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Budget Debate

2004-2005

Presentation by

Mr. Audley shaw, M.P.

Spokesman on Finance and the Public service

Tuesday, April 20, 2004

 Mr. Speaker, in this budget debate, i propose to:

The role and function of government

It is important that going into this budget debate, we remind ourselves of the role and function of a well run government in a modern and civilized state.

I describe the role of government as the engineers of a macro-economic framework that allows for the creation of a productive, prosperous and safe society.

A society in which our people are well trained to meet the challenges of a competitive global environment, are gainfully employed, earn a decent standard of living, and enjoy peace and prosperity in a clean, safe and healthy environment.

The question that must be asked is how has the government of the people’s national party fulfilled this non-controversial objective over the past 15 years of its stewardship?

Has the country had a rate of economic growth that can cause us to say that jamaicans have created significant wealth over the past 10-15 years?

The answer to this question must be based on an assessment of the indices of a wealth creating society and whether the broad masses of jamaicans have benefitted from this wealth creation.

Over the past 15 years, jamaica ’s average growth per year has been less than 1%, which is less than the annual average growth in jamaica ’s population.

While we in jamaica have this unimpressive average growth rate, our caribbean partners have grown by increments much larger than jamaica .

Over the same period, the average annual growth rate has been over 5% in trinidad and tobago , the dominican republic , st. Kitts, st. Vincent, belize , st. Lucia – and even guyana .

While jamaica has had a total growth in gdp over the past fifteen (15) years of only 15%, these caribbean nations have seen their g.d.p.grow by close to or over 100%, which means they doubled or almost doubled in size.

A comparison of actual gdp per capita figures is also embarassing to jamaica . Jamaica’s per capita g.d.p. has remained constant around the us$3,500 over the past few years, while trinidad and tobago’s per capita gdp is in excess of us$10,000 (almost three times jamaica’s) and the per capita gdp of barbados is almost us$15,000, a whopping four times greater than that of jamaica.

Put simply: while our caribbean nations have grown their economies and improved the standard of living of their citizens, jamaica has for all intents and purposes stood still and made little or no progress.

The State of the Nation

After 15 years of rule under this PNP administration, Jamaica continues to drift like a helmless vessel.

The most recent published report of the Jamaica survey of living conditions tells the story of a population just marking time with negligible to only marginal achievements.

In 2002, there were more Jamaicans using pit toilets in 2002 than in the previous year and more jamaicans fell below the poverty line in 2002 compared with 2001.

In addition, national real mean per capita consumption declined by 6.2 percent in 2002 over 2001 with sharp declines in the food and beverage, health care and personal care categories.

When looked at in constant prices, our annual mean per capita consumption in 1997 ($9,076) was more than we consumed in 2002 ($8,953). There are also almost 4% more jamaicans listed as poor in 2002 than in 1998.

Simply put, the quality of life for most jamaicans has deteriorated over the past five years and more jamaicans have become poorer over that time.

Other highlights of the survey of living conditions reveal that our quality of life as a people is getting worse and not better:

Date: 2/4/04

Source: retail outlet – christiana, manchester

“whatever growth has occurred has not created much employment, largely because of the loss of competitiveness in the 1990’s that hurt tradable goods production and thereby formal private sector employment. Employment rose less than 0.3 percent per year from 1991-2001. Between 1996-2001, only public sector employment rose, while informal sector employment was stable.

“poor employment prospects, along with high crime, have encouraged high rates of migration, and the equivalent of 80 percent of tertiary graduates in the 1990’s are estimated to have migrated.”

While it is to be acknowledged that certain strides have been made with respect to the improvement of some main roads, with the improvements at the ports and other forms of infrastructure, can we say that the quality of life of the people of jamaica has improved significantly over the past several years?

The answer is self-evident. The survey of living conditions tells the story. The reality that many jamaicans face day in and day out tells the story. It requires no embellishment whatsoever.

