FFC Submission on DoR 2003/04

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FFC SUBMISSION ON THE DIVISION OF REVENUE
2007/08 PRESENTATION TO THE SELECT COMMITTEE ON
FINANCE _____________________ 17 MAY 2006
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Structure of Presentation

• Part A Review of Conditional Grants
• Review of Conditional Grants
• Review of Health Conditional Grants
• Review of National Housing Allocation Formula

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Structure Cont.

• Part B Review of the Equitable Sharing of
  Nationally Raised Revenue
• Review of Welfare Services Financing through
  the Provincial Equitable Share
• Review of the Local Government Equitable Share
  Allocations
• Trends in Provincial Own Revenue

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Part A Review of Conditional Grants

• General Recommendations
• Reiterate that conditional grants be used
  strictly to fund spill-over benefits and national
  priorities
• Phase into the ES after being institutionalized
  in provincial budget processes
• National departments should set norms and
  standards for concurrent responsibility
• Monitor performance to ensure compliance with
  targets

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Review of Conditional Cont

• Specific Recommendations
• (Health), HIV/AIDS Conditional Grant should
  continue
• Ensure sufficient focus and resources for
  addressing the problem
• Consistent with the FFCs position on the
  financing of HIV/AIDS

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Continued

• Hospital Revitalization Grant be incorporated
  into the Provincial Infrastructure Grant
• Convergence of purpose
• Under-spending occurs due to stricter conditions
  and preference for provincial infrastructure
  grant
• Would enable provinces to address health
  infrastructure more comprehensively
• (Agriculture), Merge Land Care and Comprehensive
  Agriculture Support Programme Grants into one
  Schedule 4 grant
• Overlapping objectives and reduction of
  administrative burdens
• Agriculture dependent provinces will spend
  according to their circumstances

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Review of Conditional Grants cont..

• (Education), Refine conditions relating to
  business plans development and approval
• Minimise time spent on plans and their submission
  by provinces
• Previous FFC recommendation on the relaxation of
  conditions for decision space purposes still
  applies
• Continue the HIV Life Skills Education Programme
  Grant
• Focus the allocation mechanism on actual
  enrolment rather than using the education
  component in the PES

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Review of Conditional grants Cont

• (Local Government),
• The Municipal Infrastructure Grant should go
  beyond funding the Basic residential
  infrastructure (B), the Public municipal service
  (P) and Social institutions and micro-enterprises
  (S) but should also cover operational and
  maintenance cost

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Health Conditional Grants (NTSG)

• Allocation for the National Tertiary Services
  Grant (NTSG) based on approved policy norms and
  standards be introduced
• Norms and standards be specified according to
  types of beds, theatre, supporting staff,
  casualty, outpatients, and staff ratio and
  non-staff cost per health care service
• Government should urgently develop a national
  service plan that includes level 1

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Health Conditional Grants cont..

• NDoH establish a Chief Directorate for technical
  assistance in administering NTSG
• Service redistribution be achieved through
  separate capital accounts
• NTSG should be retained as a conditional grant
• Ensure no unilateral downgrading of referral
  services as part of a package of public sector
  services by provinces

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Health Conditional Grants (HPTDG)

• Organizational structure of NDoH should include
  unit with sufficient technical capacity
• Establish a standing committee where all
  role-players will make joint decisions on policy
  targets, inputs and funding flows
• Policy targets should be set and gazetted as
  minimum norms and standards for the funding of
  healthcare professionals

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HPTDG Cont

• Funded institutions be externally audited
  annually
• Nationally policy framework underpinning health
  professionals training
• Allocation to NDoH be a conditional grant
• Allocation to NDoE be an earmarked subsidy to
  tertiary education institutions

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HPTDG Cont

• Convert HPTDG to a specific purpose grant
• based on target enrolment by type of health
  professional
• Allocation towards pathology students using
  National Health Laboratory Services be
  incorporated into HPTDG

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National Housing Allocation Formula

• Eliminate bias through the use of variable to
  account for provincial disabilities and
  peculiarities
• Viz. traditional housing, delivery capacity
  development potential
• Perceived as biased by rural provinces due to
  non-inclusion of traditional housing
• Inclusion of poverty component favoring rapidly
  urbanizing provinces

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Housing Cont

• Recognize variation in regional cost
• Cost differ across provinces for same housing
  standard
• Different building and land cost impact on
  housing construction cost standard thereof
• Improve rural development funding for communities
  to access economic opportunities livelihood

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Housing Cont

• Enhance compliance with minimum quality standards
  for rapid housing delivery with no compromised
  quality
• Poor quality impacts negatively on costs and
  backlogs
• Demand and need is greater than what can provide
  and increased funding will be limited by industry
  capacity and implementation constraints

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Part B Welfare Service Financing

• Incorporate a social development component in PES
  based on population, population in poverty and
  institutional capacity
• Simplicity and maintenance of provincial
  discretion in delivery
• Ensure data collect on institutional capacity for
  proper financing
• Maximize the reach of welfare services by
  accounting for the spreading of institutions and
  human resources

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Local Government Equitable Share Formula

• Revise the current estimated cost (R130) of
  delivering basic services
• Current estimate may be an under-estimation of
  true costs
• Consider raising the estimated cost to R175 at
  this will ensure grant are directed at
  strengthening poor municipalities
• Simulation exercises reflect that under revenue
  neutrality, R175 allocates more to categories A
  and B and raises LES by R22 million

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LES Cont..

• Increase the effectiveness of LES
• Review and assessment of basic services cost will
  enhance LES ability to achieve its principles and
  objectives
• Review and assessment must consider differences
  in demographic disabilities and their
  composition
• It must also consider regional and geographic
  disparities as they affect quality and quantity
  of services

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Provincial Own Revenue Trends

• FFC notes general progress by provinces since
  implementation of Provincial Tax Regulation
  Process Act of 2001
• Notes general progress in implementation of
  National Treasurys and FFCs recommendations
  made in 2003 on own revenue collection and
  restructuring of Provincial Treasuries Revenue
  Directorates