Pay deal up to departments

Bloomberg

After approving an inflation-busting pay increase for public servants, government failed to allocate additional funds to pay for it, instead ordering state departments to find the money within existing budgets.

The pay deal will cost an extra R30.2 billion over a three-year time-frame, the National Treasury said in its Medium-Term Budget Policy Statement presented to lawmakers yesterday.

The public-sector wage bill already accounts for 35% of government expenditure.

“Your sweet spot should be 30%,” Finance Minister Tito Mboweni told reporters.

The wage bill for the government’s roughly 1.3 million employees has grown at an average rate of 11.2% a year since 2007, outpacing inflation and crowding out spending on services and infrastructure. Although employment numbers peaked in 2013 and have fallen 1% since, it’s not enough to contain real spending growth, Treasury said.

Moneyweb

National Treasury does not expect that personal or corporate tax rates or VAT will be increased over the medium term, unless the economic environment deteriorates substantially.

“At this stage, revenue projections assume no changes to tax rates, but provides for annual adjustments to personal income tax brackets, levies and excise duties in line with inflation,” it said in its Medium-Term Budget Policy Statement (MTBPS) yesterday.

Tax commentators have for some time warned that further tax hikes may not necessarily result in additional tax revenues. In its MTBPS, National Treasury acknowledged as much, citing little room for large fiscal adjustments.

Finance Minister Tito Mboweni stressed the MTBPS came at a time of slow economic growth (Treasury revised its forecast for 2018 from 1.5% to 0.7%),