The Debt Problem and its Consequences

In his budget presentation, the minister ducked discussing comprehensively the important issue of debt, the topic on which he spoke for the shortest time.

And when he did speak all he could say was that debt is not a bad thing – he pointed out for example that house mortgages and student loans are good things.

As all jamaicans know, mortgages and student loans are not necessarily bad, but they are particularly painful if the cost is too high or if you cannot afford to service your mortgage or loan payment!

And if you cannot fix your house or pay your light bill or send your children to school because you have this massive mortgage payment or student loan payment at high interest rates, is debt a good thing?

That is exactly the problem jamaica faces!

The reality is that over the past 15 years in which the current administration has been in government, the nation has experienced an unprecedented increase in the size of the public sector debt.

Over the years sufficient focus has not been paid to the consequences of this spiralling debt trap.

While as a nation we continue to face challenges such as crime and violence, poor infrastructure and a worsening education and health care system – the debt issue is the single most significant factor in our current state of crisis.

For too long, the debt issue has been hidden in the shadows of complex financial language inaccessible to the common citizen. And how can this be when the constitution of our country places debt servicing as the first charge on the budget?

It is my hope that by illustrating the debt issue in simple terms, the average jamaican will be able to better understand the debt problem, realise its detrimental effects on his own daily livelihood and become engaged in a debate to put an end to the endemic borrowing which continues to be perpetuated by the government.

Breach of agreement

The most basic of all social contracts, which i referred to earlier, lies in the very definition of government. Citizens pay a portion of their income to fund a government, which in turn uses these funds to secure their rights, foster their welfare and create incentives to create wealth. The size of the public debt and the debt service burden it imposes has led to a fundamental breach of this agreement.

From a purely economic perspective, the ballooning public debt has been a direct cause of low levels of economic growth over the past decade. By excessively borrowing, the government has continued to “crowd-out” the borrowers in the productive sector. By absorbing such significant quantities of capital, the government has driven up interest rates to astronomical levels that remain extremely high despite recent declines.

Such high interest rates, especially in the midst of the most massive tax package in the nation’s history, have made it simply unaffordable for entrepreneurs to borrow money, start businesses, build factories and employ workers. Those with any capital left logically invest in government instruments, lending more money to the government in return for ever-higher rates of interest and so the cycle continues.

By failing to create an environment that provides incentives for investment, production and employment the government has failed in its most basic economic promise to the people of jamaica .

But the “crowding-out” effect is no longer limited to the more traditional interest rate impact on private sector investment. The government having absorbed such large quantities of capital in the local financial markets, has now begun to cannibalise the capital set out in the budget for the public sector.

In the 2004/2005 fiscal year, the government estimates that servicing the massive debt it has built up will absorb 70 cents of every dollar in the national budget. This alarming proportion is an increase over last year’s already high levels and comes despite a massive tax package.

Rather than honouring its most basic pledge to receive taxes and provide public services in return, the government has instead forced the people of jamaica into an implicit memorandum of misunderstanding and deception in which it taxes not to provide basic services, as a modern and responsible government would do, but rather to service its debts.

This amounts to an effective transfer from taxpayers that represent all sectors of society (rich, middle class and poor) to creditors that overwhelmingly are in upper income groups, and increasingly located outside of jamaica . In effect, this amounts to a debt tax on the poor to subsidize the financially secure. (the most massive transfer of wealth from the poor to the rich since the abolition of slavery – thwaites)

Mr. Speaker, every time new record breaking crime statistics are announced or a fireman is forced to simply watch helplessly as a building burns to the ground, the responsibility must fall directly at the feet of debt and the government policies that have created it.

In order to adequately begin to solve these issues, we must first address the issue of stopping the ballooning levels of debt and debt service. As an example, reducing the debt service percentage of the budget from 70 percent to 50 percent would free up nearly $70 billion of the 2004/2005 budget.

