Govt wage hikes 'not sustainable'
Above-inflation public sector wage hikes are not sustainable, unless the quality of service improves.
|||Pretoria - Above-inflation wage hikes in the public sector are simply not sustainable unless the quality of public services improves.
This is according to National Treasury and is revealed in the Medium-Term Budget Policy Statement documents that are released to accompany finance minister Nhlanhla Nene's mid-term budget review this afternoon.
This year, government agreed to a three-year wage deal, which will see civil servants granted a seven percent increase this year, and two percentage points above inflation for the following two years. The wage deal has increased government's salary bill by 10.1 percent this year.
This increase, says National Treasury, is “well beyond the inflation-related adjustment that had been budgeted for. Without commensurate improvements in the quality of public services, such increases are not sustainable.”
The wage deal has consequences for the composition of spending, as salary requirements put pressure on capital and other critical inputs, says National Treasury. As a result, government says there is a “need to radically change the manner in which future negotiations are conducted”.
As a result, it is considering proposals to reform remuneration in the public sector.
As a result of the wage deal, government has a compensation budget shortfall of R12.2 billion this year, which will rise to R20.6 billion in 2016/17 and R31.1 billion in the last year.
Some of these costs do not need to be funded, says Treasury. “Moderate declines in employment levels have created space to absorb costs in some departments' budgets. In other cases, compensation budgets are overestimated due to weaknesses in budget management.”
However, most of the costs of the agreement, will have to be funded through savings, reallocation and drawdowns on contingency reserves.
National Treasury says the contingency reserves will be drawn down by R5 billion in 2015/16, R10 billion in 2016/17 and R26 billion in 2017/18.
In addition, says National Treasury, the revised medium-term expenditure framework does not provide for funds to expand head count. It notes departments that had planned to expand headcount or fill vacancies need to postpone their plans.
Some institutions may need to reduce the number of people they employ. In addition, provinces that had budgeted for surpluses will now have to spend this money on wages.
Government employment levels have declined from 404 496 staff in March 2012 to 402 748 as of this past March. Most national government employees are in justice, crime prevention and security cluster departments such as police, defence and correctional services, where employment levels have declined over the past three years.
This trend has been offset by the expansion of managerial personnel in administrative and policy departments in central government.
A recent National Treasury review showed, across the 13 departments analysed, 1 158 posts were added in the last five years. Total compensation spending across these departments doubled between 2008 and 2014.
National Treasury notes SA's “public servants make an important contribution to the country's development goals, and government is committed to fair and sustainable levels of public-sector remuneration”.
IOL