Mr Chairman, we who are concerned with this department, naturally expect criticism from time to time. I do not think it would be possible to conduct a proper debate on financial policy if there were no criticism, but some of these points of criticism are really somewhat strange. At the outset I should just like to refer briefly to what I noticed a day or two ago.

†This is a little report in The Daily News and it is headed “Baffle Gab”. It says:

They go on to say:

The commentator goes on to say:

I thought if the Opposition were looking for any points to make they might tackle this one and give us the meaning of this bagful of buzz-words.

Have you read the Professor’s speech?

Yes, certainly. Mr Chairman, that was just by way of introduction on a lighter note.

I should like now to deal with what I think is a very fundamental issue. In presenting the Budget to Parliament in March, I stressed the difficulty of formulating a sound and effective budget within the framework of the unfavourable conditions prevailing, over which, for the greater part, we had no control. Since that time, in fact, the all-important gold price has fallen significantly to about $370 per ounce, and may well fall further in the next several months before recovering; and the drought, instead of improving, as many believed, has in fact worsened in certain major summer rainfall areas.

These are critical developments for the South African economy, and require a most careful reappraisal of our economic and financial situation and the policy implications involved.

Let me immediately repeat what I stated in the Budget the current aims of fiscal and monetary policy were:

1. (1) To keep the balance of payments sound;
2. (2) to curb inflation; and
3. (3) by achieving these two objectives, to prepare the ground for faster real economic growth, increased job creation and a higher average standard of living for all sections of the South African population.

I went out of my way in the Budget speech to say that, all things taken together, the way in which the South African economy had adjusted to the lower gold price, the drought and the other adverse extraneous developments during 1982 and 1983, had been impressive. And the part played by fiscal and monetary policy in bringing about this adjustment has attracted favourable comment from the International Monetary Fund and other overseas’ and South African experts.

There can be no doubt that during the past three years the South African economy has adjusted infinitely better to the unfavourable economic developments in the world than most, if not all, other comparable countries. But the fact remains, as I cannot emphasize sufficiently, that a deterioration has set in lately in certain key respects, mainly the gold price and the drought situation.

Coupled with the upturn in gross domestic expenditure and imports which set in in the second half of 1983, these developments have turned the surplus on the current account of the balance of payments into a sizeable deficit. Taken at a seasonally adjusted annual rate, the current account, which had registered an average surplus of nearly R1 billion during the four quarters to September 1983, showed an annualized deficit of R1,9 billion during the fourth quarter of 1983 and a provisionally estimated (annualized) deficit of close to R3 billion during the first quarter of 1984. Although only equivalent to about 3% of gross domestic product, this deficit is nevertheless a reality that has to be taken into account in policy formulation.

Another consequence has been that the effective exchange rate of the rand has depreciated by about 11% in terms of a weighted “basket” of currencies, including the dollar, since September 1983—predominantly due, of course, to the exceptional escalation in the value of the US dollar, an escalation which shows no sign of abating.

When comparing actual total expenditure for 1983-84 with the budgeted expenditure for 1984-85, I mentioned that the increase in expenditure is estimated to be 11,7%. I have been criticized in some hostile quarters for making this statement as total expenditure for 1984-85, so it is argued, is bound to increase beyond this level no matter how strict the discipline will be. This may be so—there never has been a year without marginal additional unavoidable expenditures due to unforeseen circumstances. That, of course, not only goes for South Africa. No one, including myself, can accurately predict what will happen in all facets of our economy 12 and more months hence. Yet, I have pledged in the interest of the soundness of the economy and our finances, to keep these extra essential increases down to the absolute minimum—and I intend keeping my pledge to the extent that I have any control over these totals.

However, I warned at the time that should the expenditure estimates turn out to be too conservative and/or the revenue estimates less buoyant than expected, I could see no way of avoiding further tax increases in the year ahead and that I would not hesitate to propose their introduction in the course of the current fiscal year.

In the more than six weeks that have elapsed since my Budget Speech, the far-reaching changes in the underlying economic situation I have just outlined, together with certain other new developments, have led me to the conclusion that further remedial fiscal action is called for and that it should not be delayed beyond the time necessary for its effective implementation. A Budget surplus of R125 million, and more, for likely further drought relief will undoubtedly be fully utilized for this purpose.

In reaching this conclusion I have been particularly influenced by the imperative need to keep South Africa’s finances in a healthy state. The great objectives are:

1. (a) To maintain a sound balance of payments;
2. (b) to halt the depreciation of the rand;
3. (c) to continue to counter inflation;
4. (d) to ensure that there is no undue recourse to borrowing by keeping the Budget deficit before borrowing to a minimum, and thus relieving the pressure on interest rates which are very high;
5. (e) to ensure that there shall be no recourse to money creation in financing the Budget; and
6. (f) to assist in controlling the money supply.

Of course, the measures necessary to achieve these objectives are all in one way or another interrelated.

Excessive borrowing is damaging to the economy in several ways. Firstly, it could imply the financing of current expenditure by borrowing, that is, from capital, which should clearly be avoided. Secondly, if the deficit is financed by new money creation, it would be inflationary and lead to excessive currency depreciation and balance of payments problems. Thirdly, if the unduly large deficit were to be financed through increased Government issues on the capital market, it would raise interest rates and “crowd out” other public and private sector borrowers.

By reducing the deficit before borrowing, any additional tax increase would contribute towards a more effective “mix” of fiscal and monetary policy.

In addition to these financial policy imperatives there are further considerations which have influenced me to take the action I shall shortly announce. Among these are, firstly, the impossibility of accurately estimating the extent of future drought relief and natural disasters. Even though I set aside an additional amount of R125 million in the form of a Budget surplus for this purpose, the detailed further financial implications of these setbacks have only very recently become available.

Secondly, it was impossible at the time of the Budget to foresee that the producer price of maize would go as high as R215 per ton, and the consumer price as high as R220 per ton, an increase of more than 20%. This will entail substantial additional subsidies of well over R100 million. Furthermore, the rising import prices of maize mean that the Exchequer has to finance an increasing “loss” on these imports, probably of the order of R100 million.

Thirdly, the uncertainty as to the price of wheat for the next season—the price will only be determined some six months after the Budget—together with the pressure on the Government (the pressure is extremely strong) to hold down the price of bread as much as possible, makes it impossible even at this point to forecast the subsidy on bread for the full year with any degree of accuracy. However, that the amount will be very substantial appears to me to be quite clear.

Fourthly, there are many other substantial subsidies which for various reasons are extremely difficult to determine in advance. Among them are subsidies payable in respect of train and bus commuters and interest rate subsidies to farmers and for housing.

And then, of course, there is the difficulty of quantifying various tax concessions and tax expenditures such as investment and initial allowances on machinery and buildings.

For all these reasons I have decided to propose to raise the General Sales Tax from the present 7% level to 10% with effect from 1 July 1984; and at the same time to exempt completely certain specified basic foodstuffs from the tax.

At 10% this rate remains one of the lowest for this kind of tax worldwide.

While, in a tax of this nature, it is impossible to distinguish between consumers with differing means, I wish to propose that certain basic foodstuffs which are necessary for nutrition be exempted altogether from the tax. While a closer definition of the various items may be necessary, the items which are proposed to be exempted are as follows: Bread, maize meal, unsifted wheat meal, raw meat, raw fish, fresh vegetables and fruits, fresh milk, butter, margarine, and raw eggs.

I announced in my Budget Speech that I propose to request the Standing Commission on Taxation Policy to advise me inter alia in regard to the desirability and practicability of the exemption of a limited number of basic food items. Circumstances have, however, made it imperative for the Government to take a decision on the matter before the commission has had an opportunity to report to me.

I trust that everyone concerned will appreciate how important this matter has now become and that traders will co-operate to ensure that consumers benefit from the concessions which entail a full sacrifice of tax on the items mentioned even though a certain amount of additional administrative work will be involved. The Standing Commission will be asked to advise me on how best the exemption can be applied in practice.

In view chiefly of the exemptions, it is extremely difficult to estimate the net increase in revenue from GST for the remaining months of the year after July. Allowing for the fact that the first payment of the higher tax will only be received in August, the best estimate I can make at this point is a net additional revenue from this source of R800 million during this fiscal year.

The increase in the rate of the tax and the proposed exemptions will place an additional burden on Inland Revenue and special steps are already being taken to augment Revenue staff and inspectors and to meet additional accommodation and other requirements.

The Government is conscious of the need for the efficient administration of the tax, particularly by means of audits and inspections, not only for the purpose of ensuring that the full amount of tax is collected, but also to prevent unscrupulous exploitation of the public. After due consideration it has been decided that the add-on system should, with certain unavoidable exceptions, be made compulsory from 1 July 1984.

The steps I have announced should ensure that the deficit before borrowing will be below R33 billion, or 3% of the gross domestic product, and therefore that the Treasury’s borrowing requirements stay within sound limits. As the new fiscal measure begins to take effect, the need for interest rates to remain high to preserve sound monetary conditions should certainly be reduced. In the absence of totally unforeseen domestic or international developments, I would therefore expect this measure to contribute to an easing of both short- and long-term interest rates during the rest of the year. This will naturally reduce the plight of the drought-stricken farmers and the interest burden on the Treasury, and in due course also assist in bringing about the required recovery in fixed investment in plant, equipment and machinery.

There is a right and a wrong way to reduce interest rates. The wrong way would be for the Reserve Bank to start the process by reducing its rediscount rates, buying securities in the open market, financing Government spending and, in general, pumping large amounts of relatively cheap money into the economy. This the Bank has quite rightly refused to do, since any such action would result in an excessive and inflationary increase in the money supply.

The right way of reducing the upward pressure on interest rates, is the course we are now following, namely to reduce both the Treasury’s borrowing requirements and the general propensity to consume by raising taxes. In this way scope can be created for interest rates to decline without any accompanying excessive rise in the money supply. Fundamentally, of course, the best way to reduce nominal interest rates is, firstly, to reduce the rate of inflation and, secondly, to diminish inflationary expectations. That remains our ideal.

I anticipate that there will be those who will allege that the increase in General Sales Tax, whatever its merits in other respects, will be inflationary. This is understandable, because an increase in GST, unlike an increase in income tax, has the so-called “statistical” effect of bringing about a once and for all rise in the consumer price index. In the case at hand, of course, there will be the countervailing downward impact on the index of the exemptions now being introduced. Indeed, it is estimated that the net statistical effect will be to raise the overall consumer price index by less than 1%. Moreover, for the lower income groups, who spend relatively more of their income on the items which will in future be exempted from GST, the net price effect will almost certainly be downwards. Put in another way, it means that as far as the lower income groups are concerned, because of the larger proportion of their spending on basic foodstuffs now exempted, they will benefit by this exemption more than they would suffer by paying 3% more on non-exempted items. This should provide welcome relief where it is most needed.

The more basic point that should be made in this respect is that the whole notion that any increase in GST is inflationary is in any event fallacious. Quite the opposite is true. The proposed raising of additional revenue through GST forms an essential part of the present anti-inflationary policy. It will curb the expansion of real disposable income and therefore of consumer spending. At the same time it will reduce the deficit before borrowing and therefore the need for the Treasury to approach the capital market for additional funds. This, in turn, will assist the monetary authorities in further slowing down the rate of increase of the money supply and total spending without upward pressure on interest rates.

In all these ways, the GST adjustments should serve to reduce the downward pressure on the exchange rate of the rand and the upward pressure on prices and costs. It is, in essence, a major disinflationary step.

In conclusion, on this point, I would like to pledge that should we benefit from an unexpected and substantial rise in the price of gold, or should it appear that expenditures will be contained below and revenue appreciably exceeds my expectations, I shall not hesitate to adjust the level of taxation downwards at the earliest possible opportunity. Tax reform and tax changes are not an ad hoc mindless exercise, but are in fact a finely balanced discipline. Speaking in this context, Thomas Jefferson once said:

I believe that a careful, objective appraisal of this measure will show that we are in fact heightening and improving the balance within our whole tax system. Before GST, indirect taxes were 30% and direct taxes 70% of the whole; today, indirect taxes are 40% and direct taxes 60% of the whole. I believe that this will further redress what I still regard to be an imbalance. However, there is another aspect to the balance, namely that in the Budget we did not raise income tax on individuals because of the effect of so-called fiscal drag. That in itself has caused the amount to be expected from the payment of personal income tax to increase a good deal. We put up company tax because like in so many countries—I have some very interesting articles here on the American scene—the income from corporate or company taxation has been falling in one country after the other, also in our country, and the average level of effective tax has become far less than the nominal rate which was 46% and is now 50%. We have now gone further and we have introduced a measure to exempt basic foodstuffs from GST as a whole and are in fact giving substantial benefits to the lower income group taxpayers, who will of course pay the rest of the GST and some of whom may be paying income tax. In that sense I think this is a further point.

My last remark in this context is to issue a word of caution. This country has an economy basically so sound and so resilient that we tend to think that whatever happens to these major causes and effects affecting boom or recession, we can simply go on as usual. I have been trying to warn in a balanced way that this radical drop in the gold price has very serious effects and to have that happening at the same time as the worst drought in living memory, is a double disaster of immense proportions. All of us must realize that we are going to have to use a little restraint and a little patience in the times that lie ahead. I think this goes for all, of us, also in respect of wage and salary claims. We have all had good increases and I think now is the time to consolidate and to exercise that restraint which is necessary, so that individual savings in South Africa are restored to something nearer to the traditional level which will, of course, immediately give us more capital for more productive investment. I have the utmost confidence in the economy, but I say that after the most careful consideration and discussion with all my advisers, this is the absolutely unanimous decision we came to.

*I should like to refer briefly to the question of State expenditure. In my Budget speech I announced that the Treasury was going to take more stringent action in an effort to limit State expenditure early in the year and during the year. Therefore I indicated in my Budget speech that in order to step up our policy of financial discipline in the field of control of State expenditure, it had already been agreed inter alia to limit monthly Exchequer issues to departments and Government institutions, to one-twelfth of the total amount allocated for the financial year, with a small margin to ensure flexibility. Specific approval for any excesses must be obtained from the Treasury. I wish to state very clearly that these very important steps cannot be put into effect from April, and I shall explain why. The expenditure for April this year will.be at a considerably higher level than one twelfth of the Budget. This is unavoidable due to the payment conditions of certain services, such as the payment of the employer’s contribution of the central Government and the provincial administrations to the Public Servants’ Medical Aid Association at the start of a financial year. In the second place there is the payment of service bonuses during April, in respect of State and provincial officers whose birthdays are during the months January to April. The arrangements with regard to service bonuses will, if possible, be changed next year, depending on the availability of funds to distribute the expenditure more evenly throughout the year. In the third place there is the payment on the approved subsidy basis to universities, technikons and State-supported technical colleges of three-twelfths of the annual subsidy to synchronize the payment with the financial year of these institutions, which extends over the calendar year. The structural problem disappears in May, and after May we can keep to the envisaged restriction as far as possible. I think it is necessary that we fully understand the situation in April.

The final point I want to make while I am on my feet concerns the financing of the constitutional dispensation. Questions have been put to me in this connection, and I should briefly like to give the Committee a few answers.

I should like to draw the attention of the Committee to the issue of the financing of the new constitutional dispensation. The Treasury and the Cabinet have for some time, and still are, giving attention to the proposals with regard to principles and detail of the financing framework in the new dispensation. On top of that, the Parliamentary Committee on Standing Rules and Orders is considering the handling of financial affairs in the new Parliamentary process. Further inputs will be made to the Cabinet before a final decision is taken. I wish to state clearly that as far as I am concerned, due to the already high level of expenditure and the tightness of the revenue position this year, which I have attempted to improve by way of the additional tax proposals I have just announced, there can unfortunately be no question this year of significant additional expenditure on own affairs. My department has already drawn up a new Exchequer and Audit Bill, and a further Bill is in the process of preparation to regulate further the financing of the Houses in terms of section 84 of the Constitution. Final decisions by the Government on matters of principle are, however, necessary before both of these Bills can be fully prepared. In the nature of the matter these Bills must be introduced and disposed of during the present session of Parliament. To date, therefore, it has not been possible to make any meaningful quantification of the cost of introducing the new dispensation. Only the direct cost entailed by the enlargement of Parliament could thus far be determined with any reasonable degree of accuracy, but since provision is already being made for expenditure of this nature in the present Budget as well, which could be supplemented by way of additional appropriation where necessary, it has therefore not been considered necessary to try to anticipate matters in this regard. Indeed, the increase in the direct operating cost of Parliament will be a relatively modest amount.

As regards the financing of the third level of government, which will comprise the cornerstone of the Government’s new constitutional dispensation, I have already indicated in my Budget speech that the Government has accepted in principle the recommendations of the Croeser Working Group on the granting of additional sources of revenue to local authorities. Perhaps I could just state briefly that the recommended sources of income comprise three components. In the first place there is an establishment levy, which will be imposed at a very low rate in respect of the turnover of all commercial, manufacturing and professional business enterprizes within the area of jurisdiction of the relevant local authority and which will replace the existing commercial licence fees, that are based on stock. Secondly, a service levy on salaries and wages whereby all employers, including those in the public sector, will be taxed in respect of all their employees. Because it is proposed that this levy will replace the existing transport levy, it is proposed that part of this revenue may be utilized to try to cover the cost of urban transport in general. Thirdly, a levy on productive assets in order to balance any possible negative effect that the proposed service levy may have on the creation of job opportunities. This levy is in fact an extension of the working group’s recommendation that the total value of a property be subject to taxation. The recommendation in respect of additional revenue is based on the principle that local authorities must be put in a position, financially speaking, to provide at least the minimum standard of requirements, which also entails infrastructure with regard to housing, including roads, sewerage and electricity of the relevant communities. At present, the relevant sources of income that local authorities have to rely on are of such a nature that for the most part they only benefit the more prosperous and established areas, within whose boundaries the manufacturing industries and the main shopping centres are usually also established. Accordingly the Croeser Working Group recommended to the Government that as far as these new levies are concerned, they should rather be levied on a regional basis within a so-called economically-bound area—that is to say, the area within which people live, work and buy—and allocated on the basis of a financial formula to the relevant members, local authorities and local authorities within this area. However, since these proposals presume a collecting structure or organization which may have direct implications for the structural organization of local authorities, the proposals have, as I indicated in my Budget speech, been referred to the National Co-ordinating Council for a recommendation. Only after the council has submitted its recommendations will the Government be able to take a final decision about these proposed additional sources of income and after that, as I have undertaken, it will conduct an in-depth discussion with all relevant bodies concerning the details of the proposals. Therefore, Mr Chairman, I do not think that it would be useful to discuss this matter further at this stage.

Mr Chairman, may I ask for the privilege of the half-hour? It is customary in this debate to start by referring to the services rendered by loyal officials and to show one’s appreciation. I want to tell you, Mr Chairman, that despite the fact that one is suffering from a degree of shock, I would like to adhere to that past practice and I wish to express my thanks to a number of the officials—not necessarily mentioning them by name—for the courtesy and the cooperation what we receive from them. In particular, in one’s dealings with the office of the Commissioner for Inland Revenue and the Commissioner for Customs and Excise and the Treasury, as well as other officials who are part and parcel of Finance, we received courtesy and co-operation which we greatly appreciate. While I follow that custom, I would like to say right at the beginning that I find the speech of the hon the Minister and the statement today as one which induces a sense of shock and a sense of disbelief that this could be happening. It must raise in the minds of the public of South Africa the simple question: Does this Government know what it is doing? I do not know if it believes it knows what it is doing because we are in a situation where we had a Budget debate six weeks ago. We went through a long process of debating for a fortnight and the hon the Minister then replied just a matter of a month ago. However, we now find ourselves in a situation where the hon the Minister virtually comes along today and says that we should not take notice of what he had said six weeks ago, because it was, in fact, not right. It is an unbelievable situation. I just want to quote one passage from what he said in his Budget Speech on 28 March this year—not last year but this year. I quote from Hansard, 28 March 1984, column 3878:

Who said that?

What year was that?

We are talking about 1984, only a few weeks ago. The hon the Minister comes along and tells us that the value of the rand has dropped and he also refers to the gold price. The rand, as no doubt his advisors will tell him, is undergoing a managed float. We and everyone else know it. We also know that one can deal with the gold price within certain levels and certain margins but I cannot understand why the hon the Minister says that something dramatic has happened to the gold price. Something dramatic has not as at today happened to the gold price. It has not happened, but what I find even more remarkable is that the hon the Minister comes here and gives us part of his reasons why he has to do this and, in doing so, he tells us that he did not realize how large the increase in the price of maize is going to be. Where is the hon the Minister and his Government living?

Did you realize it?

As a matter of fact, when we commented on it, we actually appreciated the fact that we thought that there had been in in the circumstances considerable sacrifices by the farmers of South Africa in respect of this particular maize price because I knew what the crop was likely to be and what is likely to happen. Ask anyone who sits on that side of the House and who is a farmer and who has any knowledge of what is going on in the maize industry and he will tell you how dissatisfied the farmers are with that price. He will tell you what the situation is. The hon the Minister talks about the fact that he did not anticipate what he had to do about the imports of maize. I see the hon member for Smithfield is smiling, because he saw the Maize Board and he knows what they said but neither of us can tell this Committee what they said. We will have to wait for another occasion but it will prove my case, would it not?

