office (PBO), established under the Money Bills Amendment Procedure and Related Matters Act to advise parliamentary committees on budgetary matters, raised their objections in a meeting on Tuesday of parliament’s four finance and appropriations committees.
The budget tabled by finance minister Enoch Godongwana increased the fuel levy for the first time in three years.
The levy on petrol was increased by 16c to R4.01 a litre and by 15c to R3.85 a litre for diesel. Treasury estimates that it will generate R3.5bn in the 2025/26 fiscal year.
Political parties such as ActionSA, EFF and MK have expressed opposition to the fuel levy hike.
FFC chairperson Patience Mbava said the increase undermined Treasury’s claim that the budget was pro-poor and that the social wage had been protected.
“That has to some extent been eroded by the fuel levy increase, which threatens to erode those gains in the long run.
“We know that the poor are the most exposed to direct transport costs and food price inflation. The brunt of the increase will be borne by the poor essentially,” Mbava said.
It had to be seen in the context of government’s strategic priorities to reduce poverty and tackle the high cost of living.
PBO public finance analyst Sibusisiwe Sibeko questioned whether there was any need for an inflationary increase in the fuel levy that would affect the cost of transport, the third-largest contributor to household consumption according to the Stats SA income and expenditure survey this year.
“If government really believes in achieving a primary budget surplus (when revenue exceeds noninterest expenditure) this could still have been achieved without increasing the fuel levy,” Sibeko said.
She said the fuel levy increase and the non-inflationary adjustment to personal income tax brackets would have a significant effect on low and middle income earners. Treasury could have at least considered an adjustment for the lower income brackets.
The PBO is also concerned about the extent of provisional allocations, which were included in the fiscal framework but not in the functional budgets. It also said Treasury’s economic growth forecasts are too optimistic.
The FFC recommended in its submission that the government embark on a clear path of fiscal consolidation to achieve a zero-balanced budget within three to five years.
It said there had been extensive growth in total government expenditure, outpacing revenue since the 2008 financial crisis with no sign of fiscal consolidation.
“The widening fiscal gap between revenue and expenditure as deficit indicates that the government has followed a policy of fiscal expansion moving further away from a zero-balance budget.
“Over the medium term there has been no indication of balancing the main budget with debt considerations pointing to a deepening debt cycle enveloping the SA economy,” the submission says.
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