This amount, is equal to more than double the $30 billion allocated to education, and approximately 66 percent of the total non-debt expenditure in this year’s budget.

What then is the reality of jamaica ’s debt?

The purpose of government in providing basic services to ‘we the people is severely compromised and we are all hopelessly shortchanged’.

Education - shortchanged . Government cannot honour its commitment to putting more resources into this vital area, and has already failed to honour the agreement signed with the opposition to increase the education budget by one percent per year as a percentage of the total budget over the next five years.

Health care - shortchanged. Hospitals do not have adequate drugs to take care of the needy. Nurses are on strike because they are not paid on time. And now they plan to increase hospital fees.

Poor relief - shortchanged. Budget for infirmaries is cut, those requiring special diets are unable to get it. Buildings need repair.

Police - shortchanged. Over 40 stations could be closed due to the poor conditions under which the police have to work. Meanwhile, in the first quarter of this year ending in march there were 69 more murders over the same period last year.

Public

Cleansing - shortchanged. Street cleaners on strike for wages.

Fire fighting - shortchanged. Over j$637 million cut from the budget, is needed to keep the service at a minimum level of functionality to pay staff and repair equipment.

Prisons - shortchanged. Prisoners on strike protesting the inhuman conditions under which they have to live.

Capital budget - shortchanged. Thereby depriving our small farmers and small business people of assistance and depriving citizens from minor water supplies and other critical social services.

Poverty

Alleviation

Programmes - shortchanged . While poverty unspeakable exists in too many areas across jamaica , the socially sensitive programmes like p.a.t.h., j.s.i.f. and p.i.d.p. are all cut.

Mr. Speaker, this is the background, these are the consequences, this is the reality of a government that has lost track of its real purpose for being in government.

The government’s deceptive practices in the budgetary process

In addition to the consequences of the debt burden which i have just emunerated, we are once again faced with a set of deceptive practices in putting together a so-called “credible” budget.

In the past, i have referred to such issues as deferred financing and other forms of financing such as increases in a raft of user fees of all conceivable types, as schemes calculated to conceal the real impact of the budget.

But the creative or deceptive financing strategies of this finance minister seem to have no end. Let us take a few examples.

Justice

The minister of justice openly admitted during standing finance committee that the j$57.5 million earmarked for legal aid was just about enough to pay off outstanding debts to attorneys for the previous year. So this year’s services will not be paid for until next year. What kind of accounting is this? It is in clear violation of the government’s own regulations that payment for goods and services should be settled within 30 days.

Education

This year’s allocation to the university of the west indies (uwi), jumped from j$1.6 billion to j$4.0 billion, representing a substantial increase over previous years’ subventions as listed in the estimates of expenditure.

The finance minister during standing finance committee admitted that he will now begin to show the full level of support for the uwi in the budget as in the past, other financing mechanisms were used such as tradeable instruments, etc.

But the question is, mr. Speaker, where in the budget over the past several years, is the difference between the j$1.6 billion per annum and the actual amount allocated to the u.w.i. shown, and why wasn’t it the norm to put the total subventions to the uwi. On the budget? And is it now being done in desperation to increase the education percentage of the budget?

Mr. Speaker, we are now told that uwi is at this time indebted to a bank to the tune of over j$3.0 billion, based on a “comfort letter” which was provided by the government to the university to allow them to go and borrow these funds.

So mr. Speaker, when will the minister honour this comfort letter and all the other instruments that he has been providing to the uwi over the years?

The country needs transparency and a full accounting of the allocation to the uwi.

Parish infrastructure development programme

In the parish infrastructure development programme capital b was cut to a mere j$60 million from j$242 million in the previous approved budget, while the minister of local government admitted that existing projects on the ground need a total of j$170 million, thereby making this allocation short by j$110 million – just to complete existing projects and not to start any new projects.

