THE DA'S 2006-07 ALTERNATIVE BUDGET

The Democratic Alliance today (13 February 2006) presents its alternative budget for the 2006/07 financial year, entitled "Jobs, Growth and Delivery". The document provides a costed synopsis of our policies and programmes and is intended to influence public debate about how government's resources can best serve the interests of the nation.

JOBS

We believe that joblessness is the single largest challenge facing the South African economy, for without more jobs it is impossible for the majority of South Africans to share in the fruits of faster growth. To this end we propose a wage subsidy of R750 per annum aimed at increasing the employment and income of low-wage workers. The way our wage subsidy policy is structured will also help fight casualisation and improve job stability.

GROWTH

It makes no sense that a country with a 38% unemployment rate and a tiny deficit has one of the highest tax rates on companies in the world. What is needed to kick-start the economy is a series of bold and imaginative changes to our tax system.

In order to encourage greater investment and savings we propose that the secondary tax on companies be halved. The government should make a commitment to reduce corporate income taxes to 25%, starting with a 1% reduction to 28% this year. Tax on retirement funds should be reduced by one third. The interest and foreign dividend income exemption should be raised to R20 000 per annum.

Altogether, our proposed programme of tax cuts and offsets comes to the value of R29.7 bn, which, together with our expenditure proposals, will take the budget deficit to 3.2%.

LOCAL GOVERNMENT

At the local government level, most South Africans are not getting what they pay for and deserve. For too long we have had good budgets for local government services coupled with an astounding failure to deliver on the ground. Part of the problem is that local government is too far removed from the people and for this reason we propose that district municipalities, which effectively constitute a fourth tier of government, be scrapped. Another part of the problem is that local governments do not have the capacity usefully to spend the funds that they are allocated. To remedy this, we not only need to get our educational system in working order, but we need to specifically improve the training and skills levels of local government administrators.

SKILLS

The government needs to do three things to bring enough skills to the market for sustained 6% growth.

Our public education system needs to be restructured so that matriculants leave school in a position to pursue further study and be trained. Skills development needs to be taken out of the hands of the SETA bureaucracy and returned to the private sector in the form of a subsidized apprentice system.

We need to dedicate resources to promoting and administering skilled immigration. The Department of Home Affairs recently, after painful delays, published immigration quotas in various occupational categories - but it remains to be seen whether the Department of Home Affairs will implement the new programme with the necessary efficiency.

A brief summary of our other major proposals follows below. We will:

• Alleviate the immediate effects of poverty by making available a Basic Income Grant of R110 per month to individuals earning less than R7500 per annum.
• Introduce annual nationwide literacy and numeracy testing at primary schools in order to enable identification of underperforming primary schools.
• Set aside R800 million for a fund dedicated to improving the level of science and mathematics education in South Africa.
• Set aside an additional R1.1 billion per annum to increase the pace of land reform and protect the principle of "willing buyer, wiling seller".
• Provide tax relief to promote the use and production of biofuels.
• Provide tax relief on security related expenditure.
• Scrap the Gautrain project and instead spend the money on an additional R2bn subsidisation of taxis, 300 buses nationwide, 200 kilometres of ordinary rail and 100 additional Metrorail coaches.
• Provide Opportunity Vouchers to school leavers to the value of R4500 per annum. Opportunity Vouchers may be used to fund tertiary education, apprenticeships, initial employment or small businesses.

The Democratic Alliance's budget represents a comprehensive alternative plan for a more prosperous and better South Africa.

Download full document (Jobs Growth and Delivery.doc)