Let us talk about imports. How can the hon the Minister say that he did not forecast what was going to happen in regard to the import of maize? There had been forecasts in regard to South Africa’s maize needs which had stood for a considerable period of time and we knew what the position was. I find that the reasons given for this increase, in this period of time, demonstrates just one simple thing and that is that the criticism that there was of the Budget as to the credibility of the Budget and as to the credibility of the situation to which the hon the Minister took such grave exception, was absolutely right. That was either right or, alternatively, he had no right to come here today. That is the situation and, in reality, when we talk about coming here today, the one thing for which we do not have an explanation yet is what has happened to that wonderful R600-million profit from the sale of the Sasol shares.

That is where you slip up.

That is not where I slip up and I will tell you why, Mr Chairman. That is where the hon the Minister slipped up because he has to introduce legislation in the House to deal with it. That money is sitting there. It is there and I would still like him to get up and tell us where that money is and what it is doing because he estimates to receive only another R800 million from this tax while there is R600 million sitting there.

Huh!

Do not say “huh”, rather say R600 million because it is much easier. The hon the Minister got very heated up about the attacks upon his credibility.

I ignored them.

You ignored them? Well, then someone else must have given this statement to the Financial Mail and I should imagine that someone else did various other things. In that case, it is not your picture on the cutting in my hand. Actually, it might not be the hon the Minister. Let me quote what the hon the Minister said...

You should know what I look like by now.

No, but you do not have your glasses on in the picture. It must have been taken about 30 years ago. I quote from the cutting. You were asked:

So you did deal with it, you did not ignore it. You then said the following:

They are referring to the hon Minister but in the text they use the word “Horwood”:

That has been echoed by the hon the Minister today because he has proved that his figures are no good:

Where does he find himself today, Mr Chairman? When we talk about political mischief-making, who made this political mischief? Who actually said it? Was it just the Opposition? Let us just quote a few things. The chief economist of Volkskas—who is a gentle fellow—said the following:

That is a nice way of putting it, much nicer than I do. But then, let us go a little further. There is also Nedbank and as hon members know, we talk about Nedbank in a very interesting fashion but perhaps we shall hear some more of that. I quote The Economist of Nedbank:

They are now talking about the expenditure figures. Is this also applicable to my words “cheap politicking” and “cheap political mischief-making”. There is also Mr Van der Horst of Old Mutual who said:

Are those political mischief-makers, Mr Chairman?

Who did he say that of?

You, you. He is talking about you. Professor Kantor states:

Is that another political mischief-maker? That appellation the hon the Minister might apply to people such as myself but not to innocent people like that. I will tell you what the problem is, Mr Chairman, and it is a very simple one. The hon the Minister presented a Budget in which, on his own admission, he has not even made provision for the new constitutional dispensation. He presented a Budget in respect of appropriations which have no relevance in reality to the new Constitution which starts in September because the appropriations are not in the correct form and there will have to be legislation this year in order to deal with it.

Of course.

That is necessary because the hon the Minister made a Budget which did not deal with it. That is the reality of the situation. The reality of the situation is that even now, today, on this very day that we are debating it—and we are about six weeks from the end of the session—the hon the Minister is only able to give us an evasive statement in respect of the new constitutional proposals. The bills are not here before us. We are going to meet in September and I do not know whether the hon the Minister knows it. He may not be here, I do not know. We are going to meet in September in a new constitutional dispensation and the hon the Minister has the audacity to get up here today, in the middle of May, and say to us that the Cabinet still has not decided. If that is true, the reality is that the judgment of the people when they say that this Government does not know what it is doing and it is going ad hoc from position to position, is the true situation in South Africa. It does not know what it is doing and that is the greatest indictment against this Government. There is one thing which upsets me. There was an old Roman law concept which stated that when one inherited something from someone, one had to take over the debts as well. It was called hereditas damnosa. It was a damned inheritance. You took it over with the debts, the problems and everything else. That is not done anymore today and when one inherits today one is not liable for the debts of one’s predecessor. However, the Government is giving the new Constitution a hereditas damnosa, a mess to take over.

You should not be so irresponsible.

I am being very responsible. When one refers to responsibility, one should look at what we are dealing with. New members will be elected to Parliament and new Houses will be established. The tragedy is that people with hopes, aspirations and feelings will be elected. We are giving them something which we will have to sort out before we hand it over.

The new sales tax will come into force on 1 July. What will happen between now and 1 July in respect of people buying goods on which there will be a 10% GST? In this time people will get themselves into debt in order to buy certain goods. Is that what the hon the Minister wants?

There are exemptions in respect of certain foodstuffs. The day the hon the Minister introduced GST, we on this side of the House appealed that foodstuffs of essential nature should not be subject to GST. How many years has it taken the hon the Minister to come to his senses? It is quite a remarkable situation in that the hon the Minister has appointed a committee to investigate and advise him on the matter and then suddenly he says: To blazes with the advice, I will do it in any case. If this is the situation, why did the hon the Minister not do it years ago when the Opposition asked that GST not be levied on these products? However, there is a catch in this and I will tell hon members what it is. There will now be an exemption from GST in respect of the essential foodstuffs which are listed, but the fact that there is no GST on these foodstuffs will be taken into account when wheat subsidies are calculated and will also be taken into account with maize subsidies and other administered prices. The hon the Minister will therefore give with his one hand and I have a horrible suspicion that he will be taking with the other hand. We will watch what the hon the Minister does with the bread price and other administered prices because, with great respect, we have a suspicion—which is well founded judging by the history the hon the Minister has demonstrated to us.

The hon the Minister also made announcements which had already been made and debated previously by Mr Croeser regarding new forms of taxation. I previously, perhaps jokingly, said that as far as tax was concerned, I could only think of one human activity which the hon the Minister was afraid to tax, but that everything else was likely to be taxed. This is beginning to prove true and I am even a bit fearful about this one activity in the light of what the hon the Minister is doing.

The hon the Minister has already previously indicated in the Budget that capital gains tax is on the cards, but more importantly three new forms of taxation might be introduced. Even although the hon the Minister said today that final decisions had to be taken on certain aspects of these taxes, as I read the hon the Minister’s speech, the Government has agreed in principle to these things. What are these three things? What are these taxes?

Firstly, it is taxation which relates to services and is in other words an employment tax. Secondly, it is a levy on productive assets and, thirdly, a turnover tax. A turnover tax is not all that far removed from the concept of GST. Even although it is not exactly the same, the principles are similar. However, the taxation on services and productive assets go to the root of what is one of the fundamental needs of South Africa and about which we have talked and which we have not been able to get the hon the Minister to appreciate fully, namely the need to create jobs in South Africa, the need to create jobs in South Africa at the cheapest possible price and in the places and in the manner which is socially the least disruptive.

The hon the Minister said today that this may be applied on a regional basis. We cannot help but again be suspicious that the way in which it will be applied will not only be as a means of financing local authorities who are in need of other sources of revenue—we concede that—but that it will be selectively applied in order to further the Government’s ideological policies as to where industries should be established. One of the things this Government will not appreciate is that the population explosion is of such a nature and that the number of people coming onto the job market is of such a size that jobs have to be created as the number one priority, bearing in mind the two principles I have put. If this taxation is to be applied in a manner which will restrict the job creation ability of the economy, a major disservice regarding the future planning of South Africa will be done. This is of serious concern to us as there is one priority to my mind, namely that people in the year 2000 and beyond will need to have jobs and earn money as it is the only way in which stability can be ensured in South Africa. If that is not done, all the constitutions in the world will not help. Hungry and jobless people are not interested in a constitution. They will then turn to political means to see that their stomachs are full. That is what we cannot get the Government and the hon the Minister to understand.

I can quote some figures which I find utterly disturbing in this regard and which show to some extent the record of this Government. The decline in the GDP in 1982 was 1,1% and in 1983 it was 8,6%. We are therefore going backwards in that regard. However, what is even more serious, is that if we take the 1975 constant figures, in 1974 the GDP per capita was R1 042 in South Africa and in 1983 this figure was R1 012. In other words, from the years 1974 to 1983—which is incidentally the term of office of the hon the Minister—the GDP per capita has decreased. This is the reality and proof that we have all become poorer.

You have not become poorer. You have never been so happy in your life.

I have not become poorer. I am so happy in my life sitting in the Opposition which has nothing to do with GDP. [Interjections.] I am referring to the per capita figure. The hon the Minister does not understand the point I am making. I will go one step further and demonstrate this in a very simple way.

If the 1975 population index is taken as 100, it has risen to 110,7 by 1983 in regard to people employed, but the population has increased by twice that amount. It has risen to a figure of more than 120 on a basis of 100 for 1975. In 1975 the number of people employed in South Africa was 4 576 000 and in 1983, despite the population increase, only 4 924 000 people were employed.

People have become younger.

Do not talk nonsense about people being younger. You are referring to absolute figures.

The reality is that there has been a population increase at a rate which is double that at which jobs are created. This is a complete recipe for instability and trouble. That is why I appeal repeatedly to the hon the Minister to deal with this particular situation, but neither he nor the Government deals with it. That is why we are disturbed and concerned about it.

Before I leave this particular topic, I regret that I have to refer to a certain matter. It is unfortunate that it has arisen. The hon the Minister always refers to the role of the public servant. Public servants are there to serve the State irrespective of the politics of the Government of the day. They should not be concerned with the politics of the situation. It is their job to analyse, plan, prepare and advise, but the decisions that have to be made when for example a Budget is presented, are political decisions and the responsibility for that lies with the Minister concerned, the Cabinet and the Government as a whole. That is a fundamental principle. The people who serve this country and serve it well as far as finance is concerned, are to my mind people of standing, of repute and of ability. We in these benches object to them being used as excuses for Government mistakes, political mistakes and policy mistakes because the final responsibility for making a decision rests upon the hon the Minister and no one else. To put people forward as defenders of political figures is to my mind wrong. To create situations like that is something which should be ended right now. If those matters are not seen to, one will find public servants being dragged more and more into the political arena and I do not think that anybody who likes to maintain the situation which I have described, would like to see public servants being dragged into the political arena.

In the light of that, I want to refer to a letter written to the Financial Mail which says, amongst other things, the following:

That was the issue of the credibility to which I had referred.

Who wrote it?

I think it is unfair to bandy officials’ names around the House. It is the most senior man in the department for whom I have great respect. How can you create a situation that an official has to say that a Minister has dealt with the situation objectively? That is a political situation and issue.

I will deal with that.

Yes, you will have to deal with it. Whether the hon the Minister was objective or not, it’s a political issue. The whole country says that the hon the Minister was not objective and that he was wrong. [Interjections.] The Van der Horsts, Kantors, Jacobses and every economist and businessman of consequence in the country said this. They count for nothing in the eyes of the hon the Minister.

The hon the Minister is very fond of quotations and I would like to quote something now. Harry Truman once said:

I want to add a little rider to that: If you are not a cook, do not mix in. If you are a politician, you do your political job and if you are an official, you do your job as an official. A situation should not be created where the hon the Minister has to put his officials forward to defend him. He does it all the time. Every time we attack him, he says we are attacking the officials. We are attacking him and the Government. We are attacking them for their faults. [Interjections.] The hon the Minister should not dare create a situation where he has to try and shelter behind his officials. It is utterly unacceptable to the Opposition. We will not have it. Officials should be kept out of the political arena and they should do their job.

You should be ashamed of yourself.

No, I have nothing to be ashamed of; on the contrary!

There are a number of other points which I will deal with later. However, I want to raise some specific matters now which I think need some attention. Firstly, in view of what the hon the Minister said this morning particularly about GST and the other matters, what is the hon the Minister’s attitude regarding LADOFCA, what is he going to do about those rates? Secondly, in respect of the building society movement where there is a high amount of uncertainty, what is in fact the future of it and what is going to be done in respect of tax-free investments? In the third respect, we have had a lot of talk about insider trading; I want to know whether the hon the Minister is in fact going to do anything about insider trading in respect of the stock exchange. Mr Chairman, I want to ask him what he is going to do, if anything, about the tendency towards the concentration of economic power in South Africa. I want to ask him whether he is going to give any relief in respect of the announcement that companies are going to have to pay tax on their actual income during a year and not on their previous assessments, bearing in mind the problems that are connected with that, and whether he will not give consideration to two provisional payments being followed by a third one a short while afterwards in order to make sure that by then the companies will know what their income is. I want to ask him whether he has any intention of revising the rebates under the Estate Duty Act and the amounts which are allowed for insurance of Government stock in relation to inflation. I also want to ask him whether he will not reconsider his attitude towards the allowances for post-graduate study, which we are concerned with. Furthermore, I also want to ask him whether there is no intention of creating a market in respect of Government stock, for smaller amounts in particular, particularly as there is encouragement to invest in Government stock under the Estate Duty Act. Yet it is very difficult to either buy that stock in small quantities or to sell it from a deceased estate.

Mr Chairman, there are many more things which I think we can deal with; there are many more which have to be dealt with. For example, there is the issue as to whether private companies, which are small companies, should pay the same rate of taxation as large companies. For instance, in Britain companies that earn up to £100 000—not rands—pay a lesser rate of corporations tax; I think it is 38%. Now there are many of these things that need to be dealt with and the problem is that there are so many questions left unanswered from the Budget, because the hon the Minister answers what he thinks is politically advantageous to answer. However, these ordinary things need to be answered as well as the political debate that we have conducted.

Mr Chairman, we know the hon member for Yeoville to be a person who frequently conducts himself irresponsibly. I want to tell you, however, that I think his behaviour here this morning is more irresponsible than anything I have ever listened to in a financial debate. [Interjections.] One simply cannot win with the Official Opposition; one cannot win. As the hon member rightly said, for years now they have been advocating that basic foodstuffs be exempted from general sales tax. Now that the hon the Minister has excluded them, however, they again cause a furore about it. Mr Chairman, I now ask you in all fairness: If a portion of one’s revenue must be relinquished, it must be augmented somewhere and to recover it in some other way is surely an equally sensible solution. No, Mr Chairman, I maintain that one cannot win with them.

The hon member has referred here to the maize industry. If I heard and understood him correctly, he said that the maize farmers are dissatisfied. Let me tell you that the maize farmers have not, in years, been as delighted as they are this year. I would like to tell that hon member that he should rather leave the maize farmers out of it, because he knows very little about maize and about the maize industry. We shall certainly be hearing more about his views later on.

Mr Chairman, he also got around to be credibility of this hon Minister. Let me tell you that this hon Minister is regarded as one of the best Ministers of Finance we have had in years. To tell the truth, he is even regarded as one of the best Ministers of Finance in the world. I think it reprehensible for the hon member for Yeoville to have directed such a tirade at the hon the Minister.

Then he has also tried to juggle around with statistics when he spoke about the difference between the employed and the unemployed. Let me tell you, however, that juggling around with statistics is the easiest thing in the world. I think the hon member might well bear that in mind. For the rest there were the old arguments which we all know so well and which we could actually have minuted before the time. Owing to an indisposition I could not attend the Budget debate this year. I did, however, follow the debate closely, and I would like to heartily congratulate the hon the Minister, and the hon members on this side of the House, on an excellent debate. It was such a good debate that I subsequently read the following in The Argus of 12 April 1984, and I quote:

Mr Chairman, I can also include this discussion of the Vote here:

Mr Chairman, then the hon member again went on to tabulate a long list of statements he made today and in the past. I agree with The Argus in believing that the official Opposition was dealt such a severe blow by this Budget debate that it had no alternative but to run to the Press again.

Sometimes The Argus also makes mistakes.

Yes, it just depends on one’s viewpoint. As I said, however, one cannot win with the official Opposition; not with the best will in the world.

Nor with the Government.

Mr Chairman, the hon the Minister also announced in his Budget speech that the Cabinet had decided to launch a thorough investigation into the extent, the distribution and the impact of housing subsidies on the property market, and also into all the other unsatisfactory aspects of the present system of subsidies and hidden benefits. I believe that this investigation will be welcomed by all. The fact of subsidies having, in many cases, become a condition of employment, originated mainly in the shortage of skilled labour, which obliged public bodies and private companies to provide fringe benefits to “buy” employees, or even just hang onto them. Mr Chairman, I want to state, however, that housing subsidies will not really contribute to the solution of employers’ labour problems. It may be of temporary help in attracting employees, and even in hanging onto them to a certain extent, but basically it does not help to solve the overall problem. Other employers come up with similar, if not better, benefits or fringe benefits to attract workers. In this way a vicious circle is set in motion. Although no comprehensive figures are available, authorities are of the opinion that 40% to 50% or perhaps even more of all housing loans are being subsidized in one way or the other. The result of this expedient making it possible for employees to obtain housing, is that it makes it difficult for those without subsidies to buy houses, with fewer and fewer people in future being in a position to buy homes without subsidies; the long-term result will be that it will be more difficult for future generations to obtain housing.

Mr Chairman, the fact that cheap credit is being made available to so many creates an artificial demand that places those without subsidies in an unfair position. The subsidy enables some people to buy houses that are two or three times more expensive than those they would have been able to afford without a subsidy. It is absurd for people, through subsidized housing loans, to be able to afford dwellings with repayments sometimes in excess of their monthly salaries. Subsidies may be of great value to the building industry because it can supply a product the owner might otherwise not have been able to afford. But let me tell you that this creates differing standards amongst similar income groups. It is difficult to gauge the extent to which property prices have been artificially raised due to the additional demand for more expensive dwellings, but it must be reasonably high. This also causes a psychologically debilitating cycle in which people are prepared to pay increasingly more for dwellings whose prices are artificially pushed up to an increasing extent. This reflects a socialistic trend that forces property prices up artificially, thus further distorting the property market. I do not begrudge anyone their fringe benefits; I am, however, convinced that a considerable portion of the abnormal increase in property prices can definitely be attributed to the availability of cheap, subsidized money for housing. Housing subsidies also reduce the equitability of the income tax system because not everyone with the same real income necessarily pays the same income tax.

Mr Chairman, the fact that many people receive a tax-free benefit of say R6 000 or even more per year could also mean that their tax rates are lower than what they would have been had they received the subsidy as part of their normal salary. In other words, this kind of benefit is undoubtedly tantamount to remuneration and should therefore be taxed as well. Someone who buys a house for R80 000 at an interest rate of say only 2%, instead of 15%, receives an income benefit of approximately R69 000, which is normally tax-free. Those with subsidies gain an added advantage in that the value of their money drops due to inflation while the value of their assets increases as prices increase. In this way the subsidies, due to the psychological impact, contribute indirectly to the higher inflation rate, because it is true that people who are of the opinion that they are growing richer are less inclined to save and, as a consequence, often spend more. The subsidies will eventually have to be abolished, but this will have to be a very slow process. Like the systematic abolition of rent control, it will eventually be in the interests of the country for subsidies to be phased out. By beginning with the taxation of benefits such as housing subsidies, and by following this with other measures later on, it may systematically be possible to abolish housing subsidies. [Time expired.]

Mr Chairman, the hon member for Smithfield must excuse me if I do not follow up on what he has said, but I want to join with the hon member for Yeoville in expressing our thanks to the officials and so on. I also want to extend a special word of thanks to the Land Bank and the Agricultural Credit Board for what these two institutions have done recently in the wake of the disastrous drought that struck South Africa. I think they have rendered good service to the farming community of South Africa, and indirectly to the whole of South Africa as well.

Mr Chairman, it was with a great sense of shock that we listened here today to the announcement by the hon the Minister. It is true—and I have said so to the hon the Minister on a previous occasion—that this is not his normal Appropriation; he is being forced into this by political pressure. It is true that the sales tax was increased by 1% on the 1 February, which means an increase of 16,6%. Now it has been increased to 10%, which means that from 31 January until now the general sales tax has been increased by 66,6%. One can almost say that increasing a tax such as general sales tax so drastically is unheard of in the annals of history. One can work it out; it is a tremendously high tax. [Interjections.] We cannot get away from it; increasing taxes so drastically is a disaster for us.

Mr Chairman, the hon the Minister has said that in balancing the previous budgets there were certain things they could not foresee. This is a reflection on our officials. Let me tell you—and I shall shortly go into this matter—that every layman could have told the hon the Minister that this Budget was completely faulty. I can bring you a person who commands respect in South Africa. The day after the budget was presented he said that this Budget was a complete bluff. He predicted that between R1 200 million and R1 500 million would be needed later by way of an Additional Appropriation.

Mr Chairman, everyone knew there was a new dispensation; the whole referendum fight was based on it. Yet not a single cent has been included in this Budget to make provision for it. Eighty-eight Coloureds and 45 Indians are coming to Parliament as members. In this connection I am thinking of salaries, allowances, travelling expenses and pension and medical funds. Not a single cent has been budgeted for this. I sympathise with the hon the Minister because he has been forced into this by the Cabinet, and the man who deserves a thrashing is not here. Provision has not been made for those buildings to accommodate this. The hon the Minister did say that provision would be made for it later on and that the direct expenditure would not be all that high. I believe, however, that several million will be involved, because this new dispensation is going to require a lot of money.