But, mr. Speaker, in the memorandum to the budget presented by finance minister, chapter 4, page 5, under the p.i.d.p. programme, the following is stated:

“rehabilitation work on eight (8) kilometres of roads in phase ii – in portland , st. Mary, st. Andrew and st. Thomas – will be completed.

“construction activities will commence in the spanish town market and the trelawny parish council building. Designs for the st. Ann and hanover parish council buildings will be completed.”

Mr. Speaker, how on god’s earth can the j$60 million allocated under the p.i.d.p. do this, as well as complete the existing projects that require some j$170 million?

It can’t work. It is either a new new math or extending the parable of feeding the multitude with 5 loaves and 2 fishes or deception in the extreme.

The fire service

Mr. Speaker, in regard to the fire service i first cite the deception from the previous budget 2003/2004.

On the capital a budget, i set out the following table which shows what was approved for 2003/2004. What the budget was adjusted to in december for the recurrent budget and what was finally spent.

approved cut in supple. Amt. Actual

2003/2004 estimates 2003/2004

Equipment 10.0 5.0 1.60

3. To repair fire stations 25.0 12.3 5.86

Vehicles 10.0 10.0 2.56

5. To repair fire hydrants 5.0 1.0 -0-

total 70.0 34.3 13.75

Mr. Speaker, as can be seen from this table, even when the minister cuts the much needed capital budget as he did for the fire services, cutting it in half from j$70.0 million to j$34.3 million, there is no guarantee that the department will get that new level. In fact, the actual amount received by the jfb was j$13.75 million or a mere 20 percent of the approved budget of j$70 million.

It begs the question, what is the true budget? How many other areas of the budget were similarly affected? And is this the sleight of hand used by the minister to achieve his fiscal deficit targets by keeping the capital budgets starved while keeping the payment of statutory deductions, goods and services in persistent and chronic arrears amounting to over $20 billion by my conservative estimate.

And indeed if this $20 billion were added to the fiscal deficit, it would represent $48 billion or 10% of gdp, instead of the officially stated figures of $28 billion or 5.8 percent of g.d.p.

Underfunding of the jamaica fire brigade

Mr. Speaker, during standing finance committee, it was revealed and confirmed by the minister of local government that some j$300 million additional are needed to operate the fire service at existing levels of staff complement and some j$337 million to provide the minimum requirements for repairs to vehicles, acquisition of fire fighting equipment, and repairs to buildings, including several condemned by the public health department. Among those condemned are barnett street , montego bay, falmouth and port maria.

Indeed, mr. Speaker, while the finance minister has been silent on this issue of the extra j$637 million needed, the minister of information has stated that “there will be no cuts to personnel in the fire service in line with the m.o.u. with unions.”

So, if there are to be no cuts, how will the budget shortfall be met?

Report on fire services

Mr. Speaker, i draw your attention to a report by the jamaica fire brigade which confirms the underfunding of the department and which has led to the brigade failing to pay over statutory deductions in order to use up those funds to fill some of the shortfall.

This report has been supported by a devastating review carried out by a unit from the ministry of finance which confirmed that in the last fiscal year, the fire brigade was underfunded and at the end of october 2003 the department had outstanding bills amounting to j$614 million.

The finance ministry report made the following conclusions:

The report noted:

“the state of affairs currently existing within the j.f.b. seriously afffects the delivery of its service.

In addition to the provision of funds to clear the existing indebtedness of the department, funds are also currently required for the following areas:

It should be noted that the department needs to have a properly funded systematic maintenance programme for it to provide an effective service in keeping with its mandate.”

It is also noted that over the years the financing of the fire service from the consolidated fund through the warrant process has been a problem. It is therefore evident that alternate sources of funding needs to be explored.

Passed test for probity

The report further noted that a test of the accounting system for probity, propriety, regularity, and accountability of public funds, revealed –

Despite this, mr. Speaker, the finance minister in his public statements conveys the impression that the problem is mismanagement while he comes to parliament with this grossly unrealistic and inadequate funding of an essential service like fire that protects life and property, and expects us to pass it without questions?

