The National Treasury has sought to allay fears that the contested 2025 budget could disrupt government spending programmes if the legislature rejects the budget, which includes a VAT hike proposal.
The National Assembly is to consider finance minister Enoch Godongwana’s budget, including its proposal to raise revenue by hiking VAT by 0.5 percentage points this year and again next year, on Wednesday afternoon.
On Tuesday, parliament’s standing committee on finance adopted the fiscal framework and revenue proposal report for the budget. ActionSA's proposal to remove the VAT hike and keep personal income tax in line with inflation was supported by the ANC and the IFP.
The National Treasury said the fiscal management system of government had a lot of flexibility thanks to the Public Finance Management Act, but Treasury remained committed to supporting parliament in its consideration and timely adoption of the 2025 budget.
“The public should not be concerned about the delivery of critical government services, including, for example, the payment of social grants, while the parliamentary process for the 2025 budget is ongoing.”
The Treasury said during the first four months of the financial year, up to 45% of the total amount appropriated in the previous annual budget may be withdrawn from the National Revenue Fund to spend on already existing programmes.
“During each month thereafter, up to 10% of the total amount appropriated in the previous annual budget may be withdrawn. In aggregate, the amount withdrawn may not exceed the total amount appropriated in the previous annual budget.”
These funds were not additional to funds appropriated for the relevant financial year and any funds withdrawn must be regarded as forming part of the funds appropriated in the annual budget for that financial year.
“Though the fiscal year starts on April 1 every year, the Appropriation Bill is always passed later. This means that every year, departments incur spending before the Act takes effect.
“Therefore, as in previous years, government departments will continue to spend as normal because funds may be withdrawn from the National Revenue Fund for the requirements of departments from April 1 until the bill for the 2025/2026 financial year is passed by parliament.”
According to the Public Finance Management Act, if the national annual budget is not passed before the start of its corresponding financial year, funds may be withdrawn from the National Revenue Fund to cover state services during that financial year.
Behind the scenes, political parties in the government of national unity (GNU) have been negotiating to find a deal that allows the budget to be passed by the House. While the DA is in the GNU, it has been vocal about its opposition to the budget and said it would not support any budget with a VAT hike.
By early on Wednesday there was still no deal between the DA and the ANC after talks deadlocked.
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