The hon the Minister also said that not much more money would be allocated for own affairs. The question however, is, what are own affairs? Of the 14 points mentioned in the schedule to the new Constitution, each is subject to a general law, excepting of course boreholes and a few other matters. The Cabinet realizes that it cannot budget now, but that it has to wait for the other two Houses, because as far as taxation is concerned, those two Houses will be setting the pace in the future, and hon members surely know that that is so.

What is going to happen with respect to general affairs? Will we still have matters such as own affairs and general affairs here? I should also like to find out how next year’s budget will be drawn up under the new dispensation. Will there be a mixed sitting when the hon the Minister delivers his Second Reading speech? What we want to know from the hon the Minister, above all, is whether his Vote will still be discussed in the same manner as before. Will we still be able to discuss these matters with the Minister across the floor of this Committee? Will the discussions of this Committee be public, or are the discussions at a mixed sitting going to take place in camera because the public of South Africa is not allowed to know what is going on?

Let me emphasize today that South Africa has now seen what the NP has let the country in for. During the referendum campaign we warned the public that they would pay, but then we were made out to be people who did nothing but gossip. Now, however, the true facts, the whole truth, has come to light.

These own or general affairs, regardless of what they are, are all going to cost money. I therefore ask the hon the Minister to take the bull by the horns and to tell us for which additional matters allocation will have to be made in the future. We grant that when a country needs money, it must be provided by means of taxes. We also concede that a country cannot get hold of additional capital solely by means of loans. At a later stage I shall be referring to the high burden of interest that results from loans. The State must be able to pay for what it wants. I maintain, however, that the NP Government is wasting the country’s money.

Let us take a look at what will happen to taxes in future. Notwithstanding the taxes that have been announced, the hon the Minister is still in a dilemma, because as of 1 September he is going to be taxing fringe benefits. This issue has been discussed for many years now and I would therefore be glad if the hon the Minister could tell us what the formula is to be and what it is that will be taxed as of 1 September. He has had enough time for reflection, and we would therefore be pleased if he would inform the country about this. Do not let us have to wait until 31 August for this; please tell us now what is going to happen in connection with those taxes.

The costs involved in third-tier government is another aspect that is going to deal us a severe blow. The hon the Minister has referred briefly to everything that is going to be taxed, and I am sure the nation will, as is the case today, be stunned to hear about the full extent of this. The hon the Minister told us in his budget speech that the taxation of close companies was still being examined, but could he now tell us what is to happen in that connection? Can we still, to the Minister and the department, make certain contributions in regard to these close companies, because I do believe that we can, for example, make some contribution in regard to undistributed profits, something which would be in the interests of both the country and the Receiver of Revenue.

What has happened to revenue in this Budget? The hon the Minister told us that the normal tariffs were going to be increased. But what happened? In the case of ordinary companies the tariff was raised from 46,2% to 50%, which is a fairly big increase, but this brought the tariff in line with the maximum rate for individuals, and I have already said that in my opinion this was a good thing. It is clear however, that our economy is on the decline, in fact that it is in a parlous state. For example, for the financial year 1984-85 R2 900 million was budgeted for taxation on ordinary companies, while the revenue for the previous year stood at R4 100 million. This represents a reduction of R1 200 million on ordinary companies, and this is clearly a danger signal because the hon the Minister, the Reserve Bank and the officials involved in the Appropriation know what this means. The hon the Minister has been forced not to reveal the full extent of the Budget. Now the country, which has to be taxed piecemeal, by instalments, is dealt one blow after another because the hon the Minister, should he reveal the full extent of the situation would cause the entire country, including the NP, to crumble.

What has happened to personal taxation? In the 1984-85 financial year personal taxation contributed R7 650 million, while it stood at R5 289 million in the previous year. So private individuals are going to pay R2 360,9 million more in taxes. Surely this indicates that there is something going on here. Everyone can see in what a dilemma the hon the Minister finds himself. It certainly cannot be pleasant for him to realize that the private individual now has to pay out so much more in tax. The total amount represents an increase of nearly 45%, although tax is of course paid on a sliding scale, and this can therefore not be said to hold true for every individual. So this is an overall increase of nearly 45% which the individual will have to pay.

What is happening to the gold and diamond companies? The surcharge has now been increased from 15% to 20%. This is a substantial increase, and we therefore expect more revenue, and shall all be joyously grateful if there could be more revenue, but what is the true state of affairs? The goldmines will be paying R30 million less per year in taxes. [Time expired.]

Mr Chairman, the hon member for Sunnyside made a few statements to which I wish to refer briefly. In the first place he reproached the hon the Minister because the hon the Minister was not at this stage taking Parliament into its confidence and budgeting for the establishment of the other two Chambers. What is the hon member talking about? He is talking about 0,000000 per cent of the total estimates. Surely it does not have a material effect or influence on the estimates. Secondly, the rules, regulations and procedure have not yet been clarified at this juncture, and therefore it is not possible now to announce a budget in which provision is made for those things on which no final decision has yet been made.

Do you not know what you are going to do?

On the contrary, I am pleased that that hon member is now participating in this discussion, because it seems to me he is suffering from the same crisis of confidence and communication as that which hon members of the CP are suffering from. The hon member for Yeoville’s leader, as well as the hon leader of the CP, are serving on the Committee of Standing Rules and Orders and the Select Committee on Internal Arrangements.

Those committees have nothing to do with money.

The hon member for Yeoville knows just as well as the hon member for Sunnyside that the committee in question is formulating and drafting those rules and regulations so that they can be put into operation. [Interjections.]

I want to come now to the hon member for Kuruman, because it seems that he does not tell the hon member for Sunnyside what is happening.

Mr Chairman, may I please ask a question?

No, Mr Chairman, I am sorry, but I do not have any time to reply to questions. The hon member for Sunnyside should talk to the hon member for Kuruman for a change so that he can open up lines of communication. Apparently there is no line of communication between his leader and him either, and the same applies to the hon member for Yeoville, for it seems to me his hon leader does not tell him anything either. Therefore it is time they began to open up those lines of communication.

Mr Chairman, may I please ask a question?

No, Mr Chairman; perhaps the hon member can ask his question later.

I want to come back to the hon member for Yeoville now. I was shocked this morning, Mr Chairman, shocked to the core by the most irresponsible statement that hon member has ever made. Firstly he saw fit to make an attack on a person who cannot defend himself here, namely an official. It is true that he did not mention him by name, but do you realize, Mr Chairman, what that accusation by the hon member for Yeoville means?

The hon the Minister said he must stop it.

That hon member always talks before he thinks. I now want to try to spell out to him the implications of the statement which the hon member for Yeoville made here. Does the hon member for Yeoville realize that that statement by implication means that no official is able or entitled to make a “fair comment”? The hon member more or less made the following statement, ie that the official concerned had allegedly said: “The Minister replied to this objectively” and that according to him it was “a statement of fact”. If the argument of the hon member for Yeoville were to apply in future, it would mean that no official would be entitled to make any kind of comment on any policy statement or on anything else. Do you realize, Sir, what implications this is going to have in future for the country’s administration? In my opinion the hon member for Yeoville must reconsider that statement, and if that hon member now realizes what the implications of this statement are, he ought to stand up and repudiate the hon member for Yeoville. I hope he will do so.

I have another two questions that I want to put to the hon member for Yeoville. Firstly, the hon member made his fourth speech in the Budget debate after the hon the Minister had made his reply. I should now like to know whether he has finalized his speech today. Or are we going to read his second speech in the newspaper again?

We shall read it in The Cape Times tomorrow.

Since the hon member for Yeoville is so eager to make speeches, I should like to know when we are going to receive his final reply to his sociological magnum opus which he gave us in 1983, namely the “Report of the Economic Commission of the Progressive Federal Party and the Charter for Social and Economic Progress”.When are we going to receive it? We ask for it every year. When are we going to receive those details? If the hon member has another turn to speak before the Third Reading, he may as well give us a statement in that regard in the newspaper, for the whole nation is still waiting for it.

The last point I want to make in regard to the hon member for Yeoville is that he is not only inclined to quote only part of what people say, but he does so deliberately. Inter alia he quoted Prof Kantor incompletely, and I cannot allow this opportunity to pass of quoting what Prof Kantor said about this hon Minister. If there is one person the hon member for Yeoville quoted incorrectly and whom he should not even try to quote, it is Prof Kantor, for believe me, Prof Kantor does not agree with that hon member. In fact, Prof Kantor is the greatest supporter of the hon the Minister I know. I am quoting what he said on 22 March 1984:

Read the part that I quoted.

Mr Chairman, the entire report is in this vein, including the headline “South African corporations thriving—Kantor”. That is what Prof Kantor said about this hon Minister. The hon member for Yeoville should rather not try to quote Prof Kantor if he wants to criticize the hon the Minister.

This is selectiveness again.

Mr Chairman, in the time I still have at my disposal, I just want to put a few questions to the hon the Minister. Firstly, I know that the recommendation of the Margo Commission on the possible appointment of a committee to monitor the mergers and take-overs on the Johannesburg Stock Exchange has elicited a tremendous reaction in the market, and I should like to know whether the hon the Minister is able to make any further comment in this regard, or whether any progress has been made in this connection.

Today I should like to avail myself of this opportunity and raise a matter with the hon the Minister in regard to which I know that representations were made to his department in the past, a matter which has been pending for a long time and which is at present, in my opinion, beginning to pick up speed again, namely the question of legislation in regard to insurance brokers.

I know that during the course of the years various Registrars of Financial Institutions have at certain stages been in favour of this, while there were also some who were not in favour of it. If one considers the loss of R1,5 million recently suffered by insurance companies and also by individuals in Port Elizabeth, one wonders whether this is not a matter which could be reconsidered. I do not mean reconsider with a view to creating a bureaucratic institution, but merely to see what can be done about the institution as such, so that we can have more regulation in the insurance broking business. I think it is of material importance for this matter to be investigated and I should like to hear the hon the Minister’s comment on it. Personally I would be very sorry if he could not foresee the possibility of this matter at least being investigated with the view to establishing something of this nature.

As far as the operation of the hon the Minister’s department is concerned, I want to say that I think this is the one department which does not lay itself open to the criticism of being bureaucratic at all, precisely because the hon the Minister has, during the past few years, taken great care to maintain monetary discipline in South Africa. Last year he and his department were paid a great compliment in that the International Monetary Fund did not have to impose any further conditions when discussions were held in regard to facilities. I think this is something which is unique of its kind in the international situation, and that is why one speaks of this department and its operation with pride, particularly if one bears in mind that this has been achieved in spite of all the financial discipline that has to be exercised—and this is done with the greatest freedom of operation which must constantly keep pace with the times, for example the recent lifting of the statutory obligation of financial institutions and the liberation of the international movement of finances and investments... [Time expired.]

Mr Chairman, I agree with the hon member for Vasco to a limited degree that South Africa, compared to other countries throughout the world, is not doing so badly. I agree with him. However, while he may be satisfied with what we are doing, we in these benches are not satisfied. We believe that South Africa could be doing an awful lot better economically than we are doing at the present time.

I want to associate my party with the expressions of shock that had been expressed by the hon members for and Sunnyside in regard to the increase in the GST. I want to say at the outset that we welcome the removal of GST from basic foodstuffs. We think this will go a long way in assisting especially the lower income groups when it comes to surviving in the world in which we live at the present time. However, having said that, we believe that we are entitled to be shocked at this announcement, because there is no doubt about it that it is going to eat into the purchasing power of economically hard-pressed South Africans at the present time, and we therefore believe that the hon the Minister should be condemned for having allowed the state of the economy to have reached the stage where this additional taxation is now necessary—and I say “necessary” because we in this party do not believe that the State should borrow money, especially from the Reserve Bank, in order to pay its way. If this Government, which is elected by the people...

[Inaudible.]

That is fair enough. She is avoiding it, but this Government, through its excessive expenditure, is now taxing the people still further and forcing them to pay for this. We believe that we must cut expenditure.

On what?

I shall mention that later on.

There is another thing on which we agree with the hon member for Yeoville. He condemned the hon the Minister for his ad hoc management of the fiscus. As the hon member said, it was only six weeks ago that the hon the Minister presented his budget and now we get this additional taxation. This is resulting in a situation in which there is no longer any certainty as to what one must expect as far as taxation is concerned. There is no stability and there is no continuity. As the hon member said, this is ad hoc planning. Having said this, I believe that what the hon member for Yeoville and the hon the Minister have been doing, is that they were just arguing the effects of our economic dilemma today, an economy which is a deteriorating one. They are not searching for the cause of our economic decline. I want to repeat what I said in the budget debate. The cause of South Africa’s present economic decline is the wasteful expenditure in which we are indulging. South Africa today is wastefully living way beyond its means. We are spending more than we are earning as a nation and as individuals on non-productive cost items. It is not only John Citizen who is doing this, but also the Government. The net result of this, as I stressed in the budget debate, was that during the hon the Minister’s term of office—and I am pleased that the hon member for Yeoville has also emphasized this today—the gross domestic product per capita has declined. This means that over the last 10 years South Africans as individuals have on average, been getting poorer. During the Second Reading debate there were many hon members on the Government side who responded to my argument by pointing to the so-called prosperity which we see around us. Certainly a lot of people have grown fat in the last 10 years, but what about the average man in South Africa who has been getting poorer? Those down the lower end of the income scale have grown much poorer during the last 10 years. I have warned the Government—and we have stressed this in debate after debate in the last three or four years—that if we cannot get our economy moving at a level where we have an increase in the gross domestic produce of at least 5 per cent per annum between now and the turn of the century this country will have lost the race against time in which developing countries are involved. [Interjections.] I do not have the time. There are other countries in this world, for example in the East and South America, that are heading for disaster because they have already lost the race against time. That race is economic growth compared relatively to population growth.

Name one country that does have a growth rate of 5 per cent every year.

That hon member and others have in the past agreed that we need this 5 per cent growth, but if this figure is incorrect, then the advisers to this Government are feeding us a lot of nonsense, because the figure of the annual growth rate of 5 per cent was furnished by the Government’s officials and their departments in researching this matter. It now appears that because of this Government’s failure, they are now running away from their own growth-rate figures. If one reads the hon the Prime Minister’s economic development programme one will see that it is stated that this is the rate of development we need. Four years ago, I warned the Government as a loyal South African—and I know they are all loyal South Africans—of the economic dangers we face, but now, in 1984, we have made no real progress and now we have only 16 years before the turn of the century and if we continue with this gradual decline in the per capita gross domestic product in future we will have lost the race to which I have referred. One just has to look at the poverty in India and some South American countries to see what I mean.

I say that South Africans are indulging in extravagant expenditure which is way beyond their means. I want to tell the hon the Minister that I firmly believe that a lot of this is as a result of the proliferation of tax-free fringe benefits. There was a time when only the top executives got the fringe benefits, but today everybody, from the top to the bottom, gets tax-free fringe benefits. Artisans and labourers, for instance, are getting tax-free fringe benefits today. What are they? I can refer to motor-cars, for instance. There are people driving cars way beyond their real means because the employer or the Government pays for it and passes on the cost thereof to the consumer, or the taxpayer. I can also refer to housing. Today there are people living in houses which are eating up as much as 60 per cent of their gross emoluments which, in reality, they can ill afford. [Interjections.] One can see the way that hon member thinks. What I am saying to him is that that additional cost is added to the cost of the item being produced, or service rendered, and therefore we have this proliferation of inflation. I have said that it is wasteful extravagant expenditure the nation as a whole cannot afford. I say that we must get back to the days of the work ethic when people truly earned these things. Look at what our parents did. How did our parents build up their wealth? I want to ask those hon members whose parents were farmers how their fathers and grandfathers build up their farms. It just does not come out of fresh air. There is no such thing as getting something for nothing. If one gets something for nothing it means that somebody else has paid for it. In this case we are paying for it through a lowering of our average standard of living. There are many people in South Africa who are getting poorer through no real fault of their own. Those of us who, like public servants and big company officials, can increase wages and pass it on to the consumer, are the fat cats while others, who do not enjoy these benefits, are the losers. I want to warn the hon the Minister about these realities which other governments are now having to face. Recently the Prime Minister of Holland took a major decision to cut all public servants’ salaries by 3%. Three years ago the German National Railways decided to cut all its employees’ income by a certain percentage in order to survive. I want to suggest that we pull in our belts.

Did you take this last 12 per cent into account?

That is not the point. You do what is economically right for South Africa and I shall accept it. If South Africa has to bite the bullet, as other nations have recently been forced to do, then I will also bite the bullet. What I am trying to do is to talk a little bit of economic reality into the hon the Minister’s head.

That is easy talk.

That hon member says it is easy to talk. I want to tell him that he must not come and talk to us farmers about easy talk. We have had to face the drought, low international prices, and high interest rates, and as a result, have had to pull in our belts.

[Inaudible.]

It is not. You see the contradiction, Mr Chairman? That hon member says our whole standard of living is higher than before, and yet the hon the Prime Minister’s statistics show that the gross domestic product per capita has dropped over the last 10 years. How can everybody’s standard of living then be higher? Some certainly are higher, but others must surely be lower. This is the point I am trying to stress today. And Sir, I believe it is going to get worse, because when we have the new dispensation operating and the Coloureds and Indians come into this Parliament they are going to want more for their peoples. They will have new aspirations and they are going to have new demands. This is a natural thing to expect from people. It is part of human nature. It is the business of politics—and I hope that hon member will realize this. I can just imagine the pressures that are going to be brought to bear on the hon the Minister of Finance in future as Coloured and Indian politicians start shouting for the same things we have been enjoying. The problem that has to be faced is how are we going to pay for them? Are we just going to print the money or tax our people into the ground, or are we going to turn South Africa into a power house of productivity? That is what I am appealing for today. What I am appealing for today is that we get our people to work in producing real wealth. [Time expired.]

Mr Chairman, in amongst the whole plethora of statements the hon member made in his speech there was some truth. He followed on what the hon member for Smithfield said, namely that there is a lot of waste in our society in terms of, for instance, subsidies, which have caused distortions, and people who are living too luxuriously. However, I think that the general tone of what he has said is not correct. The fact of the matter is that this country is a miracle country by any definition one wants to make.

Quite right.

It is so.

If you can still keep going with a Government like the present one it must be a miracle.

The fact of the matter is that compared to any comparable country in a comparable situation this country comes out more than favourably.

There is not a comparable country with apartheid.

I should like to return to the argument raised by the hon member for Yeoville, and I am sure this argument will also be raised by hon members on that side of the House. The fact of the matter is that the hon the Minister has come along today and increased the general sales tax by 3%. The hon member for Yeoville stood up and said that he was shocked. He said that he heard it with disbelief and asked whether the Government knows what it is doing. One can look at the speeches the hon members for Yeoville and Port Elizabeth Central have made earlier this year in the no-confidence debate. I quote from the speech of the hon member for Port Elizabeth Central (Hansard, 1 February 1984, col 265):

He was absolutely right. I quote further:

Later on he said:

I can give a whole plethora of quotes like that from inside and outside of Parliament. The fact of the matter is that the hon the Minister himself in his budget speech mentioned the possibility that he might have to increase taxation.

Business suspended at 12h45 and resumed 14hl5.

Mr Chairman, before lunch I showed how members of the Opposition had predicted that there might be an increase in sales tax. The Minister never excluded the fact that sales tax might be increased. As a matter of fact certain of the financial publications, for example The Financial Review, wrote at the beginning of the year when GST was increased:

The fact of the matter is that it was expected and it was predicted—including by members opposite. The state of the economy as such—the drought, the slow recovery of the agricultural sector even in those areas that have had rain—and the fact that the gold price has fallen away in between and that is to cost the State something between R300 and R350 million if taken on an annualized basis. I want to say to the hon the Minister that I want to congratulate him on his courage and I want to thank him for his compassion. I want to congratulate him on his courage because he has done what had to be done. He did what he had to do. We cannot live beyond our means. Somebody said: “What are we going to leave the future?” We cannot leave them a debt mountain. The fact is amidst the necessity of the circumstances, having had the courage to do what had to be done, the hon the Minister had the compassion to bring relief to the poor. The hon member for Yeoville has in the past—and I commend him for it—called for just that to happen which has happened here. That is that we should do away with GST on certain essential commodities, such as basic foodstuffs.

But why only now?

If I had time, I would have motivated that for him also, but I do not have time. I want to give an example of what real meaning this step has to the poor. I want to quote from some figures prepared by the Bureau for Market Research of Unisa and we shall take the Vaal Triangle and the impact of what is to happen on an average Black household. The average Black household earns something like R5 573 per annum.

That is nonsense.

Why does that hon member not give credit where credit is due? He shifts his argument. That member shifts his goal every time. The average household spends approximately, if it is taken together, something like 28,42% of the household income on essential foodstuffs such as meat products, grain products, vegetables, milk products, eggs, fruits and nuts, That means that over a year that household now would save R163 by not paying the tax. If they had to pay the 10% tax they would have paid R144 in tax. That is a huge saving to the poor, the people who need it most. For that reason I want to say to the hon the Minister that I commend him for this compassion on excluding basic foodstuffs at this time when he had to make this step. Let us admit: It is never popular to increase taxation. Nobody wants to increase taxation, but the fact of the matter is there is no alternative. Some parts of the country are still drought ravaged. The parts of the country that were drought ravaged have now suffered under the impact of enormous floods that brought huge costs to our country. The gold price has fallen away and nobody can predict what is going to happen there in the future. So I want to say that the hon the Minister has done the only possible thing he could do and I want to commend him for his courage and compassion in taking the steps he has taken.