This is unacceptable, and the minister must not come to tell us that the solution is that they are negotiating to borrow more money to buy new trucks. Buying new trucks is necessary, yes, but it does not deal with the chronic state of the recurrent and capital budget of the fire services.

The minister of information last monday stated that there is no plan to cut the fire services. He said: “all possible and reasonable steps will be taken to ensure that the fire service is not compromised.”

So, then having regard to the report from the ministry of finance and the warning of cuts from the minister of local government, the question is, does the government intend to provide the additional resources needed in this budget? We can’t ignore this issue anymore.

If this is in fact so, the finance minister must bring a motion to parliament before the closure of this budget debate to increase the subvention to the fire brigade for this fiscal year to j$667 million, so that we can pay our fire fighters, restore their insurance policies, repair trucks for which spare parts exist in jamaica, repair buildings and purchase the equipment necessary to improve the fire service.

On the side of truth

The minister of local government must be commended and not villified for coming out on the side of truth when she abstained from that historic vote two weeks ago.

She understands the realities of the gross and shameful inadequacies of the fire department which can no longer be covered up by any systematic programme of collective concealment.

Truth as they say, mr. Speaker, in the final analysis, is the only fixity.

Enough is enough, let us cut out the deception and hypocrisy and provide a decent fire service for the taxpayers of this country.

A breakdown in the budgetary process

Mr. Speaker, the issue of the persistent underfunding of the j.f.b. and other vital services has captured the attention of sittings of the public accounts committee.

The issue was best summarized by the auditor-general, who has made observations which are so fundmental that i quote from him:

“what the committee is seeing here, are some of the practical problems that have developed in budgetary control. In fact, we in my department have recognized that this is a serious situation that needs to be addressed and in fact we are presently in the process of examining what we consider to be a very serious breakdown in budgetary control within the public sector.

“what you are seeing here is a serious breakdown in communication. The budget is supposed to be developed on the basis of operational plans, what they call, corporate plans, and the question that arises is where for whatever reason the ministry of finance is not able to support all that has been requested, what happens.

“what changes, if any, take place in the operational plans. Do we proceed a pace as if we have received all that we have requested or do we make the necessary adjustments in order to live within the resources that have been provided? And this i believe helps to explain the tremendous build-up in unpaid bills.

“it is in fact, totally at variance with regulations which govern how public finances are to be managed. In fact, the regulations require that all obligations should be cleared within 30 days of being incurred. What we are seeing is that there is a serious mismatch between resources provided and the cost of operating at existing levels, it has to be addressed.”

Mr. Speaker, this criticism by the auditor general of jamaica , is fundamental. It represents an indictment on the loose, reckless and careless practices that have entered into central government operations.

The minister of finance needs to formally respond to this serious state of affairs in the administration of the fiscal accounts of the country because the problem is not at the fire brigade only, it is everywhere, and it is at the heart of the understatement of the country’s fiscal deficit.

The minister is failing in his fiduciary duty to address this most serious of issues.

Better management is possible

It does not have to be this way, mr. Speaker. Our government can and should be better managed in the best interests of our people. It is evident that under good management, good results can be achieved which lead to better service delivery to the people, as is now being demonstrated in the k.s.a.c. and parish councils islandwide!

Since last june, when the j.l.p. was elected to manage the k.s.a.c. and eleven (11) parish councils, the results are plain to see and are being experienced by jamaicans across the island. The change is highly visible and dramatic in impact.

The change in the management of the k.s.a.c. and the parish councils has led to –

A few examples will illustrate the difference:

St. Thomas

Led by mayor joan spencer.

That’s good management!

In portland

Led by mayor alston hunter.

That is good management!

In st. Mary

Led by mayor bobby montague.

That’s good management!

In st. Ann

Led by mayor delroy giscombe.

That’s better management.

In trelawny

Led by mayor fred bartley.

