Treasury’s proposed austerity measures will have a negative impact on most vulnerable, says civil society coalition
A coalition of civil society groups has criticised the National Treasury’s suggestion that VAT needs to increase or spending on crucial services must be cut if it is to fund an extension of the Social Relief of Distress grant.
The Universal Basic Income Coalition (Ubic) says that it is “deeply concerned at the National Treasury’s ongoing attempts to pit the interests of vulnerable constituencies against each other and to manufacture a sense of panic around a ‘fiscal cliff’, in order to drive through unnecessary and deadly cuts to social spending”.
“In particular, we reject Treasury’s threats to raise VAT or cut essential spending on the Child Support Grant or other public services, in order to preserve the Social Relief of Distress (SRD) grant.”
This was in response to the Treasury’s proposals to fund an extension of the SRD grant through regressive tax increases and budget cuts in a cost-containment letter issued to government departments on 31 August.
The coalition comprises the following civil society organisations: #PayTheGrants, Alternative Information and Development Centre, Black Sash, Children’s Institute, University of Cape Town, Institute for Economic Justice, RightfulShare An Income Movement, Social Policy Initiative and Youth Lab.
Dr Gilad Isaacs, an economist and co-founder of the Institute for Economic Justice, said: “Generating a sense of crisis in the lead-up to the Medium-Term Budget Policy Statement (MTBPS) in [November], primes the public to swallow yet more deadly, unnecessary and unconscionable spending cuts without question. This is also being used to bully government departments including health, education and social development into submission.”
Professor Alex van den Heever, of the Wits School of Governance, told Daily Maverick, “I would concur with the statements by the Universal Basic Income Coalition regarding National Treasury’s public statements. The expert panel I chaired found that VAT funding for social protection had negative economic and social outcomes relative to more progressive measures. The SRD grant has, however, been financed to date, and it was our finding that no additional taxes were required for it to be made permanent.
“But if residual tax increases were to some extent needed, these should focus on personal income taxes. The arguments that other important social programmes must be cut to finance the SRD grant don’t appear plausible, as additional funds have been allocated without much fuss to programmes National Treasury agrees with — such as employment subsidies and one-off special employment programmes — which are poorly targeted, don’t catalyse employment and don’t provide income protection to the vast majority of income-compromised households.”
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The coalition has made short-, medium- and long-term representations to the Treasury about how the R350 SRD grant can transition into a workable universal basic income. These include:
- Immediately increase the SRD grant to R450 to compensate for food inflation since 2020;
- By March 2024, increase the SRD and Child Social Grants to the Food Poverty Line of R663;
- Put in place timeframes to increase the grant to the Upper-Bound Poverty Line;
- In the medium term, raise the tax threshold, which is currently around R95,000 per annum or R7,900 per month; and
- In the long term, abolish the threshold to remove exclusions associated with means testing.
The Ubic statement goes on to say: “National Treasury has a constitutional duty to fund and continually improve the SRD. This is true also of the Child Support Grant [CSG] which ensures 13 million children have basic nutrition and basic services including health, education and social development.
“The state is able to access the resources to sustainably fund the SRD grant alongside continuing to fund all other social grants and basic services — but National Treasury refuses to tap into them because it remains wedded to narrow macroeconomic dogma.
“Extending the SRD beyond March 2024, and increasing both the SRD and CSG grants to the food poverty line (now R760), is the absolute bare minimum that civil society has been calling for, in order to advance basic socioeconomic rights laid out in the Constitution and the International Covenant on Economic, Cultural and Social Rights.”
Nomahlubi Jakuja from Youth Lab, a non-profit that is part of the coalition, told Daily Maverick, “Should austerity prevail, if Treasury cuts spending it will have a significant influence on the people who are heavily dependent on government services for healthcare, education and social grants”.
Jakuja said “a caring government” would understand the importance of increasing spending to provide free services for grant recipients, who she said were the most vulnerable members of society.
Professor Sandra Liebenberg, the chair in Human Rights Law at Stellenbosch University’s Law Faculty, said: “Recent reports that Treasury has suggested that to maintain the SRD grant it would be necessary to raise VAT or cut essential spending on other social grants and government programmes raises the stark question of how constitutional rights feature in budgetary and fiscal decision-making.
“While difficult trade-offs undoubtedly have to be made to ensure the sustainability of South Africa’s public finances, these trade-offs must be informed by constitutional rights, particularly those rights that are key to protecting the survival and human dignity of disadvantaged and vulnerable groups in our society.
“The Constitution is the supreme law of the country and binds all organs of state, including the National Treasury. Treasury should thus be required to justify the reasonableness and necessity, given other fiscal and cost-saving options at its disposal, of implementing regressive taxes such as VAT and cuts to other social programmes in order to maintain a vital programme implementing the right of everyone to have access to social assistance — the SRD programme.”
Van den Heever said, “It is a widely held view, which I agree with, that government is in a position to cut expenditure in a host of areas with limited social impact. To the extent that austerity is required, it should be targeted at the wasted expenditure, and avoid harming the most vulnerable.”
This is in line with the coalition’s suggestion to raise extra revenue by reversing the recent cuts to corporate tax, removing tax breaks for high-income earners, and meaningfully addressing the under-taxation of wealth. The coalition maintained that it would vehemently oppose Treasury’s proposed austerity measures.
Responding to the outcry about the letter, Minister in the Presidency Khumbudzo Ntshavheni has since stated that Godongwana would “shortly issue” guidelines clarifying the “unintended misunderstanding” caused by the cost-containment letter issued on 31 August. DM