Mr Chairman, it really was a quite extraordinary speech we have just listened to. It is a poor apology for what the hon the Minister had to do. It is commending him for courage, for the Lord knows what and eventually it ends up by taking from the whole series of speeches from this side of the House that were made over many years the effects of removing GST from essential foodstuffs on the very poor. I shall come back to that GST situation in a moment. We in this Chamber have had the experience this morning of listening to one of the most revealing speeches that has been made in this Parliament in this whole session. If the public of this country does not actually see in it what the situation actually is, it is purblind, because this really is the breath of reality. The results of Government policy should now be plain for all in the country to see, because we simply cannot afford them. What one sees and what we have heard today is a Minister embarrassed by the position in which his colleagues have placed him because he has had no alternative other than to reach the ridiculous situation in which he is. He is embarrassed by his own speeches that he made during the budget debate as it is either the result of gross inefficiency and ignorance—and only that—or else it is the result of a deliberate attempt to mislead the House and the country as a whole.

What about the gold price?

What did it fall by, in heavens name? What was it in rand terms? Is the hon member for Maitland suggesting that the hon the Minister was that irresponsible that he actually based all his predictions on the price of gold? What percentage did it fall to? It has fallen by a couple of percent. The economists did not know whether they had to apply their minds to the budget—I mentioned this in my budget speech—that was before the House, which they did not believe would ever happen or come about, or to the budget that they thought would eventuate. None of us ever dreamt that the second budget would be revealed so early. It is this that makes the hon the Minister’s explanations completely unacceptable. He tells us that the increase in the price of maize was unexpected. Did the hon the Minister have no dialogue with his fellow Ministers and colleagues and chief officials? One does not assess a thing like this to the last percentage. There must be some latitude. What about the cost of maize imports? I believe that I am right in saying that the actual amount of maize to be imported is slightly less in tons than we first anticipated. The gold price that has given us an excuse, has given us a special sort of feather in the cap when it goes up, but let it drop just a few dollars and it is the cause of all our problems.

I do not understand why you ask this.

We ask this, because one of the reasons given, is the fact that the expenditure in the first month after the budget was high. It has been high in that first month for the last 20 years.

There is another extraordinary change in emphasis in the hon the Minister’s speech. During the budget debate he mentioned that if expenditure were not kept at anticipated levels, he might have to resort to fiscal measures to ensure that the deficit before borrowing did not have to be financed in an inflationary way. He has now motivated this major tax increase on the grounds that revenue is not as anticipated. There is an implication in this. It is a very serious one. The risk is far greater that expenditure will not be as anticipated than that revenue will not be as anticipated. Are we then to believe that there is an extreme likelihood that when expenditure turns out to be in excess of what the hon the Minister budgeted for, we still have another tax increase coming this year? That is where the problem really lies. If one looks at the history of our budgets over a long period, one will find that it is expenditure that has normally been out by the greatest amount. I believe that it is a distinct possibility that when expenditure it is proved to be way out in this financial year, the hon the Minister will be back with further tax proposals on the increase in GST from 7% to 10% on all items with the exclusion of certain basic foods. It illustrates that this Government is completely without coherent policy and has a Department of Finance running around like a decapitated chicken. Six weeks ago that hon Minister informed us that he had set up a study group that was actually going to evaluate the whole question of GST and the possibility of removing GST from essential foodstuffs. What does he do now? He comes in and pre-empts the group that he has just commissioned. I think this can only place grave doubts on the planning, on the efficiency and on the stability of the Department. It must be completely demotivating for the people who are called upon to carry out such an analysis. I can assure the hon the Minister it is highly demoralizing from the point of view of the business community and of the council. The hon the Minister says that from the tax he anticipates a further R800 million. I do not know whether I should ask him whether that is for the remainder of this year or for the whole year. I honestly believe that he does not have the foggiest idea...

If you do not understand, we do not understand it.

By your contradictory actions you certainly do not appear to understand it. There is no continuous thrust through what you are doing whatsoever. The reason why this statement of the hon the Minister is so important is that it must reveal to the business community and the electorate two things: The first is that the hon the Minister has been put into an impossible position by his colleagues where he can have only one financial policy and that is the one that I mentioned before and every morning he must pray that the price of gold goes up. That is a sort of sweepstake attitude to the economy that I believe the country just cannot tolerate. The second thing is that the statement should tell the electorate that the crunch is almost on us. They should see that the Government’s policies have now got to be paid for and, quite frankly, the country simply cannot afford to pay for them. An expense which is an extravagance, whether it is a project or some particular purchase, can normally be financed by some belt tightening. Such an expense can be paid for, but the danger comes—and this is what this Government is doing—when you actually damage the wealth-creating machinery of the country. What cannot be afforded is this type of damage to the essential wealth-producing sector of the economy. That is definitely killing the goose that lays the golden eggs. I think the Government does this because it actually has so hazy an idea of how the wealth that it spends so liberally is created. The structures of the new constitution have been allowed for nowhere in the budget and it is almost upon us. If I heard the hon the Minister correctly—and I might not have—I think he intimated that there will be no funds available for own affairs in this financial year. Is that correct?

No.

So this might be incorrect, but the restructuring of our industrial capacity under the decentralization scheme, based on ideological considerations... [Time expired.]

Mr Chairman, I shall come to certain of the arguments, if I may call them that, and statements made by the Opposition in a few minutes. But first I just want to dispose of two little matters which I have before me. The first deals with the limitation and disclosure of finance charges. This is the so-called LADOFCA. Hon members will recall that I mentioned last year that a rigidity had set in with the upward and downward adjustment of the maximum finance rates prescribed in terms of the Limitation and Disclosure of Finance Charges Act. At the time I instructed a small subcommittee, with Prof Franzsen as chairman, of the Standing Committee on Bank and Building Society Legislation to investigate the whole issue of the prescribing of finance charges and to devote particular attention to the desirability of laying down only one maximum rate and finding a formula by means of which the finance charge rate could be linked to the general level of interest rates. I have since received the report of the committee, and quite a number of important recommendations were made.

In the first place the present ambit of the Act should not be limited to natural persons, but should also be made applicable to small business undertakings, including agricultural producers. In the second place monetary loans, credit and leasing transactions, of which the principal debt exceeds R50 000 should be exempted from the provisions of the Act. Furthermore, two maximum usury or protection rates should be determined, namely one for principal debts up to R2 500 and a second for larger principal debts up to R50 000. In addition the upper finance charge rate, which in reality should be a usurious rate limit, for principal debts exceeding R2 500, should be stipulated as the amount of the prime overdraft rate of the commercial banks, plus a margin of eight percentage points, but to this must be added a further five percentage points in respect of principal debts less than R2 500. The adjustment in the maximum rates should be published regularly in the Gazette and the cash prices of goods sold on credit, as well as the finance charge rates at which transactions are available, should be clearly displayed so that the public can acquaint themselves with the actual costs of such transactions.

I consider this last recommendation to be of particular importance since it will afford the public an opportunity to acquaint themselves with the terms on which credit is available from various grantors. Obviously such a requirement will be conducive to greater competition between credit grantors. This entire matter is one of great public importance, and the recommendations are of a drastic nature, and I therefore deem it important that the report be available for public scrutiny and that the public be afforded an opportunity to comment on it.

I have requested the Registrar of Financial Institutions to have the report, which is at present available only in Afrikaans, translated and published in both languages as soon as possible. With the recent upward pressure on interest rates, an upward adjustment in the maximum finance charge rates might normally have been justified. In view of the recommendations contained in the report and also in view of the expected effect of the fiscal measures announced today, however, I do not now consider it desirable to approve of any interim upward adjustments, but would preferably give all interested parties an opportunity to comment, after which the matter will again be given urgent consideration.

†Hon members may recall that the South Africa Special Risks Insurance Association (Sasria) was established some five years ago as a joint undertaking between the Government and the short-term insurance industry to grant cover against what I may briefly call politically-inspired damage. The State acts as reinsurer for all claims in excess of Sasria’s funds, and thus effectively guarantees Sasria’s solvency.

To date, Sasria has offered cover in respect of material damage only. For some time now Sasria, the industry, and policy holders have made representations that Sasria should in addition also offer cover in respect of consequential loss. Since it is effectively the taxpayer who is guaranteeing Sasria’s performance, I do not consider it appropriate for Sasria to insure the net profit element in consequential loss cover, but I am happy to be able to announce that Sasria will receive permission now to underwrite the balance of consequential loss, commonly referred to as “standing charges”. This decision to extend the scope of cover available from Sasria has been made possible by the recently introduced limit of R100 million per insured. I propose that this limit remains unchanged but that standing charges, excluding profits, now also be coverable. I trust that this ruling will better serve the needs of policy holders within the limited resources of Sasria. I have also received representations from Sasria and the industry to the effect that the present practice of certain large policy holders “to select” against Sasria or, put differently, to take their insurance else where and find cover overseas or wherever it suits them, is not in the best interests of the local industry. Certainly not at this point.

I am inclined to support that view. Sasria was established to serve the community in an area which is commercially largely non-viable, and only the select risks of large magnitude can hope to purchase this sort of cover in a limited and fickle market overseas. We are trying to build up a strategically important indigenous industry to serve the community at large, and the taxpayer is at risk, particularly with this kind of cover.

The so-called anti-selection I have referred to therefore does not seem to be desirable and I consider it only fair that Sasria should not be denied the premium revenue and support of these potentially large policy holders. I have therefore approved the principle that in the case of new policies or renewals Sasria cover, if required, must be purchased up to the limit of R100 million cover per insured, to the extent that it is available, before any excess cover may be sought elsewhere. I might add that a refinement of Sasria’s discounts or tariffs in these circumstances is being considered by Sasria’s board of directors, which hopefully will make its terms materially more attractive at this end of the market. I thought I would just like to make that statement on an insurance group which I think is doing very fine work.

Coming back to the measures I announced this morning, I think that it is clear from the immediate reaction of the Opposition that they are absolutely out on a limb. I want to ask them across the floor: Do they approve or do they not approve of this measure I have taken?

We do not approve of the extra sales tax.

But you want to exclude all those foodstuffs from the tax. Is that right? You have worked it out and we will be worse off than before.

Of course we are worse off than before.

So the state of the economy makes no difference to you whatsoever. [Interjections.] Nor the tremendous pressure on the balance of payments which has nothing to do with the Government on the declining rand which is due to the enormous over-valued dollar? It is not that the rand is weak. The dollar is exceptionally strong. You need to fight inflation to ensure that the deficit before borrowing is held within strict limits. Of course the hon member for Yeoville must not talk. When I put the GST up by 1% in February he said it should not have been done. The Press asked him: What should the Minister do? He said that the Minister should borrow more.

You read it incorrectly. You read it selectively.

I have got it absolutely right. He says “read selectively”. Hon members have already pointed out this morning who is reading selectively. If I had the time I would read about six things he referred to and I could accuse him of selective reading every time. That we can do. We are coming to a Third Reading debate quite soon and we will have more time.

You have all the time in the world.

No, I have not got all the time in the world. I have other statements to make. Unlike the hon member for Yeoville who, when he is driven into a corner, becomes personal, I do not because I have to deal with these facts and I have to try to keep the economy on an even keel. [Interjections.] Mr Chairman, the hon member can say what he likes. This economy is on an even keel and as long as I have the honour to be where I am I will do everything I can to keep it there. I have never sought personal popularity as a Minister of Finance. I think I can say that I have never evaded what I thought was my responsibility. Does the hon member think this is an easy thing to do today? What Minister of Finance would like to take this step if he could avoid it?

Why are you doing it now?

Because, if the gold price had gone up after the Budget as much as it has gone down, I would not have had to do this. That is the point. Could the hon member for Yeoville or the hon member for Walmer foresee what the gold price was going to do? [Interjections.] This wisdom from hindsight is about the most unimpressive thing that this Opposition can reveal.

You cannot run the country by budgeting for six weeks at a time.

Order!

This is the hon member who cast a serious reflection on one of the best officials I have ever had to work with, and that is Dr De Loor.

I did not cast reflections. Do not twist my...

You are going to listen to me now.

You are twisting again.

You are going to listen to me, because I have not started this. You started this.

But you are a twister.

Order! The hon member for Yeoville must withdraw the words “you are a twister”.

I withdraw the words “you are a twister”. You are contorting the words.

You have been mean and you have been low in this debate. [Interjections.] I say that with design. I think it was a low tactic.

Mr Chairman, on a point of order: Is the hon the Minister entitled to say that a member of this House is mean and low?

Order! Unfortunately it is not Parliamentary to use those words and I would request the Minister to withdraw those words.

I beg your pardon Mr Chairman, did you say “unfortunately it is not Parliamentary”? With great respect, I ask you to withdraw those words. You are not entitled to say “unfortunately”. [Interjections.] You either give rulings impartially or please call the Chairman of Committees.

Order! Will the Minister please withdraw those words.

If you say it is not Parliamentary, Sir, I will withdraw it.

I asked you to withdraw the word “unfortunately” otherwise I ask you to call the Chairman of Committees.

Order! It was a way of speech.

I am sorry, it was not a way of speech. You used those words. [Interjections.] Otherwise I want you to call the Chairman of Committees.

Order! Will the hon member for Yeoville please resume his seat. The Minister may proceed.

I am not accepting this, Mr Chairman.

Mr Chairman, the hon member for Yeoville has cast a grotesque reflection on the Chair. I want to ask you to rule that he withdraw it immediately—and unconditionally. If not, failing that, I must ask you to deal with him as you see fit. I am rising as a member to request that this reflection on the Chair should not go unpunished. I ask you to take immediate action.

Order! I erred in using the word “unfortunately”. I should not have used that word. I can understand that the hon member for Yeoville was not happy about that, but his action in dealing with the situation was also not correct. I regard the matter as closed and ask the hon the Minister to proceed.

I want to read this letter to which the hon member referred. It is in the Financial Mail and it says:

I referred to GDP.

Fine; I do not mind what you call it. Whether it is GDP or national income, the hon member said average income had fallen and therefore, he said, every South African was poorer.

On average.

The hon member did not say that. I have his Hansard here. He did not say it. If you want to argue we can have it investigated. We are now going to deal with the facts. What is the hon member doing when he issues his statement? He is now talking on behalf of the PFP and he says:

That is the PFP:

That is exactly what I said, per capita income:

That is right.

It was never said. The hon member never said “average” and I told him he had completely misrepresented the meaning of an average. Where does this come from? How could he have said this? It is not in Hansard, neither in his nor in mine. How dare he say that I had said that people were on average poorer? You see, Sir, we talk of credibility.

I never said that.

This is what it says in your name. The hon member never corrected it.

What are you talking about?

I am talking about what I saw in two newspapers. You see, Sir, those who live in glass houses had better not throw too many stones. That is the point. Who put in the words “on average”? They were never used by him nor by me.

You do not know what you are talking about.

I know what I am talking about. What I am saying is that that is a completely misleading statement you made of what was said.

I do not think you know what you are talking about.

The hon member can squirm as much as he likes.

I am not squirming.

He must not talk to me about credibility.

Let us talk about incomes. I dealt with that in my speech. I dealt with it at some length. The hon member said I did not deal with it. The hon member for Amanzimtoti jumped on the band wagon too this morning and referred to the drop in incomes and said that those in the lower income groups had in fact suffered most. [Interjections.] That is what he said. I do not know whether the hon member has seen a study called “The Black Market Book” which was commissioned, I believe, by The Argus or at least published by the Argus Group and which has been given some publicity? There they talk about the survey that was made, the APMS, the All Products Media Survey. Among the interesting things that appear there are what they call the “claimed average monthly incomes from 1973 to 1983”. They then give the figures in respect of Whites, Coloureds, Asians and Blacks. The base year is 1973 and the figure is set at 100 each time. The average household income for Whites went from 100 to 314 over the period 1973 to 1983. In respect of Coloureds it went from 100 to 473; Indians went from 100 to 479 and Blacks went from 100 to 407. However, as they point out, that is an under-statement. Because of a technicality that figure, they say, clearly should be higher. These are in respect of the lower income groups. All of them increased substantially more than the higher income groups. How does he then say that the poorer sections of the community suffered most?

Mr Chairman, with your permission, would you allow me to make a correction? Is that possible?

Unfortunately, in terms of the rules I cannot allow the hon member to do that at this stage.

Mr Chairman, if the hon member said the wrong thing I accept his good faith.

Mr Chairman, I should like to put a question to the hon the Minister. If he studies those figures closely he will see that I am incorrect in saying that the lower income groups...

Order! That is not a question.

Mr Chairman, I am asking the hon the Minister whether he would study those figures.

Mr Chairman, if the hon member maintains that position then I must really strongly cross swords with him. All these facts are against him.

Mr Chairman, may I ask a question?

No, the hon member has made his statement. I thought the hon member was going to withdraw it, because as it stands it is not right.

The higher income groups suffered the most; not the lower income groups.

These figures show that the real incomes of the lower income groups were quite remarkably high.

The hon the Minister should read my private members’ motion on inflation and he will see what the truth of the matter is.

That is not what the hon member said today. The hon member for Yeoville says the same sort of thing. He talks about incomes from 1975 to 1983. Is that correct?

The per capita incomes.

Yes, and he says they have fallen in real terms.

Per capita on the 1975 figures.

Fine. What has the hon member done? He has taken as the base year 1974-75 which was the peak of a business cycle. In December 1974 the gold price reached an all-time high peak for years of $200 per ounce. That was when the growth rate was about 7%. He takes that as his base year and he takes as a comparison the low point on the business cycle, namely 1983. If he had taken 1978 and 1981 or other comparisons I can mention to him, he would have found exactly the reverse. Then there would be an increase of per capita incomes. I say when you live in a glass house you must not throw stones. These things have a habit of turning around and hitting one like a boomerang in the eyes. As far as that point is concerned, I think the less we say about it the better. To say that the great majority of South Africans are not better off today than they were at any time in the past, is a fantastic statement to make. It is not borne out by studies and it is not borne out by any really competent observer who studies these things. Therefore, let us get away from that sort of statement.

There are a few other matters that have been raised and I shall do my best to answer as many of them as possible in the limited time at my disposal. May I just, in conclusion, at this point say that the hon member for Yeoville, you may recall, Sir, in the Budget debate was very critical of the fact that Government spending as a proportion of aggregate spending was 25%. He said that was the major part of spending. In my reply I answered him on that point. What does an authoritative economist from Canada who is visiting here say in this regard? I am referring to Prof Grubel. This is a report in the Financial Mail of 27 April. It reads as follows:

I could go on quoting his statement. It is an excellent assessment by a man who is completely objective on all accounts.

Finally, I want to say that I have just been given the Reuter report on what I said this morning. The report concludes:

Then they quote various business leaders. I thought I should just leave that little point with the Opposition at this stage.

Mr Chairman, it is a great pleasure to be able to speak after the hon the Minister.

The hon member for Yeoville was born with two wonderful talents. One of these was the ability to bluff people and the other was the ability when he has nothing to say, to say it with an excess of bravado and bombast. On 2 April 1984 (Hansard, column 4182) the hon member moved an amendment to the Second Reading of the Appropriation Bill. Point (4) of the amendment reads:

A third talent the hon member was born with, is that he is not naïve. Surely the hon member did not believe that if we totally abolished GST on certain foodstuffs, the GST on other goods would not rise. I am asking the hon member whether he believed that, but he is now making meaningful debate impossible by refusing to reply to the statements made by hon members on this side of the House. Perhaps I am too junior for him; perhaps he is afraid I will mention the fourth talent he was born with. While the hon member is looking up now, I want to ask him whether he believed that if we abolished GST on certain articles it would not rise on other articles? I am asking the hon member this.

It does not follow that this must be done.

In other words, if we abolish GST on foodstuffs, we must follow the advice the hon member also gave us in his speech on 2 April, and borrow more. Is that correct?

We have not yet discussed the R600 million of Sasol.

That is not a reply. I am asking the hon member a direct question and now he is using the first talent he was born with and is trying to bluff his way out.

What you have just said is unparliamentary but I shall not even take a point of order.

I do not think the hon member should take a point of order because he would only lose it.

I simply cannot understand why the hon member who is such a friendly person and who can smile so pleasantly, does not simply get up and say: “Thank you, Mr Minister, for abolishing the GST on basic foodstuffs.” Then the hon member can tell the general public: “Look what a good and effective Opposition we are. We have been advocating this since GST was introduced and now we have succeeded.” But he does not do that.

Since the hon the Minister has made the announcement today, I want to express the hope that whereas GST has now been abolished on certain foodstuffs, this will be to the benefit of the consumer in the sense that dealers will not continue to levy GST on those foodstuffs bought by the consumer and then not pay it into the Treasury. I think this is something we shall really have to give attention to in order to protect the consumer. We know that malpractices do occur and I am asking that we give attention to this matter.