That’s good management!

In st. James

Led by mayor noel donaldson.

That’s good management!

In hanover

Led by mayor lester crooks.

That’s good management!

In st. Elizabeth

Led by mayor franklyn witter.

That’s good management!

In manchester

Led by mayor desmond harrison .

That’s good management!

In clarendon

Led by mayor milton brown.

That’s good management!

In st. Catherine

Led by mayor raymoth notice.

That’s good management!

And, mr. Speaker,

In the kingston and st. Andrew corporation

Mr. Speaker, we proudly present to you the proud stewardship of the leader of the k.s.a.c., the councillor of the tivoli gardens division in west kingston, his worship the mayor of kingston and st. Andrew, councillor desmond mckenzie.

And that’s good management!!

The jamalco/alcoa investment

The pending investment of us$690 million by alcoa at the jamalco plant, is without question a substantial investment which will yield major benefits both at the construction phase and in incremental earnings from tax revenue as a result of moving the capacity of the jamalco plant from $1.2 million metric tons per annum to $2.5 million metric tons per annum.

This investment comes against the background of a 50-year all-time high demand in the bauxite/alumina sector, driven principally by high demand from china.

In his budget presentation, the minister of finance indicated that approximately us$300 million of the projected capital investment will be spent in jamaica over a 3 to 4-year period.

However, mr. Speaker, it is important that our vision and perspective is not clouded by the euphoria of this investment. There are critical questions to be answered for us to have a full picture of the investment and whether jamaica is preparing itself to take maximum advantage while minimizing long-term negative effects.

The following questions are posed for the minister to answer.

This is necessary to minimize the importation of skilled labour from abroad, and also ensuring that maximum productivity and efficiency is obtained from our workers.

While these questions are critical to this expansion project, there are outstanding issues that must be addressed.

For instance, since we know that bauxite is a depleting resource, what is our roadmap for replacement industries for bauxite and how does the development of other non-bauxite sub-sectors such as limestone and marble fit into this?

And what of the many communities that have been mined out and today these communities have precious little to show in terms of sustainable capital investments in infrastructure on such things as clinics, community centres, roads and water supply systems?

Mined out districts like mocho, breadnut valley in north central clarendon, harmons in south manchester and the many areas in st. Ann (madras, gibraltar, farm town, bethel town, thickets) that today have precious little to show for the depletion of bauxite from their areas, except the cavernous holes in the ground that have either not been reclaimed or are poorly reclaimed?

And since the capital development fund was not adequately used for the purposes for which it was intended, isn’t it important that we put on the table the issue of a replacement mechanism for the capital development fund that can target resources in a well-structured way to rebuild mined out communities that have been left behind in abject poverty and without basic infrastructure?

And mr. Speaker, we must make a commitment to setting aside a specific portion of the taxes to be earned from the expansion of the bauxite/alumina sector, to be a dedicated fund for expenditure on human development and infrastructural projects in mined out communities.

Energy

The minister took note of the dilemma the country faces with respect to the increasing cost of energy.

However, in putting the issue of an energy policy on the table, we must look beyond a tax on fuel to all of our options, including:

Where do we go from here?

The debt issue

In order to address the many problems we face, we must reduce our high debt servicing cost and more fundamentally, reduce the increase in the public sector debt itself.

In order to decrease the proportion of the budget allocated to debt service, we must decrease the rate paid on government instruments. Recently, the private sector has called on the government to pursue a voluntary debt swap that would in effect swap expensive local debt for cheaper debt indexed to the u.s. dollar.

While we support a debt swap in principle, such a move would have several disadavantages such as increasing exposure to exchange rate volatility, and most importantly, not lowering the overall size of the debt.

Creative strategies need to be explored

Instead, we propose examining more financially creative means of swapping debt, such as: securitizing foreign exchange inflows that mitigate these risks.

