Parliament 'accepts' it must begin afresh with fiscal framework

Parliament has accepted that, in light of recent developments, it must go back to the drawing board on the fiscal framework, it said in a letter to the Western Cape High Court on Friday.

In the letter, lawyers for parliament said this acceptance was not because the process initially followed was unlawful, as claimed by the DA and EFF. Instead, it was because the earlier process had been “overtaken by the events postdating the hearing on this matter”.

Part of the DA and EFF's case on the VAT hike on Tuesday was that parliament's acceptance of the fiscal framework — National Treasury's budget outline — on April 2 was unlawful. Lawyers for parliament defended parliament's process while lawyers for the finance minister defended the lawfulness of his decision to increase the VAT rate. 

Finance minister Enoch Godongwana’s announcement that he would be reversing the VAT hike was made on Wednesday evening, the day after the court heard argument.

The letter informed the court of Godongwana's reversal announcement but said its position remained that the reversal announcement (like the initial announcement to increase the rate of VAT) was separate, in law, to parliament’s process around the fiscal framework.

But, it said the minister had also written to the speaker of parliament to say he was withdrawing the Appropriation Bill and the Division of Revenue Bill — “to propose expenditure adjustments to cover the shortfall in revenue”.

According to the law, these bills are tabled in parliament “at the same time as the national annual budget ... and the proposed fiscal framework,” said the letter. Given that, it was parliament’s view that the earlier fiscal framework adopted by parliament “can no longer stand”. Parliament “accepts” that the earlier resolutions on the fiscal framework “can no longer prevail”, it said.

Either a new fiscal framework or, alternatively, an amended fiscal framework would have to be tabled, and then an “entirely new process followed”.

The letter said parliament could, in terms of its rules, rescind the resolutions adopting the earlier fiscal framework. Or, if the court sets aside the fiscal framework as argued for by the EFF and the DA, parliament could consider and adopt a new or revised framework “attendant on an order of the court”.

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