I actually want to express a few ideas today on other items of criticism we hear very regularly from the Opposition, namely that the Government is always responsible for inflation and that the Government’s financial and economic policy is the beginning and the end of inflation. Because we hear so frequently that people are having a hard time and that inflation is the main culprit, I want to say that I think it is a superficial statement and a generalization simply to say that people are having a hard time. There is a category of people who are battling and for whom one feels tremendous sympathy. What I want to say today does not concern them. If we always generalize and say that people are having a hard time, we are creating a psychosis of suffering which has a depressing effect on the public’s frame of mind and their approach to inflation. This in turn has the effect of undermining the will of the man in the street to fight inflation. There are many symbols of the prosperity we are experiencing today. There are two motor cars per family and some even have three. There are microwave ovens and there are television sets. Astronomical amounts are spent at Christmas time on luxury items and less important items. If we consider how money is being wasted in this country, one frequently asks oneself: Do we still know what it is like to have a hard time or have we forgotten? This container holds a dozen chicken eggs and costs 7 cents. That is approximately a half cent per egg if eggs cost in the region of R1,20 per dozen, which is more or less the price today.

I have just said that nowadays eggs cost approximately R1,20 per dozen. The packaging of a dozen eggs consequently costs 5% of the price of one dozen eggs and we are throwing this money away. The total amount being thrown away like this in the Western Cape is approximately R60 000 per week, or R3,1 million per year. Countrywide the corresponding amounts are very close to a quarter of a million rands per week, or approximately R13 million per year.

When we say that people are having a hard time, I want to refer to the fact that if a person wants to purchase a motor car today, he has a choice of 267 different models of passenger vehicles on the South African market. This does not include bakkies, combi’s and that category of vehicle. The prices vary from R6 000 to R115 000. A manufacturer of light Italian motor cars has 24 different models on the market in the Republic. A German manufacturer has 21 models on the market, which vary from light and middle-class to heavy passenger vehicles. My question then is: Can South African really afford such a luxury? Is it really necessary for such a tremendously large variety of motor cars to be available to the public on our market? It can be argued that many of these motor cars are assembled on the same production line and that costs are consequently distributed over the entire range, but if one takes a look at the technical specifications of the respective associated models, there are frequently similarities, but there are more frequently differences, often vast differences.

In conclusion I want to say that we have to beware of two things in this country. The first of these is the hard-time psychosis. The other is the psychosis that all is well, that this will always be the case and that things can never go badly. I think that if we want to be a little level-headed and if we as responsible politicians want to warn our voters outside, then we shall also tell them that if we do not treat our economy more responsibly, eventually our economy will also treat us as it did in the ’thirties.

Mr Chairman, I must say that this increase in sales tax has also come as a shock to me. There is something I just want to ask those hon members who, in speaking here, say that nothing has happened. Although certain, items are to be exempted from a general sales tax, on R8 million will nevertheless be going to be Treasury. It is the purchaser who pays for this owing to the 10% increase. I can understand businessmen sending letters of “condolence” and letters of “all is well with you, Sir.”. They know the business world. They like to scheme a bit. The hon member for False Bay refers to the egg containers costing seven cents. The man in the street cannot return those egg containers to the merchant himself. The problem lies with our industries. I agree wholeheartedly with the points the hon member made.

There is one important issue which I just want to explain to you. The big business man today does not play the part he should be playing. In the 1980-81 financial year everyone in big business, in mines and in various companies jointly paid R6 262 million of 45% of the total state revenue. Today, five years later, those same people, the same mines and the same companies, are paying R791 million less than in 1981. [Interjections.]

That hon member must please keep quiet. If you really want to have a debate, why do you not speak to me outside when I have time. Then you will learn something.

The important point is that all companies are paying so much less today. In 1981, the personal taxpayer paid 27,2% or R3 744 000 000. Today his contribution, together with this R800 million, amount to R13 000 million. Can you imagine the responsibility that rests on the shoulders of the working man? What about the proposals regarding urban transport and housing that are also being announced?

†If you look at turnover tax, employment tax and things like that, then you realize that the future of this country is a very bleak one. The biggest problem in this country is not the hon the Minister of Finance or his team. Certainly they need the money. It is the Government who has built a political elephant and they only have an economic sheepskin to cover it with. We never know when these people go over the border to sign a new treaty and what we will have to pay to the people on the other side. You do not pay tax on apples anymore, because Machel eats it, too. The point is that this Government is making the biggest mistake in its history by trying to bring into its economic system a lot of people from outside who do not bring in a cent economically. It only gives the Government a bit of political glamour. The present Prime Minister is trying to impress the world, but he is leaving his own people by the way by not providing for them.

Just look at the situation with local authorities today. Do you really think that the local authority of today needs an extra tax on housing and things like that to cover its own costs? No, it is to finance the political ideas of the present Government to bring all and sundry into the system. It is to pay for that. It is a political sop. The White man in this country has lost his control and he now has to foot the bill. He is there to foot the bill from day to day and I can assure you that he cannot go on doing it. [Interjections.]

Mr Chairman, you see, the minute you talk to those hon members about finances they want to know whether you are an Ossewabrandwag man or something. I was a “General” in the Ossewabrandwag. Let me explain: In this country it is no more a joke. There are no more jokes, you will have to foot the bill. It is no good sitting as fat cats here and getting R43 000 a year. Look at the people outside in the street today. Look at the 10% sales tax on a motor car in this country. Let us look at a Mercedes costing R21 000. One can go over the border to Bophuthatswana were there is no sales tax and buy it for R2 100 less, because “Caesar” P W is not looking after his own any more. They are looking after all the Black states around us, but not after their own people. Our own people are suffering. One can go over the border any day and buy without paying sales tax. [Interjections.]

I would like the hon member for Water-kloof to just calm down a little bit. I know he does not understand the political part of it although the hon member may know something of the business part.

I am warning this Government today and I will say again to the Minister: Mr Minister, it is not your fault and not the fault of your team. It is even difficult for me to say today what I am saying, because it may look like a reflection on the hon the Minister and his department. It is not at all. It is the philosophy of this Government that is pulling this country to the ground. Why do they not have the guts to say that they want mixed government and why do they not throw all these constituents on one voters’ roll? The point is...

Mr Chairman...

Sit down. I do not even want to talk to you.

Order! What does the hon member for False Bay want to do?

Mr Chairman, may I please ask a question?

Sit down, man.

The hon member for Langlaagte does not want to answer a question.

These people say that we say that the Coloureds are lepers, or “melaats”, as one says in Afrikaans. But those hon members think that they are lepers because they want them in Parliament, in their own separate houses—three houses for which they do not have the money. Those hon members are busy with underhanded reform, so that the public cannot see that this is a question of mixed government.

There is the hon member for Stellenbosch. Let me ask him: Do you want to have all the Stellenbosch hostels open to Coloureds or not? [Interjections.] Are they lepers? Why do you not want it?

Because of practical considerations.

Which practical considerations? South Africa does not have the money to keep these three systems going and to carry them through. We are making ourselves totally ridiculous and we have to pay the price for doing so. In politics, there is no golden mean. One has a choice and one has to decide what one is going to do. If one wants to go for reform, one must adopt the PFP’s policy and apply it with conviction so that one at least ends up with an economic proposition. The Government is only gradually, over a period of ten years, implementing its process of reform, but the end will be exactly the same as is the case of the PFP’s policy, and during that time the Government will have toppled the country economically. [Time expired.]

Mr Chairman, today I want to give the hon member for Langlaagte this piece of good advice. The hon member must be less theatrical, for then he can be far more effective in this House. The hon member for Langlaagte alleged here that the Government’s policy was expensive and that everything the Government did was expensive, that even the Nkomati Accord was expensive. I want to tell the hon member for Langlaagte this: If his party were ever fortunate enough to come into power with its conservative policy, South Africa would go bankrupt, because overseas investments in this country would be cut off and withdrawn from South Africa. The CP’s policy would lead to South Africa being isolated within a few months and within a year South Africa would be on its knees. The increase in the GST to 10% is definitely not going to hit people as hard as the hon member for Langlaagte and the members of the official Opposition are suggesting, because basic foodstuffs such as bread, maize meal, unsifted white flour, raw meat and fish, fresh fruit and vegetables, fresh milk, butter margarine and eggs are now totally exempt from GST. These are after all the basic foods we eat. [Interjections.] I suppose the hon member making the interjection eats caviar. This will mean that lower income groups are not going to pay GST on 25% of their total expenditure, on their entire food basket. The fact is that everyone’s basic food basket—because basically we all eat these foods, even the “fat cats” in the PFP and the paunchy members of the CP—is going to be cheaper. This excludes those persons like the hon member for Langlaagte, who eat caviar. Because the lower income groups, like many Black people and others, spend such a large part of their total income on food, they are going to benefit greatly from the fact that basic foodstuffs are going to be exempt from GST. For these people the benefits are going to be greater than the disadvantages. [Interjections.] I am very grateful that the hon member for Yeoville is making an interjection now. I suppose we can also be grateful that he is now going to stop complaining about something he has been advocating for years now, namely that foodstuffs should be exempt from GST. We hope this will put an end to the vendetta the Opposition has been waging over the years because we were supposedly doing low-paid persons an injustice. The extra 3% low-paid persons will have to pay on other goods will be largely relieved because they are now going to save so much on food, their main item of expenditure.

Almost six years have elapsed since GST was introduced in South Africa in 1978. When it was introduced the stated ideal was that a uniform system should be used by all vendors. Because different business methods and bookkeeping systems made this impossible owing to the disruption and the additional costs which this would entail, it was decided at that stage to give vendors a free choice to use either the add-in or the add-on system. But the understanding was that a uniform system would eventually be adopted. We know that at that stage there were great differences of opinion as to which of the two systems should be used. Now after six years the hon the Minister has decided to make the add-on system compulsory in South Africa from 1 July. It is a good thing that we at long last have finality on this very important matter. This is in line with what has been done in many American states. After they had flitted between these two systems for a long time without being able to decide whether they wanted to use the inclusive or the exclusive system, American states have now also decided to adopt the exclusive or add-on system, as the hon the Minister has also done. This system has the greatest advantages and the fewest disadvantages for the buying public.

Now that GST has been abolished on basic foodstuffs, it is also necessary to make the add-on system of GST compulsory, otherwise unscrupulous exploiters could continue to levy GST on basic foodstuffs according to the add-in system. Now they are being compelled to indicate which items are exempted. This will protect underprivileged persons in the rural areas in particular against exploitation, especially in small shops, almost all of which use the inclusive system. Now they will have to indicate what their prices without GST are. But there is one thing that bothers me as far as the add-on system is concerned, namely that there are still people in this country who use it to play political games. So frequently I have heard it said at the pay-points in shops: “Your Government is the reason why you have to pay this extra GST.” There are constant objections and veiled hints about this at pay-points and today I want to make a very serious appeal, to the hon member for Yeoville as well, for us not to play political games with a matter like this, but for us to help the hon the Minister to find the necessary money to be able to run this country well, as we are in fact doing.

Mr Chairman, I listened to the hon member for Bloemfontein North and I must say that I have little to quibble about with him. I think we can actually design a new term for him, namely that of a “late Prog”, because it seems to me that he was saying many of the things that we said four or five years ago.

I want to come back to the question of income tax policy and in doing so I also want to refer to one of the hon the Minister’s speeches during a Budget debate. In that speech it seemed to me that he was a little sceptical about the use of statistics. He told, for example, the story of the drunken man who uses statistics like a drunk uses a lamp-post, for support rather than illumination. I can actually remember that when the hon the Minister still used to lecture me, he had a different theory. He used to tell us about Disraeli who said that there were three kinds of lies, namely lies, damned lies and statistics. I am surprised that a politician is actually so wary of statistics. After all, modern statistical theory, and in particular probability theory is derived from gambling. It was devised to try to determine the odds, and it is in this field that the first research was done. It seems to me that politicians gamble fairly frequently on their future and, if one looks at our economy, that we are gambling on the price of gold and what is going to happen in this respect. I would like to look at some statistics, and I would like to discuss them with regard to longer term trends. I believe the trend is important, and not the individual figures, because one can prove virtually anything you want to with figures. I want to look at the trend of what has been happening over the last 10 years to income tax collections in South Africa.

If one is looking at a longer term trend, I think one must start with the Franszen Commission. The situation the Franzsen Commission evaluated, was one in which there was a heavy emphasis on direct taxation at the expense of indirect taxation. Following on the recommendations of the Franzsen Commission, one had a period when there was more emphasis on indirect taxation, which then seemed to be reversed. We then adopted a system in terms of which there was once again more emphasis on direct taxation, so that in the mid-1970’s the proportion of tax collected was 70% from direct tax and 30% from indirect tax. At that stage the top marginal tax rate for married people was 60%, which with surcharges or loan levies, could increase to as high as 72%. This then sketches the position prevailing at that time.

A fair percentage, and this is something I want to come back to, of that direct tax came from individuals, namely approximately 22%, while about 36½% came from companies, including mining companies. If one excludes the contribution of mining companies, the percentage contributed by commercial and manufacturing companies was 27½%. Sales tax, which is what we had at that stage, made a very small contribution of approximately 4%. The only other important statistic at that stage I want to refer to, is the ratio of personal saving to personal disposable income, which was about 11%.

We now come to the time when the present Minister of Finance took over, and I would like to say that what the hon the Minister did reminds me of that Clint Eastwood film The Good, the Bad and the Ugly. Let me start with the good.

I think the initial trend was one in terms of which more emphasis was slowly put on indirect tax as against direct tax. One can see this very clearly in that the contribution from individuals began to decline until in 1980-81 the amount of money collected from individuals as a percentage of total revenue declined to 15,2%. The amount of money collected by way of GST increased until it contributed approximately 134% of the total revenue collected. The proportion contributed by commercial and manufacturing enterprises declined to an average of about 18%. During that period the maximum marginal tax rate was reduced to 50%.

From the early 1980’s a new trend developed, and I want to refer to this trend as “the bad”. [Interjections.] No, we are going over a fairly long period, this is why I am taking long-term trends. In the early 1980’s there were no increases in individual tax rates, but with inflation rising rapidly there was in fact no need to increase basic tax rates. The number of individual taxpayers did not increase rapidly, and in fact the threshold at which people started paying tax was actually raised. I want to make the point that I think inflation is perhaps the most efficient receiver of revenue that South Africa has ever seen. Thus in the case of individuals, the amount of tax collected from 1980-81 to the present Budget increased from R2 090 million to R7 265 million. In this respect the proportion worries me, because the proportion contributed by individuals to total revenue during this time increased from 15,2% to 34,2%. The amount collected by way of GST increased and the proportion it contributed to total revenue increased from 13,5% to 23,6%. The amount collected from manufacturing and commercial companies increased from R2 417 million to R2 900 million. Its contribution declined from 17,6% in 1980-81 to 15,2% in 1984-85.

One of the outstanding characteristics of the period 1974-75 to the present day has been the systematic reduction in the effective rate of tax paid by manufacturing and commercial companies. The actual amount of tax paid by manufacturing companies on profits has declined from 30,3% in 1974-75 to 20,4% in 1982-83. The effective tax rate of commercial enterprises has declined from 38,1% in 1974-75 to 29,7% in 1982-83. Over that period companies were certainly making profits. There is no doubt about that. One only has to look at the Johannesburg Stock Exchange. It is not a case that they were not making profits. The problem was that they were not paying tax on those profits. As a result of this, a heavy reliance was placed on GST and on taxing individuals. In his reply to the Second Reading debate the hon the Minister of Finance implied that I was overly concerned about the impact of income tax on the middle and upper middle class.

I also said that about half of all GST was paid by companies.

Yes. I am quite prepared to defend the position of the middle and upper middle class, because if we are going to kill these people’s initiative, it is not going to be the middle and the upper middle class alone who are going to suffer, but the whole of the South African economy. They are the people who have the skills that keep this economy going. If you demotivate them in any way, and I believe that fiscal drag is having this impact, all of us are going to suffer.

We have a very unique system in South Africa. When one looks at our welfare system, one sees that we do not do like they do in the United States where they actually deduct money from one’s salary for various welfare benefits and that employers also contribute. In South Africa those welfare services are paid for by the people who actually pay income tax.

I want to look at one segment of our labour force which I believe has been particularly hard hit by the impact of inflation on tax rates—I know the hon the Minister is looking at this—namely the married woman. I would like to quote just one or two examples. I want to take the case of a married couple where both have a taxable income of R8 000 each. I do not think that this is a particularly affluent income for two people working today. According to my calculations they paid roughly R600 more in tax as a married couple than they would have paid had they been single. If one looks at the figure where the man earns R16 000 and the wife earns R8 000 then they pay R1 427 more. To sum up, between 1975 and 1976 and 1983 and 1984 the consumer price index has increased by approximately 175%. The amount of tax collected from individuals has increased by 339%. The amount of tax collected from companies has gone up by 83%.

For what period is that?

The period 1975 to 1976 and 1983 to 1984 and the figures are taken mainly from this book and the department’s statistical abstract. What is significant is that personal savings as a percentage of disposable income has declined from 11,6% to an all-time low of 2,6%. [Time expired.]

Mr Chairman, it is a pleasure to follow the hon member for Edenvale because he is a member who usually makes a well-balanced speech and I am sure the hon the Minister will reply fully to what he had to say.

I should also like to say a few words about income tax reform. In accordance with the announcement made by the hon the Minister in his 1983 Budget speech people of all population groups will be liable to pay income tax in terms of the Income Tax Act with effect from the 1984-85 tax year commencing on 1 March of this year. When the Act comes into effect I am certain that the minds of the public will have been set at ease as far as the equal payment of income tax by all taxpayers is concerned. The old system, in terms of which Black people were assessed under the Black Taxation Act, while Whites, Coloureds and Indians were assessed under the Income Tax Act, led to great uncertainty among voters. There is not a topic in regard to which more questions were asked than this one and this was just because great disparity was seen in the old system. The new system also has certain definite advantages, but also disadvantages. In the majority of cases Black employees will now pay less tax because rebates for children, dependents and life insurance and deductions for medical costs are allowed. Repayments may also be claimed which could not be done under the Black Taxation Act. An advantage for employers is that only one tax act now applies to all employees which could lead to less confusion. But the disadvantages are that all Black workers must now furnish their employers with an IRP2 return, but this excludes farm workers and domestic servants who earn less than R2 400 per annum. All Black employees with an income of more than R8 000 must now submit income tax returns and employers are required to issue IRP5 certificates to all their employees from whose remuneration tax is deducted and to ensure that Black employees complete their return, the IRP2, of personal particulars. This leads to additional administrative obligations. Something I should like to bring to the attention of employers is that all employers who are not yet registered at their nearest Receiver of Revenue must have themselves registered. If a farmer only has labourers who earn less than R2 400, he need not register.

As far as rebates for Black people are concerned, there are also a few aspects which should be considered. The Act provides that the ordinary rebate in respect of each child is allowed. In the case of polygamous marriages, only the income of the first wife is taxed in the hands of the taxpayer. The other wives are regarded as separate individuals, but they will also be entitled to rebates for their children. In addition, Black taxpayers are entitled to all other obligations for which the Income Tax Act makes provision. The co-operation of employers and employees is essential in order to ensure a smooth transition to a system which will be to the benefit of most Black workers.

I should also like to say a few words about estate duty. Recently many people have asked that estate duty be abolished. I can understand that request and this affects the farming community in particular, but at present people living in towns and cities are also affected because of property prices and valuations which have risen tremendously owing to inflation. The present state of affairs means that today on paper a person owning property can be a millionaire whereas he is no better off than he was a decade ago. This causes tremendous uncertainty in the planning of one’s estate. Usually the actual effect is that the position in which one can find oneself arises at a stage when provision can no longer be made for cash in an estate because at that stage the person is no longer insurable. My fear is—particularly as far as agriculture is concerned—that a position may arise which will make it impossible for young farmers to find the cash to pay estate duty so that they can keep their parents’ farms and that the rural areas will become even more depopulated because properties will have to be sold to pay estate duty.

Mr Chairman, I do not want to ask for estate duty to be abolished, but I do want to ask that attention be given to the rebates allowed in respect of estate duty, because in recent years—I think it was a year or two ago—these have been increased to a certain extent but they did not keep pace with the rate of inflation. This means that more people fall into an estate duty category than was previously the case, which was surely not the intention of the hon the Minister of Finance. All I want to ask is that a situation be created where constant adjustments are made with regard to the rebates allowed on estate duty so that no one will be worse off than he should be or than he would have been if the inflation rate had been taken into account.

I should also like to express my concern about the long drought which has been prevailing in the country for the past three years. We are grateful that there have been good rains in many places during the past few months and this has brought considerable relief, particularly since the water levels of most dams were alarmingly low, and these have now risen again.

Although these has been great relief, Mr Chairman, I want to express my serious concern because the position is still such that the water supply is still very limited and it is not yet possible to lift water restrictions everywhere. In many respects this affects the economy drastically and together with the low point at which the economy finds itself, this has led to certain industries finding it extremely difficult to remain in operation.