To explain, mr. Speaker, by separating future foreign exchange derived from the bauxite industry from other jamaican dollar fiscal revenues and issuing bonds directly backed by these inflows (known as securitization), we could receive rates significantly below our current high interest rates (likely as low as 6% - 8%).

These proceeds could be used either to repay existing more expensive local debt or be set aside for future amortizations. Such a plan would not increase the size of the debt or impose any additional taxes on the jamaican people. More importantly, unlike other debt swap proposals made by the private sector, this would not increase jamaica ’s exposure to foreign exchange movements.

Mr. Speaker, this strategy has been successfully adopted by some of our oil producing latin american neighbours such as venezuela and mexico , and could be successfully employed in a jamaican context.

Inspiring confidence among stakeholders

In addition, reducing interest costs can also come from inspiring greater confidence among stakeholders to accept lower rates of interest. Meeting its fiscal targets will be a key factor in this.

But having continuously missed its own fiscal targets in large part causing a downgrade by the s & p and a change in long-term outlook from stable to negative, the government has been trying for the past year to reach an agreement with the imf before the 2004/2005 budget that would replace the smp programme discontinued by the fund in 2003.

Monitoring agreement with i.m.f. uncertain

The fact that no agreement has been reached could point to the imf’s reluctance to be associated with the government’s current budget. Recently, the government hinted that an agreement might likely resemble the relationship the bank maintain’s with lebanon and would act as a significant signal to creditors and rating agencies.

However, imf deputy managing director agustine carstens on a recent trip to lebanon described his organisation’s relationship with lebanon as merely “maintaining a close dialogue and providing appropriate technical assistance”.

In actuality, such a loose association with no real enforcement mechanism would do little to boost jamaica ’s credibility. In fact, rating agencies contacted have stated that without a formal agreement their perception of jamaica would be unlikely to change.

Backpedalling

But there now appears to be some backpedalling on the need for a monitoring arrangement with the i.m.f., with the government now appearing to be buoyed by signals of renewed interest on the international capital markets. Or is it that the i.m.f. is reluctant to play along with the government?

The minister must address this issue as the i.m.f.’s seal is necessary especially having regard to our smooth access to a range of multilateral loans for critical social programmes.

The government needs to be committeed to arriving at a meaningful monitoring arrangement with the i.m.f., even if it is subject to conditionalities that require greater fiscal prudence.

But mr. Speaker, in the final analysis the finance minister must do more than merely search for new labels, he must instead work to set realistic targets, and for the first time in many years, begin to achieve them.

Reducing debt

Regardless of the measures taken to reduce interest costs, reducing the rate of public sector debt, itself is an even more meaningful role. The government must not be allowed to continue to replace growth with more borrowing. No longer must the minister of finance celebrate his ability to raise even more debt [especially at high interest rates].

In this vein, i wish to repeat the call made by the leader of the opposition in his budget presentation last year:

“why should excessive levels of fiscal deficit cause unnecessary tax burdens and punitive interest rates? There should be a prescribed base level in law, below which the deficit must not fall. Nor must the national debt that burden the nation today, tomorrow and for future generations to come, expand its size and its burden recklessly. There must be a limitation by law.”

Mr. Speaker, such a commitment by the government to adhere to limitations on the growth of debt would be the clearest possible signal to the people of jamaica and the international capital markets that the government is seriously committed to addressing the debt burden.

Given the government’s recent attempts to establish meaningful social partnerships as a means of improving the macroeconomic situation, we call on the government to honour its obligations to the people of jamaica , by agreeing to legal and legally enforcible limitations on the size of the public debt.

Existing laws must be strengthened to place a firmer grip on the excesses of a reckless administration.

Alternative budget proposal

Mr. Speaker, in addition to creatively reducing the cost of our debt and placing limits on debt, we must also address the critical social areas that are in the best interests of all jamaicans.

It cannot be that in times of fiscal tightness, cuts are made across the board without regard for the need to set priorities. Priorities must be set and the consequences of each decision carefully calculated putting our social and development needs first.

