Chairperson, Cope supports the fiscal framework but would like to make the following points. The key point is contained on pages 10 and 11 of the report. It says that "higher government expenditure as a share of GDP ultimately requires a growing tax base or higher tax rates." That is what the report says. As there is little likelihood of the tax base growing, the country must brace itself for higher tax rates.
This year, government expenditure is going to be R979,3 billion and the revenue is going to be R666,6 billion. The government will spend R312,7 billion more than it has in the bank. Government will either have to reduce its expenditure by 50% or seek to increase its revenue by 50%.
Government's net loan is now hovering near R1 trillion and will therefore soon pass the trillion mark. As we now see, South Africa no longer has a cushion to ride out a financial storm. We are in a situation of high risk. Meanwhile, the government wants us to believe that its borrowing is countercyclical. That is not so. If government borrowing went 100% into infrastructure development and manufacturing investments, then the expenditure could certainly be regarded as countercyclical.
We know, however, that the opposite is true. Government is funding consumption from borrowing. This year, government will enter the market to borrow over R300 billion. This will put a squeeze on money supply. With government taking such a large chunk of savings, businesses, investors and households will have less to borrow. It will also, once again, put pressure on the interest rates. We in Cope are not comfortable with this.
Job creation, as the hon Chaane has said, will need greater liquidity in the economy to stimulate business growth. The government must reduce its own expenditure. When the Minister of Finance requests that money be spent on frontline services and not on administration, he is being very gentle towards us or government. He should, in fact, demand it.
While the Minister of Finance should be commended for achieving savings of R30,6 billion over the Medium-Term Expenditure Framework, MTEF, period, he should seek to increase this.
Cope does not believe that the government should be relying on economic growth to stabilise the debt stock. Government must use a belt-and-braces approach, otherwise our children will be landed with debt incurred by this government.
The Minister of Finance needs to be given a free hand to curb expenditure and to institute a state procurement process which will adjudicate these finances from the outside, not within the department. We need to save every cent or face the consequences of higher taxes and a constrained economy. I thank you. [Applause.]