Supplementary Budget 2020

Treasury: We have not introduced austerity measures

The decline in non-interest government spending since the mid-2000s is not a sign of austerity, a Treasury official has said.

A team from Treasury on Friday responded to issues raised in public hearings on the Budget, before Parliament's standing committee on finance.

Earlier this week the Budget Justice Coalition put forward that Treasury had introduced austerity measures in fiscal policy over the past five years. This was reflected in the fact that non-interest expenditure had not increased in line with revenue growth.

In response, Treasury's acting deputy director general for the budget office, Ian Stuart, unpacked the structure of government spend over the medium term. He said the expenditure ceiling had been introduced in 2012 and expenditure growth had declined substantially, compared to patterns observed in the mid-2000s.

"It’s not austerity," Stuart said.

He went on to explain that although the fastest-growing area of spending is debt servicing costs (at 10.7%), spend on community development, learning culture, social development and health were still above inflation.

The structure of the budget for the next three years shows that learning and culture is allocated the most at R1.2trn. Social development, which consists mostly of social grant payments, amounts to R900bn, and allocations for health amount to R720bn.

Stuart said that trade-offs had to be made to account for the financial support to Eskom, meaning government had to raise the expenditure ceiling and increase taxes. To avoid slippage in the deficit, Treasury elected to raise taxes, at a smaller amount than previous years, he added.

Treasury had to make decisions in an environment where GDP growth is slowing, the tax-to-GDP ratio has come down, and anticipating pressure coming from state-owned companies especially Eskom which "dwarfs" others.

"The budget reflects how we balanced all the decisions," he told the committee.

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