Today, i offer a set of priority areas for expenditure increases as well as areas for expenditure cuts.

m fire - $300 million – salaries and allowances.

$337 million – capital a.

to repair stations and fire units and purchase equipment.

m p.i.d.p. - $170 million – capital b

to complete existing projects on the ground including brown’s town market, mandeville parish council building and parochial roads.

m infirmaries - $80m capital a - repairs to buildings and purchase equipment i.e. stoves, washing machines, etc.

$20m recurrent to improve nutrition and bedding.

m education - $2.6 billion recurrent and capital to bring budget up to 10 percent of total budget of $328.2 billion, in accordance with the agreement between government and opposition. Emphasis on early childhood and primary education.

m health - $1.0 billion – to cover chronic arrears to suppliers of goods and services.

m national

security - $600 million – capital a

to effect repairs at police stations, prisons, court houses and j.d.f. buildings.

m agriculture - $200 million – capital a for crop incentive programmes.

m industry &

tourism - $200 million – micro enterprise self-start fund

$200 million – j.t.b. overseas marketing budget.

m dedicated

bauxite

fund - $500 million – to assist with infrastructure and economic activities in mined out communities.

This totals $6.247 billion.

How to finance it?

This could be financed by a combination of the following initiatives.

J$4 billion would be saved with this initiative.

(quote from minister’s speech last year)

Mr. Speaker, these initiatives combined amount to savings of $7.0 billion, leaving a surplus for other areas that might need some topping up.

This will help us to address these critical issues in the medium term such as:

The minister tells us that this budget was hard to craft and i agree, especially against this background of an increasing share going to debt servicing.

These proposals will move this budget from being primarily an accounting budget with the emphasis on debt servicing, to a more creative, and equitable distribution of resources, while maintaining the overall parameters of fiscal prudence and tight budgetary management.

Conclusion

Mr. Speaker, i have sought in this presentation to point out the failures of the government to deliver growth, development, prosperity and a better quality of life on an accelerated basis to the people of jamaica .

The assertions made are all fully backed by the information provided by the government.

The issues we face far transcends the ability of the finance minister to give us sugar-coated information at budget time, while all around us the stark reality of poverty and persistent under-development face us.

The basic services for which we are being shortchanged represent the core function and purpose of government. They are the final test of successful governance and this government has failed these tests.

The question is, can we afford to stay on this ruinous path?

The question, mr. Speaker, is should we the people continue to allow the government to continue recklessly and blindly along this path of a failed economic model, in which they now herald new investments in bauxite and tourism as if it’s a magical cure?

Should we as a people not now demand fundamental change to the structure and function of our economy to allows for broad-based economic development opportunities to emerge from negril point to morant point?

And should we not demand that the i.m.f. signs off on no cosmetic deal with the government of jamaica that will merely give them license to continue to plunge us deeper and deeper into social and economic desperation and deeper and deeper into the valley of the shadow of debt?

Mr. Speaker, i have stayed away from the issue of corruption in this budget debate. Not because it does not exist. Indeed some issues are now before the courts. But it can be said that the greatest corruption of all, is the corruption of mismanagement, arrogance and indifference.

And the greatest act of malfeasance of all, is the act of continually implementing policies that rob resources from the poor and give to the rich, and deprive the people of their wealth-creating potential.

The central challenge of our time is to restore government to its primary role as a facilitator of economic development and wealth-creation, and a provider of basic services that lead to a better quality of life for the people.

Mr. Speaker, when we go adrift of this objective, as we have now done, it amounts to a betrayal of public trust and a squandering of the human potential of our country.

Public trust must be restored in our public officials and this can only come about if we have the will, the courage and the conviction to chart new courses.

Thank you, may god bless you all and may god bless jamaica !

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Audley shaw, m.p.

Opposition spokesman on finance and

The public service

April 20, 2004