Budget plays it safe: IPPR

GOVERNMENT has been cautious about introducing radical changes to its Budget, however needed they may be, the Institute for Public Policy Research (IPPR) says.

In its opinion paper on the National Budget for 2006-07, which was tabled in the National Assembly last week, IPPR’s Robin Sherbourne says the Budget represents “continuity tinged with change”. “Overall, the impression given is very much one of piecemeal and opportunistic reform rather than change according to a well thought-out, long-term plan,” says the policy watchdog.”There is no shortage of nettles to be grasped if the Budget is to become a more effective tool at promoting higher growth and reducing poverty and income inequality.”The IPPR appears unimpressed by the small surplus Government is expected to produce by the end of this financial year, because the turnaround will be short-lived and spending is set to return to new highs in the next financial year.Government is set to return to operating on a budget deficit in the next two financial years, despite earlier promising to sustain the surplus for at least two years.This year’s expenditure is set to rise to 35,6 per cent of GDP – well off the Minister’s target of 30 per cent and the highest level since Government introduced its Medium-Term Expenditure Framework (MTEF).The substantial rise in revenue this year through payments from the Southern African Customs Union (Sacu) has encouraged the Minister to raise spending by 18 per cent for this financial year.The IPPR criticised Government for still spending every cent it can lay its hands on.It said it was only because of the unusual revenue boost, which is not expected to recur, that Government was able to spend to the maximum and still produce a small surplus.The IPPR says it would have expected Government to reduce its public service in efforts to curb expenditure.In her Budget speech, Finance Minister Saara Kuugongelwa-Amadhila said that the civil service was bloated and the current situation “unsustainable”.But she said layoffs were not necessarily the answer and that savings would be made by appointing only essential staff.A large portion of the increased spending will be for personnel expenditure, which rises from N$5,5 billion to N$6,1 billion.After a two-year absence, the additional budget is expected to make a comeback towards the end of the year.”Despite the absence of radical changes in spending patterns, it is possible to detect less dramatic shifts in emphasis and perhaps a hardening of attitudes towards poor budgetary practices and wasteful spending,” says the IPPR.This is the sixth successive year that the Minister has presented a three-year perspective on revenue, spending and the deficit – the Medium Term Expenditure Framework (MTEF).This year’s MTEF appears unusual because it forecasts declining revenue and expenditure but an increasing deficit, whereas the previous four MTEFs all projected that revenue, expenditure and deficit would decline.The IPPR praises Government for being serious about tackling corruption and cutting waste through its allocation of N$3,5 million to the recently established Anti-Corruption Commission.It says the Budget also signals that the spending emphasis is shifting towards priorities such as the creation of a knowledge-based economy and reducing poverty.But the IPPR criticises Government for its spending choices, especially the N$120 million for the new State House project this year, and more than a billion to the Defence Ministry and millions more for the security and protection of VIPs.”Defence, security and the protection of VIPs take precedence over other pressing priorities with no clear explanation,” says Sherbourne.He also questions the continued expenditure on perpetual loss-making enterprises such as Air Namibia (N$153,4 million), Namibia Wildlife Resorts and State-owned media.The IPPR says it is further concerned about whether Government’s land reform programme is meeting its intended aims and whether resettled families are succeeding in becoming full-fledged commercial farmers.Government is once again allocating N$50 million for land reform this year, although last year an allocation of the same amount was barely spent.The IPPR points out that Government announced virtually no changes on the revenue side of the Budget, choosing not to introduce any tax adjustments, increasing the taxpayer threshold or any changes in tax rates.”Overall, the impression given is very much one of piecemeal and opportunistic reform rather than change according to a well thought-out, long-term plan,” says the policy watchdog.”There is no shortage of nettles to be grasped if the Budget is to become a more effective tool at promoting higher growth and reducing poverty and income inequality.”The IPPR appears unimpressed by the small surplus Government is expected to produce by the end of this financial year, because the turnaround will be short-lived and spending is set to return to new highs in the next financial year.Government is set to return to operating on a budget deficit in the next two financial years, despite earlier promising to sustain the surplus for at least two years.This year’s expenditure is set to rise to 35,6 per cent of GDP – well off the Minister’s target of 30 per cent and the highest level since Government introduced its Medium-Term Expenditure Framework (MTEF).The substantial rise in revenue this year through payments from the Southern African Customs Union (Sacu) has encouraged the Minister to raise spending by 18 per cent for this financial year.The IPPR criticised Government for still spending every cent it can lay its hands on.It said it was only because of the unusual revenue boost, which is not expected to recur, that Government was able to spend to the maximum and still produce a small surplus.The IPPR says it would have expected Government to reduce its public service in efforts to curb expenditure.In her Budget speech, Finance Minister Saara Kuugongelwa-Amadhila said that the civil service was bloated and the current situation “unsustainable”.But she said layoffs were not necessarily the answer and that savings would be made by appointing only essential staff.A large portion of the increased spending will be for personnel expenditure, which rises from N$5,5 billion to N$6,1 billion.After a two-year absence, the additional budget is expected to make a comeback towards the end of the year.”Despite the absence of radical changes in spending patterns, it is possible to detect less dramatic shifts in emphasis and perhaps a hardening of attitudes towards poor budgetary practices and wasteful spending,” says the IPPR.This is the sixth successive year that the Minister has presented a three-year perspective on revenue, spending and the deficit – the Medium Term Expenditure Framework (MTEF).This year’s MTEF appears unusual because it forecasts declining revenue and expenditure but an increasing deficit, whereas the previous four MTEFs all projected that revenue, expenditure and deficit would decline.The IPPR praises Government for being serious about tackling corruption and cutting waste through its allocation of N$3,5 million to the recently established Anti-Corruption Commission.It says the Budget also signals that the spending emphasis is shifting towards priorities such as the creation of a knowledge-based economy and reducing poverty.But the IPPR criticises Government for its spending choices, especially the N$120 million for the new State House project this year, and more than a billion to the Defence Ministry and millions more for the security and protection of VIPs.”Defence, security and the protection of VIPs take precedence over other pressing priorities with no clear explanation,” says Sherbourne.He also questions the continued expenditure on perpetual loss-making enterprises such as Air Namibia (N$153,4 million), Namibia Wildlife Resorts and State-owned media.The IPPR says it is further concerned about whether Government’s land reform programme is meeting its intended aims and whether resettled families are succeeding in becoming full-fledged commercial farmers.Government is once again allocating N$50 million for land reform this year, although last year an allocation of the same amount was barely spent.The IPPR points out that Government announced virtually no changes on the revenue side of the Budget, choosing not to introduce any tax adjustments, increasing the taxpayer threshold or any changes in tax rates.