I am thinking here in particular of the nursery industry which renders a great service in beautifying our parks and gardens and in providing plants and trees for the successful survival of the fruit industry, which is an important earner of foreign exchange. Recently a large number of these businesses, particularly on the Rand, were forced to close down.

But we remain hopeful that the rains which have begun to fall so well, will continue during the next few seasons and that the water shortage which has hit agriculture so hard will recover to such an extent that we can have normal production years again so that the farmers can recover from their financial plight. On the other hand, if we consider the economic recession, I want to express the hope that the turning point is closer than is expected. [Time expired.]

Mr Chairman, you will forgive me, for my time is very limited, and in view of the sort of day this is and in view of what has been done to the South African consumer today, I believe I must use my time to better effect.

Mr Chairman, the hon the Minister asked me across the floor of this House whether we approved of the fact that he has taken away sales tax on certain basic foodstuffs. I want to say to him: Yes, we do. However, when he couples that at the same time with a measure that is going to bring in a normal tax year in excess of R1 billion then I believe we have every reason for complaining. The effect of the step which the hon the Minister has taken today is going to be grievous in the South African economy. First of all, I have no doubt that there will be a stock exchange reaction and prices of industrial shares are likely to go down. Secondly, it is a very difficult time in the economy at this stage and what the hon the Minister has done today is going to deepen the depression in which we are already. It is going to weaken the rand and, in fact, I believe the rand dropped in value yesterday to 78 American cents. I think this can easily be one of the lowest points we had in many, many years. I am not sure what the last low point was, but it was not very far away from that. Obviously it is going to have the inevitable effect on the employment in this country and that is the fault of this hon Minister. South Africa should realize now that the real implication was of a “yes” vote in the referendum. We warned the voters that this was going to be very expensive and I believe that point has been proved today. I want to ask the hon the Minister what the effect is going to be on the price of petrol? I think that price will now increase by approximately 2 cents per litre and this is also going to have a very adverse effect on the economy of South Africa, the inflation rate and on the price of basic foodstuffs which this hon Minister has just seen fit to reduce by taking away the sales tax. It is going to go up again because of the input costs of the farmers brought about by the extra 3% tax. Mr Chairman, there can be no doubt that the Budget which this hon Minister presented at the end of March, was a bluff. It was nothing but a bluff. That he can come along such a short time later and tell us that he has to collect an additional R700 million in general sales tax to meet a shortfall means that the Budget itself bore no real implications for this country. The hon the Minister has without doubt lost control. He has lost control of the economy and he has lost control of Government spending. I want to put to him the point that he is taking the tax off certain basic foodstuffs but I want to suggest to him that he should consider the possibility of taking sales tax off all foodstuffs because he is, for instance, taking sales tax off raw meat. However, I want to point out to him that Black people, many of whom who do not have the privilege of having electricity, often buy cooked meat because they cannot afford the cost of cooking in the townships. They have therefore historically bought cooked food and it is one of their staple diets. Now the hon the Minister has taken the tax off the raw products but he is not taking off sales tax off the cooked foods and I believe that that should be done. I also believe that sales tax will be levied on tinned foods and I believe it is important that this should not happen.

What about sugar?

Sugar too. Yes, I will quite happily go along with sugar. When the hon the Minister compares our rates of sales tax with other countries in the world he is actually misleading us because what he does not tell us is what those countries do with the money they collect. For instance, Britain has a 15% value added tax but it does provide many benefits to the taxpayer. It provides totally free medical attention for all people in Britain. They provide an excellent and equal old-age pension to all citizens without the iniquitous means test which we have in this country.

Do you want a welfare economy?

I want considerably less tax than this hon Minister is levying for the Government at this stage.

I now want to refer to housing. In this country it is the private flat-owner who is expected to subsidize those who cannot afford to pay economic rentals for the properties which they occupy. This is something which should be done by the Government.

All we get is apartheid and yet more apartheid while the friends of the Government in some instances pay little or no tax at all. One only needs to look at the situation regarding Mr Chiavelli to see the answer there. I understand he has a picture in his sitting room of himself having dinner with the hon the Prime Minister, the hon the Minister of Foreign Affairs and the hon the Minister of Defence, and yet he has paid no tax. What is the hon the Minister doing about this? I hope he will reply. Is the situation being investigated and will he report to this House in this Vote about what he is doing about Mr Chiavelli’s tax situation? [Interjections.]

We are paying the price of racism and apartheid in this country. While on the subject of racism, I want to refer to one of the hon the Minister’s own departments, namely the Department of Customs and Excise. I asked a question earlier during the session regarding the question of how many persons in each race group are being employed by the Directorate of Customs and Excise to man dock-gates at Cape Town, Port Elizabeth, East London and Durban. One finds that 239 people are employed, all of whom are Whites. There is not one Coloured, one Indian or one Black. I believe there is a very big turnover of these people and yet no people from other race groups are employed. I believe it is time for this kind of racism in the hon the Minister’s own department to come to an end. Why can we not see Coloured, Indian and Black people manning the dock-gates and customs posts? What does the hon the Minister have against these people that this job is restricted to Whites only?

The oil supply is another indication of the price we are having to pay for apartheid. Referring to the premiums which we paid in 1980, the then Minister of Mineral and Energy Affairs said in this very Chamber that we were paying premiums of up to 8 dollars per barrel. Our normal requirements are approximately 300 000 barrels per day, of which a small percentage was supplied by Sasol at that stage. If it is therefore estimated that we bought 270 000 barrels per day and we paid an 8 dollar premium per barrel, we paid 2 160 000 United States dollars per day for the supply of oil and that means an amount of no less than R788 million per year. That is one of the costs we have to pay for apartheid in this country. How much better it would be if we could spend that money on Black education, housing, medical attention and so many other things that are very badly needed in this country.

What has the hon the Minister now done in his Budget? A certain amount of money was voted for the State Oil Fund in order to build Sasol 2 and 3. This was done as a big patriotic gesture. The hon the Minister invoked patriotism at that time, saying that this had to be done in order to have the correct strategic fuel supplies. What does the hon the Minister do now that Sasol has been built? He takes that money away for the purposes of government and it now becomes just another tax. I believe the hon the Minister is trading on the patriotism of South Africans for his own ends.

As I have said, the hon the Minister has bluffed the country with his Budget. How much will this tax bring in? When it was increased by one cent from six cents to seven cents, we were told it would bring in R700 million. An increase of 3 cents will now bring in approximately R1 073 million in a full year. If a one cent increase brings in R700 million more, three cents should bring in R2 100 million. One therefore comes to the conclusion that GST on basic foodstuffs will in a normal year bring in approximately R1 000 million. That is what the hon the Minister has been taking from the poor people of this country over a period of five years while we have been pleading with him to remove this very tax.

To sum up, we need better financial control—the Auditor-General and the oil supply are just an indication of that—and we need better control of Government expenditure; we need GST to be removed from all foodstuffs; we need an end to ideological expenditure; we need an end to removals and consequent expenditure, and we need this hon Minister’s resignation.

Mr Chairman, when one listens to the hon member for Port Elizabeth Central and other hon members on that side of the House, one cannot help wondering whether they should really be taken seriously. While the hon the Minister was making the announcement on the increased GST this morning, they initially adopted a tone of indignation. But when it came to the “soft” part of the announcement, namely the relaxation of GST on certain foodstuffs, for which they had been pleading for many years, that same hon member for Port Elizabeth Central kept on nodding affirmatively and implying that the announcement of the hon the Minister met with general approval. Now, however, it seems to me as though the official Opposition considers it to be their duty to present a constant facade of indignation in this House, despite anything the Government does.

I also want to refer to another matter which the hon member has repeatedly raised in this House and in the Other Place. He built up his own set of circumstances around Mr Chiavelli which might have nothing whatsoever to do with reality. And I do not think it has. He then announced it as a fact and as the truth. I think an hon member of this House, and particularly one as senior as the hon member for Port Elizabeth Central, with his white hair, should be a little more responsible when he discusses matters of this kind. It would behove him to do so. He referred to the price we have to pay for apartheid. Has he ever considered that we in South Africa may also have to pay a price for stability and order? When the circumstances in South Africa are considered, the approaches in principle of the PFP are measured against our approaches in principle and in turn against the reality, and it is then found that it behoves us to incur certain expenditure in the interests of order and stability. We then thank the Lord that those hon members are not in power and are not ever likely to come into power either.

My time is limited and I want to refer to a completely different subject. All indications are that when the next Budget of the Republic of South Africa is introduced, it will be introduced in the tricameral Parliament, as instituted by the new Constitution, Act 110 of 1983. That is also where it will be discussed. It will be an important day when that Budget is introduced. The new dispensation, which was conceptualized long ago, about which a great deal has been said and which will be born with the opening of the new Parliament, will take its first step on that day. In the days that follow we shall very soon learn one important thing, whether there are enough people among the three groups involved in the new dispensation who have the will and the ability to cause the dispensation to succeed. During recent years a great deal has been heard about consensus politics, negotiation and give and take. If there are some of the participants in the new dispensation who have heard these things, but possibly did not understand what they were all about, that is when they will learn.

The success or otherwise of the new dispensation will depend on whether we succeed in reaching an agreement among ourselves on the budget of the country. That is absolutely basic. I have every confidence that we shall succeed. My confidence is not based on unquestioning faith, but I have reason to believe this on the basis of my own experience of negotiation and consensus politics. There are many other hon members in this House with the same experience and they will agree with me. They are those who found their way to this place via local government. It is not everyone who did so, either, but only those who served on local authorities that granted recognition to management committees for Coloureds. We can take cognizance of one thing: Without exception the best relations between city councils and management committees were build up wherever the councils were under the control of members of the National Party. These are people who act with a positive approach to their fellow South Africans.

What were the consequences of that sound co-operation which took place on the overall local government level? As a result there is now a nucleus of Whites, Coloureds and Indians who have experience of negotiating with one another around a conference table, who have learned to respect one another’s standpoints, who have learned that every financial situation has limitations and who have experienced the satisfaction of reaching agreement with one another, in spite of conflicting claims. I myself have on more than one occasion in the past found that the mere acceptance of the realities during budget discussions was in itself a way of allaying conflict.

Secondly, sound co-operation on the third tier served as a training school in what lies ahead for a large number of those who will now for the first time become involved in governmental processes on the first tier. I have had experience of Coloured people conferring with me around a table who had no idea of what was involved. I saw how they developed until they were able to make a meaningful contribution at every meeting. They learned quickly, because their abilities are definitely not more limited than our own.

Thirdly, we learned from the sound co-operation that when people find that financial realities are unavoidable, what emerges is rationality and realism. One then finds that the ideological and emotional aspects of a political set-up are accentuated to a lesser extent. One then finds that honest work takes the place of those aspects, the object being to get the best out of the budget for the community concerned in spite of the limitations.

Fourthly, we found that co-operation and consensus-seeking were remarkably conducive to sound general human relations. In the beginning I went more than once with a reluctant heart to such discussions. The people with whom I had to discuss matters were mistrustful of me, if not directly hostile. Negotiation politics was for all of us a completely new field, but we wanted it to succeed, we were honest and fair towards one another, and before we knew it we were also on friendly terms with one another. It was not long before all of us were looking forward to the meetings which we held regularly. I want to emphasize today that if it had not been for these structures of co-operation that were created by this Government and which were utilized by people of goodwill and on which people could acquire experience and skills, I would definitely have had less confidence in the potential of the new dispensation to succeed. To tell the truth, I doubt whether it would otherwise have been in any way possible to cause the new dispensation to succeed.

Be that as it may, the road ahead requires that the best in all of us should now emerge. There must be reasonableness, fairness, unimpeachable honesty and goodwill. We will have to be prepared to negotiate, and negotiate and negotiate once again. If there are some of us who are by nature impatient, we will soon realize that it is a weakness that has to be controlled.

In the discussion of the budget we shall simply have to create many opportunities for talking to one another. We shall have to ensure that those talks take place under circumstances which offer the least opportunity for emotional demonstration. I have very strong personal misgivings about whether we shall in future be able to allow ourselves the luxury of the traditional general budget debate. I have found that this debate assumes the form of an ordinary political discussion. It is conflict-creating and has virtually no positive value and in future this will be the case to an even lesser degree. I know that the hon the Minister and his competent advisers are aware of the importance of the participating parties reaching general agreement with one another on the national budget. In particular this is the case in regard to the distribution of funds.

Mr Chairman, I know that it will be difficult to do what I am now going to suggest, but if there could be a degree of intergroup communication and liaison with the Treasury even in the process of the preparation of the budget, it would be a great help in furthering the achievement of consensus. It is a new dispensation which lies ahead, with unique challenges, and we must go forward to meet it with a unique approach. [Time expired.]

Mr Chairman, I should like to start by thanking the hon Government Whip for finding two minutes for me to reply to the hon the Minister, who corrected me earlier this afternoon.

Never let it be said that I am so stubborn that I cannot admit that I had made a slight mistake. The hon the Minister is correct in pointing out to me that the lower income groups in South Africa, especially the Blacks, Coloureds and Indians, have in fact had a rising standard of living over the last 10 years. I agree with that. However, his figures clearly show that, on average, the average South African’s income has dropped. I think the hon the Minister will concede to me that the incomes of those people in the upper income groups, those who have their own businesses or who are professional people, have probably increased on average over the past 10 years.

Mr Chairman, I refer the hon the Minister to the debate on inflation during the discussion of my private member’s motion last year, when I quoted certain statistics. These statistics clearly show that those people in the middle, the middle income group, who are predominantly White, are the ones who have suffered as a result of the falling-off in the average gross domestic product over the last 10 years. I see the hon Whip is giving me a signal indicating that my two minutes are over, but I think I still have another half a minute.

Mr Chairman, this is the point that I want to put to the hon the Minister: On average, the gross domestic product per capita has dropped and the people who have suffered as a result of this, according to the statistics available to me, are those in the White middle income group. There is no doubt about this.

Everything depends on the base year from which you start the comparison.

I am taking it over 10 years—from 1974 to 1984. Mr Chairman, I thank the hon Government Whip for giving me the time to clarify this point.

Mr Chairman, I am sorry that I have to come in here from the sidelines, as it were. I am well aware that no tries are scored from the sidelines, and I shall probably not try to do so either.

There is a matter which I want to refer to on this Committee today. I understand that this matter was in fact raised here by the hon member for Port Elizabeth Central. I notice that he is not present here at the moment; unfortunately I was not able to ask him to be here. I wonder whether the hon Whip would arrange for him to come. [Interjections.]

Mr Chairman, I am pleased that our colleague, the hon member for Port Elizabeth Central, is here now, because I should like to refer to a matter which, as I have ascertained, he also raised here. It is a matter which has recently received quite a lot of publicity; I am referring to the question of Mr Chiavelli’s income tax.

The headline to a report which appeared in the Sunday Times of 29 April 1984, read as follows:

Do you have the name of his tax adviser?

†Mr Chairman, now I should like to know more about this from the hon member for Port Elizabeth Central, because I am informed that he seems to know a lot about it.

I got my information from the Sunday Times. [Interjections.]

Oh, I see we have the same source. [Interjections.]

*Mr Chairman, I say that this report was written with a great deal of cunning and anyone who relies on this report, which was published as being factual, is being a party to that cunningness. Let us see what that report says: That report says this man has assets to the value of R2 500 000 000; it also says he has an income of R650 000 per day. Furthermore it says that he paid only R196,75 in personal income tax. But the report then goes on to say:

In other words, what inference must then be drawn by the public who read this report? The inference must then be drawn that the authorities admit the correctness of the report. This phrase “... bears the stamp of official authority” must imply to the public that the authorities admit that those facts are accurate. Yet all those allegations made in the report are stale news; the hon member for Port Elizabeth Central can read about it in the Sunday Express of 19 July 1981—which was almost three years ago. All those facts were also furnished at that stage. That is without saying what this so-called “stamp of authority” is to which this report refers. The reason for this is that even an official assessment from the Commissioner of Inland Revenue of R196,75 does not mean to say that the person’s assets are R2 500 000 000; it does not mean to say that his taxable income in South Africa is R650 000.

In other words, the hon member for Port Elizabeth Central fell into the trap of a report which was misleading and malicious. He did so for one reason only, and that was to use the Department of Finance in order to blame the Government, so that public feelings could be aroused at the alleged irregularities with the purchase of oil, a matter that is at present being investigated. Mr Chiavelli is an alleged oil dealer. Mr Chairman, I say that was the reason for this.

The Government has denied that.

Mr Chairman, that report was submitted to the hon the Minister, and his comment was that he did not comment on people’s income tax affairs. That is correct; it is 100% correct. Section 4(1) of the Income Tax Act protects the privacy of people in respect of their income tax affairs. That is right, it is quite right. We shall play our part in providing that protection, also in respect of the affairs of the hon member for Port Elizabeth Central.

Thank you.

Mr Chairman, I can tell you now that the Commissioner of Inland Revenue has consistently refused, in terms of that specific section of the Act, to disclose information on any person’s private income tax affairs, even to the Minister. Not even a court in South Africa can compel the Commissioner of Inland Revenue to disclose any information, dealing with a person’s private affairs, in that court. That is correct; that is what we advocate. Even if a taxpayer should disclose unlawful income on which he has paid tax—because a person pays tax even on unlawful income—in his income tax return, a court would still not be able to compel him to disclose that information.

I am not here to defend anyone, and I shall certainly not take up the cudgels for anyone who has transgressed in this connection. However, there are certain things which result from the Act and which must be borne in mind when we assess matters such as these. Firstly, we are taxed according to our source of income. In other words, if a person’s source of income is in South Africa, he is taxed in South Africa. If the source of income is outside South Africa, that person is taxed in the country concerned. Throughout the Western world it is a known fact that people do business in their own name or in the name of a company. Then that person is either taxed privately or through the company, or in both ways. Surely it is also a known fact that there are well-to-do people who pay very little or even no tax in their personal name. They do however, pay tax in the name of the company.

Mr Chairman, in conclusion I want to say—and in this connection hon members must bear it very clearly in mind that I am not acting on anyone’s behalf—that we are dealing here with an immigrant. Our Income Tax Act very definitely lays down special conditions in respect of immigrants. I do not think I can explain it in simpler terms than by way of this guide, which has probably been distributed to all members by an obliging company. On page 158 it states that all business profits, rentals and other income obtained abroad in respect of persons emigrating to South Africa, shall remain tax free. They remain tax free for always. This applies to Mr Chiavelli; it applies to any immigrant who enters this country. It also states that dividends on foreign shares, if the foreign shares were acquired before the person entered the country, are also tax free.

Mr Chairman, I ask hon members, when malicious reports such as this one are published, to give thorough consideration to these legal aspects which I have disclosed. I can give you and the public the assurance that this department, as far as its capacity extends, will not allow people to get away with unlawful tax benefits.

Mr Chairman, I think the hon the Deputy Minister will agree that the allegations in the Sunday Times were extremely disturbing for the ordinary man in the street, especially in view of all the other matters surrounding the Salem incident and the acquisition of oil. I believe that the hon member for Port Elizabeth Central was only doing his duty when he raised the question. On the other hand, I think the hon the Minister is doing the correct thing in explaining to us today the background to it. However, in no way can I see any justification on his part for directing any criticism at the member for Port Elizabeth Central. He is only doing his job; he is doing what a man in the Opposition should be doing. [Interjections.] In spite of that, I personally still find it extraordinary that a man of alleged wealth, such as Mr Chiavelli, should only be paying R196,75 on income tax. [Interjections.]

Mr Chairman, I should like to revert again today to the question of the economy, because I believe that the hon Deputy Minister is again using a very well-worn tactic of drawing a red herring across today’s debate, especially when we look at the serious situation in which the South African economy finds itself. Looking back on the South African economy over the last 10 years, I believe we have been saddled with one of the worst Ministers of Finance that we could ever had wished for. I shall try and justify this by going through a number of different aspects. First of all, there is the inflation rate. If one looks at the consumer price index in South Africa in 1975—which is fortunately a good year to start from, because that is the base year—one will see that it was 100; it is now 264. This is also the year when the hon the Minister started. If you look at our main trading partners over the same period, the figures are the following: In Germany it is now 140; in the United Kingdom it is 247; in the United States of America it is 185 and in Japan it is 150. It will interest hon members to hear what the inflation rate in those countries is right now; for instance, in Japan it is 1,5% and in the Federal Republic of Germany it is 2,74%. Our present rate of inflation is 10% and there are many commentators who believe that it will be considerably higher by the end of this year.

What about Brazil?

I am comparing ourselves with our main trading partners. [Interjections.] We should not compare ourselves with the worst because then it is easy to make ourselves look good. Mr Chairman, I am willing to bet the hon the Minister that our inflation rate will be far closer to 15% than 10% by the end of this year.

Secondly, let us look at a comparison between the hon the Minister’s budgeted figures and his actual figures over the past seven or eight years. In every single Budget Speech that I have studied, he has always emphasized the need for tight fiscal discipline. Unfortunately I do not have the time to quote the figures for every single year, but in the financial year 1978-79 the budgeted increase was 9,1% and the actual increase 13,8%; 1981-82, budgeted increase 14%, actual increase 19,8%; 1983-84, budgeted increase 10,3%, actual increase 16,5%. I believe that one cannot win them all, but this hon Minister has not won any.

