Budget endgame still blurred – John Matisonn

Key topics:.ActionSA rejects VAT hikes and income tax increases in the national budget.Calls for cuts in wasteful spending, including deputy ministers and international travel.Political deadlock may lead to a revised coalition or further budget compromises..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here..If you prefer WhatsApp for updates, sign up to the BizNews channel here..By John Matisonn ___STEADY_PAYWALL___.Action South Africa has formally rejected the national budget that includes a 0.5% VAT increase this year and another equal increase next year, sending a budget settlement back to the drawing board..Some ANC leaders had been hopeful that ActionSA support might allow them to cobble together a majority in parliament with its other GNU partners excluding the DA..On Friday, ANC chief whip Mdumiseni Ntuli said engagements with ActionSA, MKP and EFF "reassured us that political parties are willing to find a solution – and we will find one.".But on Monday ActionSA decided to reject the budget and informed the ANC in writing. The other two non-GNU parties, MKP and EFF, told the ANC on Friday they also disliked the VAT increase, but their first requirement was the removal of the DA from the GNU..ActionSA objected to increases in both VAT increase and income tax (through income tax bracket creep) while government had "failed to address its own considerable wastage and inefficiencies.".In an interview, ActionSA national chairperson Michael Beaumont explained that his party required "upfront concessions" to ensure that wasteful expenditure would be cut before joining the government.."Our underlying problem with the GNU agreement was that the other parties went in like lemmings on a vague statement of intent, so that once they entered government they became culpable for government's actions they may disapprove of.".Beaumont proposed a range of symbolic and substantial cuts as well as reprioritised increases to restore capability to government..Among the small but symbolically important cuts were removing the 43 deputy ministers, and excessive international travel budgets of ministers that have amounted to R200m in the GNU's eight month tenure. "Even the department of local government and traditional affairs spent R11million on international travel. Why?".Read more: Examine the Budget: Your money matters – Chris Patterson.Beaumont called for a "fundamental review" of spending that would cut programmes that have not delivered or are lesser priorities, and an increase in the National Prosecuting Authority budget. "This budget also cut local government from 4.7% of the total to 4.6%, when it's obvious local government needs more support not less." .While parliamentary committees have always held hearings on the budget, this could mark the first time that committees seriously consider rejecting the Finance Minister's budget by voting for cuts he did not make. .Many independent and academic commentators have called for a change in priorities as the only way to restart economic growth – by cutting old programmes and reassigning funds to priority growth areas..The parliamentary budget office called for an expansionary fiscal policy to stimulate growth, noting that "an economic strategy focused only on increasing infrastructure spending will not be enough to shift the economy from its current low growth trajectory"..The National Assembly meets on April 2 to consider the 2025 fiscal framework proposals and the report from the standing committee of finance. But the Public Finance Management Act (PFMA) allows government spending to continue based on the previous year's budget allocations if parliament has not passed the budget by April 1,..If a majority cannot be achieved, Beaumont said the GNU should be dissolved and a new group of coalition partners brought together. However, it seems more likely that parliamentary committees will find a compromise because the alternative is so much worse..In the GNU, the ANC has refused to contemplate cuts because they would inevitably lead to job losses among ANC loyalists in government. .If this impasse is broken by even small cuts to some of the many wasteful government programmes, that could be an important kick-start to better government..If they do, it will be the first time parliament has engaged seriously with a sclerotic budget process that has avoided the hard decisions. .Read also:.🔒 Budget deadlock: DA pushed GNU toward spending cuts – John MatisonnBudget 2025: The DA's battle line in the fight for economic reformSA Budget: VAT hike, massive infrastructure spend, and debt peaks

Budget endgame still blurred – John Matisonn

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