Article written

  • on 27.02.2014
  • at 04:30 PM
  • by Kevin Hind

Budget 2014: ‘The Disconnect between Plans and Budgets’ 0

Common sense suggests that budgets follow plans, not the other way around. Beyond the headline results of the budget, a closer look at the finance minister’s 2014 budget reveals significant contradictions and suggests a disconnect concerning the relationship between plans and budgets.

Consequently, the minister’s budget allocations are far from optimal for us to reach the twin goals of reducing unemployment and decreasing inequality. 

Minister Pravin Gordhan once tabled the idea and a discussion document called “Fiscal Guidelines”. These guidelines provided the overall macroeconomic framework for dealing with complex questions on the deficit rate, the meaning of a counter cyclical policy and reprioritisation of spending. In the wake of the ANC’s Polokwane conference and the global financial crisis, the possibilities for reaching an agreement with social partners seemed plausible.

On the one hand, an agreement on the fiscal stance of government potentially could have provided organised labour and community organisations with mechanisms to ensure that social and economic spending remained broadly redistributive. On the other hand, investors would have been provided with clearer indicators on fiscal stance, and in so doing, support private sector investment. 

This opportunity was however missed, robbing the National Treasury of perhaps its most important weapon for linking social development plans to a sustainable funding strategy.

The failure to reach agreement on the fiscal framework is compounded by the deep divisions around the National Development Plan (NDP). Minister Gordhan has outlined several proposals for linking the NDP to the budget process, but the intent of shared strategy on the economy has not been realised.

More importantly, the NDP mimics the current government programme of action, which is far from a deliberate development strategy. More to the point, the NDP runs in tandem with several other government plans, meaning that Treasury does not have a single reference point on which to allocate resources.

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