We can go back any number of years in regard to the money supply, and we will find that it is this that is largely responsible for our high rate of inflation. Yet the hon the Minister seems to have shown no ability or willingness to curb the increase in the money supply. For instance, in 1980 it was 27%; in 1981, 25%, in 1982,17% and in 1983, 16%.

The lack of discipline in Government spending has also led to the Government taking an increasing chunk of the economic cake ever since 1980. This is nowhere more evident than in the size of the public sector. The hon the Prime Minister, who is sitting here today, made a pledge at the Carlton Conference to reduce the size of the public sector. What has happened since? The public sector has increased considerably. I know that a large proportion of the increase is in regard to teachers and I have no quarrel with that, but just about every other single department has increased at a rate of approximately 3% per annum in the number of employees.

We also know that the economic development plan has over the years set a target growth rate of approximately 5% if, we are to provide enough jobs and employment for people coming into the market. From 1973 to 1983 our average growth in the GDP has been approximately 2,5%—that is on average over that ten year period—but over the last two years it has in fact declined. While we are on the question of the hon the Minister’s argument regarding GDP per capita, I refer the hon the Minister to page 6 of his Statistical Handbook. If he looks at that, he will see that the hon member for Yeoville was absolutely correct. The base year from which he started does not in fact influence the conclusion that the hon member for Yeoville arrived at all.

Let us look at a few of the commitments that have been made in the past. At the Carlton Conference and also at the Good Hope Conference the hon the Prime Minister made a commitment on the part of Central Government to reduce capital and current expenditure. As I have pointed out, this has not been done. Indeed, the Government each year takes a bigger bite of the GDP, especially in the past few years when the GDP has in fact declined.

I want to refer very briefly, as the hon member for Edenvale has done today, to what has been happening to the individual. Someone has had to pay for the bigger chunk taken by the Government. Who has been paying? The individual’s contribution towards the total Government revenue from 1979-80 has increased from 23% of the gross amount to approximately 38%. Over the same period companies’ contributions (excluding mines) have declined from approximately 22% to 15%. What has happened? The savings of the man in the street have in fact decreased and savings are the vehicle for investment and the vehicle to start growth.

Finally, I want to refer to one very important issue which has been raised in this debate, and that is the question of poverty and what is happening in that regard in South Africa. The hon member for Yeoville raised this matter in the Budget debate. I wish to refer to a question which the hon the Minister replied to in the Financial Mail. The question was: “What is the Government’s view of the long-term scenario, the spectre of massive and threatening rural poverty, sketched by the parliamentary Opposition?” The hon the Minister’s reply was:

I should like to look very briefly at how unfounded and irresponsible this is. First of all, the hon the Minister obviously has not seen or he does not know anything about the recent Carnegie survey. According to that survey approximately 9 million people in this country are still living below the poverty line. In fact, the hon the Prime Minister took great exception to this survey, which compared us to other countries in Africa. I will accept that we are possibly better off than other countries in Africa, but that does not make the situation here any better. Absolute poverty has grown in this country over the past ten years, as was very clearly indicated in the Carnegie survey. That is what should concern us, Sir, instead of looking at how badly off somebody else is. [Time expired.]

Mr Chairman, at the outset I wish to refer to what the hon member for Pietermaritzburg South said in regard to Dr Chiavelli. Does he accept the explanation given by the hon the Deputy Minister of Finance?

Yes.

Does he accept that the hon the Deputy Minister’s explanation is correct? Did the hon member say that?

Yes.

Will the hon member repudiate the Sunday Times?

Make your own speech. [Interjections.]

You see, Sir, the hon member for Pietermartizburg South...

Mr Chairman, may I ask the hon member a question?

No, Mr Chairman, I am not prepared to answer questions.

Then you should not ask questions.

The hon member did not answer my question.

*The hon the Deputy Minister gave that hon member an explanation, but now the hon member is basing his argument on a report in the Sunday Times which was refuted by the hon the Deputy Minister. The hon member said afterwards that he accepted the explanation of the hon the Deputy Minister, but he was not prepared to repudiate the Sunday Times.

The question is, where did he earn the money? Outside or in South Africa? How much money did he earn?

That hon member heard what the hon the Deputy Minister’s explanation was. [Interjections.] Is the hon member for Port Elizabeth Central prepared to say here today that he accepts the Deputy Minister’s explanation?

Sure! I accept it, but I believe it should go further.

Is the hon member for Port Elizabeth Central prepared to repudiate the Sunday Times?

Was there anything incorrect in that statement?

Mr Chairman, I am asking that hon member whether he is prepared to repudiate...

No, I am not, because I do not know that there was anything incorrect in that statement.

The hon member for Pietermaritzburg South then spoke about “the serious economic situation in South Africa”. I agree with him; there is “a serious economic situation”, but if he says that, he should look beyond South Africa alone. He should then say: “There is a serious world economic situation”, not only a South African one. Later in his speech he used comparative figures to present our economy and our finances in a poor fight. He said inter alia: “We have the worse Minister of Finance”. Very well, he may think so, the Opposition may think so, but the experts in the financial world, the people who know what the situation of the economy in South Africa is, they say we most certainly have one of the best Ministers of Finance we have ever had and that is Prof Horwood. These are people who know about these matters, people who deal with the economy and the finances of South Africa every day.

The hon member maligned the hon the Minister and blamed him because the inflation rate in South Africa was still climbing while those of our trading partners were dropping. Can the hon member tell us whether the inflation rates of our trading partners are still dropping? Are their inflation rates dropping every year? Is there not a renewed tendency in those countries for the inflation rate to climb and go on climbing?

I now want to refer to a report which appeared in The Citizen on Thursday, 10 May 1984 under the headline “US tension over interest rates”. Hon members must bear in mind that there is a forthcoming election in the USA when they listen to the following report which The Citizen, namely:

Mr Chairman, we want to combat inflation, but hon members must realize that inflation is a world-wide phenomenon. Why are we not able to contain inflation to a single figure? It is because South Africa has just come through the worst drought we have ever experienced. A drought does not afflict only the farms, but also has an effect on the consumer, and that is precisely what we are experiencing in South Africa at present. That is why the Government had to adopt emergency measures by raising taxes. The Exchequer has to function, and the infrastructure has to be expanded. How can we do this without the necessary finances? The hon the Minister said inter alia he wanted to keep South Africa’s finances sound. That is precisely what he is doing.

It is not pleasant for any government or any Minister of Finance to stand up and announce taxes. It is not pleasant to have to do this, but if circumstances necessitate doing so, then it has to be done. The Minister of Finance must be courageous and strong in taking the initiative now to establish a sound basis for the years to come, which we believe will be better years for us in South Africa. That is why the hon the Minister, in a single sentence, gave South Africa that assurance when he said: “We shall adjust taxation when conditions improve”. When our economy and the situation in South Africa improve, the Government will after all be prepared to review the tax structure and tax scales. We are not simply out to exploit people. We are here to care for people, and to care for South Africa.

Mr Chairman, allow me in conclusion to refer to the very important international investment conference which was recently held in the Carlton Hotel in Johannesburg. There a certain Mr King said that the world’s monetary systems were going to collapse completely after five years. According to him most important currencies in the world are already becoming steadily weaker, and will only be able to exist for another five years. Then our own Minister of Finance said the following: The strength of the dollar and its popularity is being supported by low inflation rates and high interest rates in America. This situation is nevertheless not permanent, he said, and gold would in future demonstrate its sovereignty as a sterling asset. With this I just want to illustrate that we are passing through an exceptionally deep current of economic problems in the world. But I believe, with this Government and with this Prime Minister and this Minister of Finance, South Africa will triumph and we shall still show the world that our finances are basically sound.

Mr Chairman, the hon member for Overvaal will have to excuse me, because he actually had a bone to pick with the hon member for Pietermaritzburg South.

I want to come back to the hon member for Bloemfontein North. The hon member for Bloemfontein North said here this morning that if the CP came into power, we would be isolated within three months, South Africa would be bankrupt and thousands of investors would withdraw all their money. That is, except for a comma here and a full stop there, precisely what the old United Party said about the National Party before 1948, but after 1948 the National Party took over and it halted the integration policy of that old United Party, and South Africa subsequently grew and flourished. For the previous 32 or 33 years things have gone well; it has only been for the last three or four years that we have been deteriorating completely. The CP of 1984 will also put a stop to this National Party on its road of integration. You can simply turn the 1948 around to get 1984—it is going to happen.

This morning the hon member for Vasco, when I asked for what the new dispensation was going to cost to be spelt out, referred to the Committee on Standing Rules and Orders. He then said “the people are still discussing the matter, and my leader and the Leader of the Opposition are still sitting on that Committee”. But the Committee on Standing Rules and Orders has nothing whatsoever to do with the budget. The matters under discussion there are the ordinary procedure that is to be adopted. If this Committee on Standing Rules and Orders now has to say what the new system is going to cost, what do we have a Minister of Finance for, and why do we have a budget every year? Then this Committee on Standing Rules and Orders can simply come forward and give us the budget. No, one must not try to drag in a thing like this now. It does not work, it is not correct, it cannot happen. That Committee has other things that it is going to work out. That Committee is concerned with sitting hours, procedure, and so on. Apparently it has also decided that three separate dining-rooms are going to be built.

While we are on this subject, there is something I want to ask the hon the Minister. We have been informed that separate dining-rooms are going to be built here for the three separate Chambers, but why, then, has the Public Servants’ dining-room been thrown open? Why should everyone eat there on an integrated basis, as is happening now? Does it apply only to the three Chambers at the top, but the officials who may not speak their piece, who may not express their opinions, are being integrated and put down. I should very much like to know what else is going to happen next.

The hon the Minister of Internal Affairs also said a little while ago that the top structure of officials was blatantly going to be given preferential treatment in order to implement the policy of the National Party. I want to tell you that we seriously question their being transferred or given preferential treatment at short notice. We are worried about that, and so is the country. I should like to know what is behind it. Surely it is intimidation and indoctrination from the wrong side.

As far as the budget is concerned—I could not finish speaking this morning—there are a few other points I wish to mention to the hon the Minister of Finance. I said this morning that we understood the hon the Minister’s dilemma. The Cabinet is forcing him in a certain direction.

Let us now consider the interest obligations which emerge in this budget. In 1973-74 the interest charges as a percentage of Government expenditure were 10,6%. In 1983-84 the interest charges were 12,2%. In this budget the increase in this year’s interest charges over those of the previous year was 25%. In this way we are going to make a cost-item a built-in part of our budget which future generations and all of us—when I refer to future generations, I am talking about one to three years from now—will just not be able to cope with. Things are happening too indiscriminately in this regard. I concede that interest rates are higher. We understand that, but as a member of one of the Opposition parties I want to point this out to the hon the Minister, because this is not being done in his own ranks. We must do it, I think it is one of our functions. Our foreign debt in 1980-81 was R360 million, but in 1982-83, it was R2 167 million. The writing is on the wall.

I also want to refer you to programme 6, item 5. Statements were made here, but we may have found them a little misleading. I want to refer to the personnel expenditure. In 1984-85 the estimates were R6 148 000, whereas in the previous year they were R1 481 000. This is an increase of R4 666 400, which represents an increase of 75,9%. This is personnel expenditure, programme 6-5. It could be that things have been included here which do not belong here, but then it should have been more clearly spelled out in these documents, so that we can compare these figures, for this increase is a little disquieting.

I want to tell you about something which struck me the other day. We had an overseas visitor here, whom I had the privilege, together with members of other parties, of speaking to. He told me that the very first thing that had worried him was that he had read on the aircraft on his way over that 35% of all economically active people in South Africa worked for the Government. He then wanted to know from me: If this is the case, if that percentage of people is working for the Government, how can a country like South Africa be productive, because officials are not productive in the same sense as the person who produces, and so on. This is a matter which causes us concern, and I am now linking it to the high State debt and the personnel expenditure which I singled out.

There is one final item I want to refer to, and that is transfer duties. Last year the hon the Minister expected the income from this source to be R180 million and this year an amount of R340 million is being budgeted for, that is to say R160 million more. It is not clear to me how this amount can be so much higher. It gives me the impression that so many people are expected to go bankrupt and be forced to sell their properties that that high amount of transfer duties will be collected. This is of course as a result of the sliding scale of higher prices.

Property prices have gone up tremendously.

But, sir, prices have not doubled since the previous year. The prices of property have not doubled since the previous year, and I think this figure is out of proportion.

There is another little matter I should like to bring to the attention of the hon the Minister and that is that the hon the Minister of National Education said last year that they had withdrawn the grant made to Sabra. I want to ask the hon the Minister a question today: Why was that money not given to Sabra? The South African Bureau for Racial Affairs is an important body, and just because a certain person is chairman of that body it seems to me it is begin discriminated against. If he resigns as chairman today, are they going to receive the money tomorrow? No, sir, I now want to ask—in regard to the Universities of Cape Town and Pretoria and Wits, anyone of them—whether they simply keep on saying “yes, master, yes, master” and proclaim the policy of the National Party, or are they opposed to it? If the money for that body is withheld, why do you not withhold the money for those universities. The University of Cape Town refused to allow Ministers to address meetings there. You know what abusive language those students used. Why was the money for those organizations not withheld? This is blatant prosecution of fellow Afrikaners. While our hon Prime Minister is here, I just want to tell him that I appreciate very much the fact that he is here, because I should like to say these things in his presence.

I came to listen to you in particular.

I appreciate that very much. The hon the Prime Minister and I speak very candidly to one another about our private observations. I just want to tell the hon the Prime Minister that the National Party should not allow itself to be stampeded because a cultural body has been established. They should try to govern and not levy ad hoc taxation. I said this morning that we would see in future how heavy and how harsh the taxes are going to be in respect of third-tier government. While we are here we should like to know far more about the third-tier government. Is there going to be more legislation this session, are we going to discuss this, to see what implication third-tier government is going to have on taxation, because with reference to what you told me, and to what the third-tier government will have to do—regional development and so on—I want to say that it is very clear to me that tremendously high taxes are going to be imposed on the taxpayers of South Africa. I said this morning that wherever taxes have to be levied, it should be done. We are not insensitive and we are not following a course where we do not want to face up to these things. But I want to make it very clear that we do not want taxes to be levied on an ad hoc basis and unsystematically, and I said that this morning too.

Mr Chairman, I want to leave the hon member for Sunnyside to dream his dreams of future growth in the Conservative Party.

I only want to refer to one matter he touched on. He referred here to the top-level officials and suggested that they were puppets of the National Party. I shall discuss this with him later. I think this is an insult to these specific officials.

On a point of order, Sir, surely that is not what the hon member for Sunnyside said at all.

That is not a point of order.

But it is still a fact that it is not the truth.

That is not a point of order. The hon member for Gezina may proceed.

Mr Chairman, I shall not pursue this matter. We shall soon be entering a new dispensation. This new dispensation is going to set new challenges which are going to require new solutions and new attitudes. In the financial sphere new and challenging demands are also going to be made on the Treasury. I think we should tell each other today, and not try to get away from it, that greater demands are going to be made on the Treasury. Not necessarily in terms of rands and cents, but also greater demands on the managerial expertise of the entire Department of Finance with all its branches, and also on that of the Minister of Finance. In the same way that separate development of the Black people in South Africa made a virtually superhuman demand on the State’s financial resources and because the inhabitants accepted this with an attitude of goodwill and assisted by means of personal contributions in the form of tax, I believe that the inhabitants of South Africa will also accept this new challenge in the financial sphere in the interests of South Africa and will make their contributions willingly and graciously. This means that we shall have to consider the sources from which the State must obtain its funds in good time.

I want to refer more specifically to indirect taxation, and in particular sales tax, as a source of revenue. Today the hon the Minister displayed the ability to take all the savour out of a person’s speech. Today I wanted to stand up here and discuss the possibility of increasing the GST. Now the hon the Minister has come along and announced an increase out of the blue—precisely what I initially wanted to advocate in my speech.

The introduction of sales tax was probably one of the most appreciated and generally accepted ways of generating State revenue. Whereas personal income tax has a narrow base, with 20% of the population providing 80% of the revenue, indirect tax—and more specifically sales tax—has a very broad base. Consequently all consumers contribute to the revenue of the State. This method of levying taxes is considered fair because it claims the rightful share of each consumer, each buyer. It has another effect. It has an inhibitory effect on unnecessary and luxury spending. It can have the effect of making the prospective buyer think twice before he spends unnecessarily. That is why the exclusive method of levying GST is probably the most suitable and the most obvious method. In this way GST becomes visible to the buyer. He can decide for himself and see how much tax he must pay.

When I was initially preparing this speech, I tried to argue that the ceiling in the levying of sales tax had not yet been reached. I reasoned that it certainly could, and would have to, rise. But I convinced myself that if this were to happen it would be essential for certain specific foodstuffs to be exempted from GST or for the GST on those items not to be increased but decreased. The diversity of the South African community and more specifically the consumer, simply does not make it feasible to demand more of the lower income groups than is the case at present. I am of the opinion that a general increase in GST on all commodities would hurt certain income groups such as pensioners and other low-paid groups. That is the reason for the gratitude and the relief that certain foodstuffs are going to be excluded from this increase.

Whereas I argued a while ago that the exclusive method of levying GST had an inhibitory effect on purchases—and was the most ideal way of discouraging the purchase of luxury goods in particular—I must now give consideration to the idea that differentiated GST will be necessary. Larger food merchandisers such as supermarkets will certainly be able to draw this distinction because of their new technologically advanced cash registers. The larger dealers can therefore use the exclusive method, but the smaller dealer—the café on the corner, the “fish and chips” shop—will find it difficult to cope. If one has to accept that the inclusive method will apply where food is being sold, this brings one to the responsibility which will rest on the shoulders of these dealers. This responsibility is to ensure, in the first place, that the correct amount of tax levied will be paid and, in the second place, that the inclusive method will not be used to increase prices.

Mr Chairman, in the few minutes at my disposal I should very much like to issue a warning against what I consider to be the serious consequences for the economy in general, but for the consumer in particular, of the present so-called bank war. To anyone who reads the newspapers it is quite clear that the competition between banking groups has never been as aggressive as it is now. In addition to the advertising campaigns, the costs of which are absolutely astronomical—I do not want to know how much they cost—more letters are being sent to potential clients than ever before. Attractive offers are being made to these people. In the process risks are increasing tremendously and write-offs of 1½% on outstanding accounts are considered perfectly normal and acceptable. The consequence is that banks are writing off millions of rands in the battle to expand and outbid the others.

My concern is not so much for the banks, although there is no doubt that their interest rate margins are narrowing, but the consumer. I am concerned about the man in the street who in my opinion is being inundated with offers of easy credit. Just listen to this: Court cases involving debts rose by 54% to R227 million for the first 11 months of 1983. Liquidations rose by 21%. Hire purchase debts rose by 66% over two years to almost R7 billion. Some of the other hon members referred to the situation in the economy as a whole. The other day I read about the Russian economist Nikolai Kondratiev who said that every 55 years the world economy enters a depression. He said that 1986 was that year. If one looks at what is going on around us the world is really heading for a serious situation. I do not want to be a prophet of doom, but how are we going to prevent this? We can prevent this by teaching our people to live within their means and by preventing our money lenders from giving credit so easily. Take hire purchase as an example. In my opinion deposits must be increased. The repayment period must be reduced. I should like to mention credit cards. In fact I should like to discuss credit cards and plastic money, because nowadays the world is becoming a cashless society. Credit cards are manna to the irresponsible consumer, the man who is not concerned about how he is going to pay his debts. In this connection a collectively shared network with a central credit data bank would be of inestimable value. But then our financial institutions, our banks, our building societies, will all have to co-operate. I have already asked several times in this House that all the banks and building societies should work with the Post Office to establish a collectively shared network.

In conclusion may I just refer to another minor point. To my mind this is an anomaly in our situation. I am referring to the matter of bursaries. Nowadays the number of students studying at universities and colleges on bursaries is increasing every day. In any case the State subsidizes studies at an institution for higher education by approximately 90%. I am referring to actual study costs, not subsistence expenses. The State subsidizes 90% of those costs and the bursary that student receives is not taxable either. In contrast, the parent who for some or other reason does not apply for a bursary and who pays his child’s study fees himself does not receive any tax relief for those expenses. The child taking a course for which bursaries are not available or the parent who would like to pay for his child’s studies himself in any case, has a double disadvantage compared with the holder of a bursary. In the first place he does not get the bursary and, in the second place, he pays for the child’s studies with money on which he has already paid tax.

I want to conclude my short speech by saying: I should like to ask the Minister and his department to give serious attention to credit ceilings for banks in respect of the individual and particularly in respect of hire purchase transactions. In the second place I want to ask him to get all the banks and building societies together in a single shared network which will in all respects be of great assistance to the Post Office as well, which has to create the infrastructure. In the third place I want to ask that the public be encouraged, by means of some form of tax relief, to pay for the higher education of their children themselves.

Mr Chairman, to what the hon member for Paarl has said, I do not want to react because of a shortage of time, but there are two things I should like to deal with briefly. One is the fact that there is little doubt that the excessive encouragement to credit is an undesirable feature. I agree with him completely. In fact the hon the Minister has been a party to it today because by announcing the GST increase from 1 July today on 11 May, a demand for credit will develop between now and 1 July of people wanting to buy goods which are going to be subject to 10% GST. He must also point out to the Minister that he has been a party to this encouragement of credit which to a large extent should be resisted. In regard to the second point, the one concerning education, I must say I for one am very unhappy about the tendency that is taking place in South Africa at the moment, where the thing for which many of us have fought for over years, which has resulted in the White people of South Africa being very substantially uplifted—and that is free education—looks as if it is going to come to an end. It is certainly going to come to an end in respect of the higher levels of education where people are going to have to pay more and more for themselves. I, for one, would have preferred to see that free education would be available to all races to give everybody an equal opportunity of getting on in the world rather than, as it is becoming now, that we should suddenly have a contrary tendency that whereas we have enjoyed free education for a long time, we are going to have to do without it, but it is not going to be extended to underprivileged people at the same time. I am very worried about it and I certainly do not like what is going on.

This debate normally should be a debate where we get an opportunity of discussing the individual aspects of the various departments that fall under the hon the Minister. However, this debate today has been under a shadow. It is an unfortunate debate because it actually is the last one which we are going to have under this old dispensation in regard to a Finance Vote. We have a Third Reading, but it is the last Vote of the Minister of Finance which we are going to discuss. I hoped that we could discuss not only the individual departments, but that we could discuss the future as to how finance was going to be handled. What have we had instead? Instead of this we had, firstly, the question of the hon the Minister’s announcement of the GST increase to 10% which he thought necessary to announce today in these particular circumstances. Secondly, the hon the Minister implied in it the admission that the criticism of the Budget, which has been going on now since it was presented a matter of six weeks ago, is entirely justified in regard to the credibility of aspects where figures are concerned. Thirdly, we cannot get the hon the Minister to get involved in a debate in short-term planning or on longterm planning. He is an ad hoc Minister and he only insists on dealing with specific things which suit him at the time. He will not discuss a broad policy and get involved in it. We have had this Minister for 10 years now and the hon member for Pietermaritzburg North analyzed certain things which have happened in those 10 years in respect of inflation. I can give it in regard to the national debt, I can give it in regard to what has happened to growth. The hon the Minister, instead of saying: This is my problem and I am going to deal with it, tries to brush it all away and he gets a lot of sycophantic remarks from around the place from his supporters saying how marvellous he has been. The reality is that it is not the image that counts, it is the reality of what this Government has done to the finance of the country in the last 10 years. That is why rather than the incorrect image that is created, we want to see the reality of what has happened to South Africa in the last 10 years. The reality of what has happened to South Africa is, even when one quotes GDP figures which are beyond question in regard to per capita GDP and when one shows that the GDP income in 1983 is less than it was in 1975 and in 1974, it is brushed aside as something which is irrelevant and of no consequence. One cannot discuss the finances of South Africa in this manner. That is why we have decided that in the light of the attitude which the Minister has adopted in this debate and the way he has managed the affairs of this country... The hon member for Vasco must not point his funny finger at me...

Order!

In the light of that we have no alternative but to take a step which I do reluctantly. I am forced by the circumstances to do this. That is that I move:

One does this, but one does not do it lightly.

I think it is a compliment.

Does the hon the Minister think it a compliment? I tried to work out whether one should take the whole of his salary away or only to do it in a token form, but I happen to like his wife and I do not want her to starve and therefore we cannot take away all of his salary. The hon the Minister must get down to realities. Take the issue that I raised. I did not want to bandy names around this floor, but he does it. [Interjections.] I have no quarrel with you. Just keep out of this.

Order! The hon member should address the Chair and not individual members.

Through you, Mr Chairman, I have no quarrel with the hon the Deputy Minister. I agree that income tax is secret and I agree that what he said was legally right. I have no quarrel with the hon the Deputy Minister. He should not interfere when we are busy with other things.

Let us take this letter situation. If the hon the Minister wants to drag officials into politics he is going to have a fight on his hands with us. We are not going to have officials dragged into politics. The political responsibility lies on the hon the Minister. [Interjections.]

You are a shocker.

I am not a shocker; I am a very nice fellow! It is just you who do naughty things. This is the whole problem. The hon the Minister tries to shift responsibility. We will not let him shift responsibility because that is what politics is about. [Interjections.

When did I try to do it?

You do it in every single debate. Let me take a couple of other things which are realistic.

I think you should sit down.

I think you would prefer me to sit down but I will not sit down; I will be here for a long time and I will be here long after you have ceased to be the Minister of Finance. Do not worry about that; however, I will be sitting in the Opposition benches. I will be very happy. [Interjections.]

I want to deal with the position of this hon Minister under the new Constitution. I want to ask a couple of very important questions. One is: Is there going to be collective responsibility in the Cabinet under the new Constitution in respect of financial matters? In other words, if a Cabinet Minister, let us assume a Minister from one of the other houses, disagrees with the Budget, is he going to be forced to resign because he disagrees with the Budget or is there going to be collective responsibility? Are the Ministers in the Cabinet as a whole going to be included in the preparation, understanding and presentation of the Budget? Is there going to be a question of collective responsibility?

The second thing which I think is important is the following: Is there going to be a Budget committee which will actually deal with the Budget, not after it has been presented, but before it is presented in the manner of the American system? Is there going to be such a Budget committee as there is in the United States of America? I think these are the things that we should be debating because they are important in regard to what is going to happen. I do not believe that we should be faced with fait accompli in respect of these matters. I believe that we should deal with them now and that we should be faced with them.

I want to tackle the hon the Minister on the question of the exemption of certain foodstuffs from GST. I want to ask the hon the Minister in all calmness to go and look at the list again. I ask the hon the Minister to look at the list again and to do just a few things. Are there not other items which are essential foodstuffs as well and should therefore be included? Let me give you some examples: Tinned fish, tinned meat and other tinned foodstuffs which are eaten because one cannot get fresh foodstuffs.

Tinned food is a luxury.

No, tinned food is not a luxury. I want to tell you that there are people who sit and eat tinned pilchards because they cannot afford anything else. They are not rich people. [Interjection.] The hon member for Amanzimtoti does not eat tinned pilchards, he eats caviar. There are other essential foodstuffs like salt. I think even sugar is in fact an essential. I do not believe that sugar is a luxury. On the other hand, amongst the items which are included in the list are items which I believe can include luxury items. I do not think when the hon member for Amanzimtoti buys his prawns and crayfish that it should be exempt.

Why are you giving me a hard time?

Because you are giving me a hard time, so you are going to get it back. With great respect, Sir, I would like to ask the Minister to look at this again. [Time expired.]

Mr Chairman, the hon member for Yeoville has just moved an amendment here for the hon the Minister’s salary to be reduced. If one had listened this morning and again this afternoon to the hon member for Yeoville as well as the other members on that side of the House, one would have found it shocking that people could produce so few arguments on the finances of this country. We must realize in the first place, something which that side does not want to realize, that of most of the countries in the Western World, South Africa has been affected the least by the worldwide recession in which we find ourselves. Simply consider the unemployment figures which the USA and the United Kingdom are experiencing. We can then be grateful that this country has, under the circumstances, come through it in such a good condition here.

What is the real unemployment figure among Blacks?

The hon member himself knows that the unemployment figures for the Whites, Coloureds, and Indians are virtually nil, and, according to our latest statistics, the figure for the Blacks is approximately 8,2%.

You know that is not correct.

It is no use saying that it is not correct while the hon member does not have any other figures.

Then there are the arguments of the hon member for Salem, or rather the hon member for Port Elizabeth Central, who made attacks here on the GST being increased to 10%, and who said that too much was being spent. I now want to ask the Opposition—not one of them have so far provided me with an answer—where the State should cut back on its expenditure? According to the Nedbank report which one of the hon members on the opposite side quoted, there were four items in respect of which the increase exceeded 20%, viz education, defence, interest and I think the other was assistance to farmers. In the case of other departments the increase was approximately 2%. My question now is this: Does the hon member want cut-backs on defence?

I referred to the Group Areas Act.

The hon member will not say education, for then the Black teachers who are being appointed... [Interjections.]

Order!

Those hon members are not concerned about where costs should be whittled down. No, they do not say a single word about that. Let us now consider the attacks those hon members made on the tax proposals. The hon member for Edenvale quoted a long story here about how tax on the individual was becoming more onerous by the day, etcetera. The hon member for Edenvale should surely begin to realize that the whole trend today in the USA, Britain and everywhere else is towards indirect taxation. This is a normal pattern to get away from direct taxation, because direct taxation prejudices initiative, savings, etcetera.

I happen to have with me the Canadian Progress Report and the Radical Tax Reforming Budget of Britain, which many of those hon members supported so blithely in one of the debates. If one reads these proposals one will find that we are nowhere near that situation. Their proposals for the next few years will lead to increases in indirect taxation and excise duties. Compare our 10% with their 15%. Very well, it is value added tax. Nevertheless the hon member for Edenvale must be careful about levelling criticism since the modern trend in taxation is particularly towards taxation on consumer articles, or indirect taxation. This is the trend in order to get away from direct taxation.

We have now had the hon member for Yeoville saying that the Minister’s salary should be reduced by R1 000, because he has no long-term view. One should gauge the policy of the hon the Minister during the past ten years by certain norms. One should gauge it according to norms, and not according to gossip which appeared in the Financial Mail. It was a reprehensible story, and I did not expect it of that hon member.

By what norms does one gauge a tax? One does so in terms of its equity. What does the concept of equity mean? Hon members understand the concept. The hon the Minister of Finance came along and reduced the progressive portion, not the Progressive Party, which was in the region of 70%, to 50%. The hon the Minister changed the income base on which maximum taxation is levied from R28 000 to R40 000. The hon the Minister went further and introduced indirect taxation to get away from placing too heavy a burden on our higher income groups, which are the groups that save. That is not all. Again we are talking about equity. He introduced the Black taxation system to bring about horizontal equity.

A further norm for gauging taxation is neutrality. The hon the Minister has effected neutrality, and today we find that there is no longer a differentiation between taxation on the individual and taxation on the company. [Interjections.] Unfortunately my time is limited, or I would have been able to discuss this matter with the hon member for Yeoville at length.

Let us take the norm of efficiency. Over the years the hon the Minister has made the system more efficient. Let us consider the latest Budget which those hon members and the newspapers are complaining about quite vociferously, namely the removal of certain concessions. Our tax base is being persistently eroded. The erosion taking place is tremendous. Let us consider the whole question of write-offs. I just want to point out to you that the British say that the large write-off allowances which are being granted are unproductive. They propose that they be reduced from 130% to 100% and subsequently to 50%. There are the write-offs in respect of tuition, of which I am a great supporter, but hon members themselves know that this system, too, is being abused. Let us take the proposed tax on fringe benefits, which I know those hon members definitely support. Fringe benefits which are not taxable in the USA comprised 7% of total income in 1961, and by now the figure is 18% of total income.

These are all facets to which the hon the Minister of Finance has been giving attention for some time. He has frequently stated to us that his ideal is to have as few allowances, deviations, etcetera, as possible, but to bring down the maximum percentage of taxation as far as possible. The hon the Minister has brought it down to 50%. The hon the Minister wants to raise the income base on which the maximum taxation is levied as much as possible. I think that if the hon the Minister has a good year, he will be able to move it up to R60 000 or R70 000. Then many of these deviations and allowances will not be necessary. I want to tell the hon member for Yeoville that I have not yet made a study of the hon the Minister’s development of his tax structure over the past ten years.

Mr Chairman, I think this is the appropriate moment, here at the end of the debate, to pay tribute. Firstly I want to pay tribute to hon members who participated in the debate, but I must say, in particular to those good hon members on this side of the House who without exception made such effective contributions throughout. I have the greatest appreciation for that. I think any objective person listening to this debate would have agreed with me that they were positive and were made in a pleasant, constructive spirit. I should like to thank them very much.

I should just like to tell the hon member for Gezina that I wish he had said earlier that he had actually wanted me to put up the GST. I think he should get a medal! But, in any event, it was good to hear.

Next I should very much like to thank the officials of my department, which is a very large and comprehensive department, very sincerely for their loyalty and their wonderful support, not only in recent times, but throughout my period of office in the Cabinet. I must tell you, since I am now in my tenth year as Minister of Finance, that I find it very heartening to be able to say that they are not only the most pleasant people with whom I have ever worked, but also the most competent and the most loyal. There is an esprit de corps—this is the best expression I can use—in that department as a whole. The morale is high and I think it is a privilege to be associated with it.

I should also like to thank my hon friend, the hon the Deputy Minister, very sincerely for his wonderful support.

It is almost impossible for me to comment on all the arguments that were raised here, as well as to reply to all the questions. I just want to say that I am delighted to see that my old friend, the hon member for Smith-field, is back in the saddle again. We wish him everything of the best. He is an important hon member, and not only in the House. He is chairman of the finance group of our caucus and chairman of the very important Select Committee on Public Accounts. We hope that things will go very well for him. The hon member for Smithfield raised the question of the subsidy on housing. I just want to say very briefly that I agree absolutely with his approach. At present a wide-ranging investigation is being instituted into the question of housing subsidies in the public sector. In fact, this matter is at present before the working group of the Cabinet Committee for Economic Affairs. We shall hear a great deal more about that subject.

The hon member for Vasco raised the matter of the Margo Report. This deals with the establishment of a panel on mergers and take-overs. This was released for comment by the Standing Advisory Committee on Companies. The latest information at my disposal is that the comment received is at present being considered by the Standing Advisory Committee. Good progress is being made, and I think that we shall be able to discuss this matter further very soon. I think it is a good thing that the hon member raised this important matter.

The hon member for Sunnyside discussed the tax on fringe benefits and, if I understood him correctly, asked what was in fact going to be taxed. I think my reply to that must be that the hon member will simply have to take a good look at the report, and that we will in any case have an opportunity to discuss that matter thoroughly before any legislation can be passed.

I referred in my Budget speech to small companies. I spoke about closed companies. In this connection I can say that details will be furnished in the Income Tax Bill that has still to be introduced. I think the hon member will see very clearly in that measure what our approach is and what we are envisaging. The hon member will simply have to wait until that Income Tax Bill is introduced. I also think that this was an important matter which the hon member raised.

†The hon member for Port Elizabeth Central talked about the low value of the rand. Of course, the rand in terms of the dollar has depreciated because the dollar has risen out of all proportions. However, that does not necessarily mean that the rand is weak. The rand, I think, has in fact held up remarkably well. Two days ago the DM was quoted at DM 2,75 to US $1. The Swiss Franc was quoted at S Fr 2,29 to US $1. Sterling was quoted at £1 sterling to US $1,38. As far as I am aware, these rates were all at historically low levels against the dollar. Therefore, all these currencies are finding it very difficult to keep up with the US dollar in the circumstances. The fact that the US dollar is so incredibly strong in the currency market and is exerting pressure on the exchange rates of most other currencies against the dollar is perfectly clear. It is true that the rand is under some pressure because of our balance of payment situation. That is one of the main reasons, as should have emerged clearly from my speech this morning, why we have taken the measures we have. We have to maintain a sound balance of payments. After all, the balance of payments reflects the state of our finances with the whole of the rest of the world. It is misleading, I think, to look at the exchange rate of the rand against the dollar only. One must look much further afield than that.

The question of building societies was also raised. The position is that the Technical Committee for Banks and Building Society Legislation has been for some time and still is in discussion with the building society movement and other interested parties regarding the framing of the new building society legislation. It is being done with care and indeed very thoroughly. The draft legislation is to be published in the foreseeable future and then we will invite comment from all interested parties on the draft legislation. Normally the new building society Bill will come before Parliament, but I doubt very much whether it can come this session. We will have to wait and see how far we get. I would very much hope it can, but I am not sure about that.

Regarding the tax-free investments that building societies currently offer, the decision in principle has been taken to phase out these tax concessions as, of course, most of us know. I am awaiting the recommendations of the technical committee regarding the best way of implementing that particular decision without causing any particular disruption. I can say that considerable progress has been made on that front.

My friend, the hon member for Vasco, raised the question of the insurance commission and the incident at Port Elizabeth. That matter is at present sub judice and therefore I do not propose commenting on the merits of the case. However, the incident has forcibly demonstrated the dangers inherent in the present practice of long-term insurers to pay commission to insurance intermediaries as if a full year’s premium has been received whereas in fact only one month’s premium has been received. This so-called annualization of commission exposes the insurer and, therefore, his policy holders to serious losses if the subsequent monthly premiums do not materialize. I have requested the Registrar of Insurance to investigate the matter with a view to possibly limiting commissions to only such premiums or premium instalments as may have been received by the insurer.

The hon member for Edenvale also spoke. I must say, as I have said in previous debates, that it is always a pleasure to listen to him, because whether one agrees with him or not, he puts his case on the merits, puts it courteously and gives the facts. He raised one or two interesting points when he spoke earlier and raised some interesting points, too, when he spoke again. He again referred to the decline in company tax revenues. This is an interesting phenomenon which has been found in the last few years in many, many countries. I have here, for instance, the 16 April issue of Time in which they give a breakdown in column form of what they call the burden sharing of taxes. According to this in 1950, individual income taxes were 40% in the United States and corporate income taxes 26%. In 1970 individual income taxes were 47% and corporate income taxes 17%. In 1983 individual income taxes were 48% and corporate tax income only 6%. They have a real problem and I know they are studying this phenomenon very carefully indeed.

I asked our department just to give me something comparable and the hon member may be interested to know that in the 1974-75 tax year, the total tax revenue share of companies—I am not talking about mining companies but what the Americans call corporations—was 23% and the share of individuals 22%. In 1979-80 companies contributed 18% and individuals 19%. In 1983-84 companies contributed 16% and individuals 26,5%. The rest of the breakdown includes items such as mining, which is quite a big item, estate duty and so forth. I think the hon member will be interested to see that we have perhaps not gone quite as far down the scale as the United States. However, that is why in my budget speech I deliberately dealt with this. I have taken certain measures, particularly affecting the so-called tax expenditures, the investment allowances which have really been causing a great leakage of revenue and have depressed the average rate of tax and companies well below the nominal rate, in fact, to probably 25% last year instead of 46%.

I should like to say that the measures I have announced this morning, were the most considered measures I could have taken and I should like to say to the hon member for Yeoville, because he returned to it again in a very unpleasant manner, that as far as my staff is concerned, I do not hide behind anybody but take the full responsibility for every decision I take. I think everybody knows that. What is, of course, worrying the hon member is that with this magnificent staff I have I can say here in public that there is absolute consensus among us as to the measures I have taken, not only today, but right through since I have been Minister of Finance. I have had the most fantastic support from my staff. There is not one of them, also not amongst those who have already retired, who is of a calibre that he would not have opposed any measure I took if he felt he should. The hon member for his own purposes, which sound like cheap politicking and which I think is undignified, again this afternoon raised this matter whereas I thought he would have apologized. The hon member said that this is the last time we will meet in a discussion like this before the new dispensation. I may just say that this new dispensation is being thoroughly studied and has been for months and months. In fact, the financial aspects of the new dispensation were being fully studied already long before the late wonderful Mr Coert Pretorius, Secretary of the Treasury, who was an absolute authority in this field, was killed in that accident. That is how long we have been studying this matter. This will be fully laid before the House and hon members will be able to discuss the merits in detail. This is a huge exercise. As for the hon member for Yeoville’s action in moving that my salary be reduced, as I have said across the floor of the House, coming from him today, I regard it as a compliment. I do not seek any chivalry from him. Unfortunately, I have learnt this. It is very unfortunate because he is the chief Opposition spokesman on finance. As I have said more than once before, he could take a leaf out of a book of a man like the hon member for Edenvale as to how to conduct a financial debate, but that was throwing good suggestions against a brick wall. He can take any action he likes, it will not worry me at all. I have never sought popularity and I stand by everything I have done. I take full responsibility. For the reasons I gave today and which I could add to if I had the time I say this was the absolutely responsible thing to do. If this country’s economy is to be kept basically strong and sound and secure, this is what you have to do. You have to take these measures. I say again that if the gold price had risen after the budget by as much as it had fallen, I would not have had to do this, but nobody can tell me that it will not fall further. Although on a longer run view I have every confidence that the gold price will rise—I have said this in the Other Place and I have said it in public—for the next few months we have to be doubly careful. I should like to thank the hon member for Waterkloof for the dispassionate way in which he put this whole question, particularly in regard to our tax policy.

*I am sorry the hon member could not speak for a longer time, for he was dealing with a few fundamental aspects of our policy. It is a pity that the hon member for Yeoville again said towards the end that he was sorry that I had not dealt with certain things. All that that hon member does, every time he rises to his feet, is to be personal. This Committee can be the judge of whether what I have just said is correct or not.

†I do not want to end on that note. I am not particularly interested in what the hon member has to say. I think there are much more important things in this House and in this Committee and much more important things in the great department I have the honour to lead, to do for the welfare of this country than to worry about him.

Amendment put and the Committee divided: