BUDGET DEBATE 2005/2006
PRESENTATION BY
AUDLEY SHAW, M.P.
OPPOSITION SPOKESMAN ON FINANCE AND THE PUBLIC SERVICE
TUESDAY, APRIL 19, 2005
“CORRUPTING THE BUDGETARY PROCESS”
INTRODUCTION
FOR THE FIRST TIME SINCE INDEPENDENT JAMAICA , THIS BUDGET DEBATE IS TAKING PLACE WITHOUT THE PARTICIPATION OF A FORMER FINANCE MINISTER WHOSE CONTRIBUTION TO THESE DEBATES OVER 40 YEARS BOTH IN GOVERNMENT AND OPPOSITION HAS BEEN SEMINAL.
I HAVE NOT ONLY BENEFITED FROM THESE CONTRIBUTIONS BUT I AM THANKFUL FOR THE GUIDANCE I RECEIVED FROM HIM OVER THE YEARS. I REFER, OF COURSE, TO THE FORMER MEMBER OF PARLIAMENT FOR WEST KINGSTON, THE MOST HONOURABLE EDWARD PHILLIP GEORGE SEAGA, WHO TO DATE, HOLDS THE RECORD AS MINISTER OF FINANCE PRESIDING OVER THE GREATEST PERIOD OF ECONOMIC GROWTH IN JAMAICA.
I ALSO TAKE THIS OPPORTUNITY TO WELCOME MR. BRUCE GOLDING WHO REPLACES MR. SEAGA.
THE STATE OF THE NATION
THIS BUDGET DEBATE IS BEING HELD AGAINST THE BACKGROUND OF SERIOUS CHALLENGES THAT FACE US AT THIS TIME.
ANY POSITIVE INITIATIVES OF NEW INVESTMENT IN TOURISM AND ANTICIPATED ADDITIONAL INVESTMENT IN THE BAUXITE/ALUMINA SECTOR, DOES LITTLE TO DETRACT FROM THE ISSUE THAT THE ECONOMY CONTINUES TO BE IN A NO-GROWTH TO LOW-GROWTH MODE.
LACK OF MEANINGFUL GROWTH
THE PERSISTENT LACK OF MEANINGFUL GROWTH IN THE ECONOMY OVER THE PAST 14 YEARS AVERAGING LESS THAN ONE PERCENT PER YEAR FOR THE PAST 12 YEARS, CAN BE TRACED TO THE FACT THAT THE MANUFACTURING SECTOR – A MAJOR PILLAR OF ECONOMIC DEVELOPMENT – HAS BEEN SO BADLY DEVASTATED OVER THE YEARS, THAT TODAY, MANUFACTURING ONLY CONTRIBUTE 13.8 PERCENT TO G.D.P., COMPARED WITH 20 PERCENT OF G.D.P. IN 1989, AT THAT TIME 145,000 PERSONS WERE EMPLOYED IN THIS SECTOR COMPARED WITH ONLY 80,000 PERSONS BEING EMPLOYED IN MANUFACTURING TODAY.
THE LACK OF MEANINGFUL GROWTH IN THE ECONOMY IS CAUSED BY A LACK OF DIVERSIFICATION IN THE ECONOMY, AND THIS IS DUE TO THE GOVERNMENT’S LACK OF FOCUS ON THE FUNDAMENTALS OF WHAT IT TAKES TO ACHIEVE BROAD-BASED ECONOMIC DEVELOPMENT THAT PROVIDES OPPORTUNITY FOR OUR CITIZENS. (I WILL RETURN TO THIS SUBJECT).
INFLATION
INFLATION WHICH WAS PROJECTED TO BE 9.0% IN 2004/2005, WAS 13.7 PERCENT AND WILL NO DOUBT BE FURTHER AFFECTED WITH THE ILL-ADVISED DECISION OF THE FINANCE MINISTER TO INCREASE G.C.T. AND REMOVE ALL ITEMS FROM ZERO RATING.
AND TAKE NOTE THAT THE BASIC FOODS ON WHICH THE POOR RELY, IS HIGHER THAN THE RATE OF INFLATION.
INFLATION ON BASIC FOOD ITEMS
ITEM |
PRICE I YEAR AGO
2004 |
CURRENTPRICE
2005 |
% INCREASE |
RICE |
$13.18 PER LB. |
$14.63 |
11.00 |
FLOUR |
14.00 PER LB. |
14.00 |
0.00 |
SUGAR |
19.82 PER LB. |
20.20 |
1.92 |
CORNMEAL |
11.00 PER LB. |
21.94 |
99.45 |
MILK POWDER (LASCO) |
31.50 PER PK. |
42.40 |
34.60 |
CONDENSED MILK (BETTY) |
56.10 PER TIN |
62.50 |
11.41 |
MARGARINE |
37.65 PER LB. |
57.72 |
53.31 |
CHIFFON MARGARINE |
66.40 PER PK |
69.90 |
5.27 |
GRACE MACKEREL (DUTTY GAL) |
25.00 PER TIN |
25.00 |
0.00 |
COOKING OIL |
94.00 PER LITRE |
110.00 |
17.02 |
BREAD (2 LBS.) |
75.50 PER 2 LB |
85.00 |
12.58 |
SALTFISH |
128.00 PER LB. |
149.00 |
16.41 |
WATER CRACKERS (SML) |
28.10 PER PK. |
28.10 |
0.00 |
SPECIAL CREAM CRACKERS |
18.50 PER PK. |
21.40 |
15.68 |
RED PEAS |
56.00 PER LB. |
86.50 |
54.46 |
SARDINES |
34.30 PER TIN |
36.00 |
4.96 |
MACARONI |
28.10 PER PK. |
60.30 |
114.59 |
BAKED BEANS |
53.10 PER TIN |
51.10 |
-3.77 |
EGGS |
90.00 PER DOZ. |
114.00 |
26.67 |
SALT |
9.00 PER LB. |
10.50 |
16.67 |
CHICKEN |
72.45 PER LB. |
75.00 |
3.52 |
TOTAL |
$1,155.50 |
$1,359.79 |
17.68 |
INTEREST RATES
INTEREST RATES, WHILE TRENDING DOWN MARGINALLY, CONTINUE TO BE INTOLERABLY HIGH, WITH THE GOVERNMENT’S BENCHMARK TREASURY BILL RATE STILL HOVERING IN THE 14 PERCENT REGION.
IT IS TRUE TO SAY THAT COMMERCIAL BANKS NEED TO AGGRESSIVELY CUT COSTS AND INCREASE EFFICIENCIES IN ORDER TO SIGNIFICANTLY REDUCE THEIR SPREAD BETWEEN THE GOVERNMENT’S BENCHMARK RATE AND THEIR LENDING RATES.
BUT THE CALL ON COMMERICAL BANKS MUST BE PRECEDED BY A CALL ON THE GOVERNMENT TO LEAD THE WAY TO BENCHMARK INTEREST RATES OF LOW SINGLE DIGIT LEVELS WHICH IS THE ONLY WAY TO ACHIEVE RATES THAT ARE COMPETITIVE WITH OUR PARTNERS IN THE CARIBBEAN . IT IS THEN AND ONLY THEN THAT COMMERCIAL BANKS WILL GET THE CONFIDENCE TO CUT INTEREST RATES. AT PRESENT, COMMERCIAL BANK RATES IS A FUNCTION OF GOVERNMENT’S HIGH INTEREST RATE POLICY.
THE CONTINUING DEBT PROBLEM
JAMAICA ’S STOCK OF DEBT MOVED FROM J$34 BILLION IN 1989 TO $760 BILLION TODAY, BREAKING THE ¾ TRILLION DOLLAR MARK, AN INCREASE OF 2,135 PERCENT, OR A YEARLY INCREASE OF 142 PERCENT. THIS MASSIVE BORROWING HAS RESTRICTED THE GOVERNMENT’S ABILITY TO EFFECTIVELY CARRY OUT THOSE FUNCTIONS THAT FORM A PART OF THE INESCAPABLE MANDATE AND PURPOSE OF GOVERNMENT.
APART FROM THIS MOUNTAIN OF DEBT , WHAT DO WE HAVE TO SHOW FOR IT BUT INCREASED JOBLESSNESS, MORE CRIME AND DEEPER POVERTY?
AND DESPITE THE IMPOSITION OF YET ANOTHER DRACONIAN TAX PACKAGE, THE SECOND LARGEST TO THE “RUN WITH IT” TAX PACKAGE OF 2003/2004, THERE ARE NO DISCERNABLE ADDITIONAL BENEFITS TO BE DERIVED BY THE PEOPLE.
THE MINISTER’S SO-CALLED BALANCED BUDGET WOULD HAVE PLEASED THE COUNTRY’S CREDITORS AT HOME AND ABROAD. HOWEVER, THIS HAS BEEN ACHIEVED ON THE BACKS OF POOR PEOPLE, BY DEPRIVING THEM OF BASIC SOCIAL SERVICES WHICH ARE NECESSARY FOR A BETTER QUALITY OF LIFE.
HERE ARE THE CONSEQUENCES OF A RECKLESS AND INSENSITIVE ADMINISTRATION THAT PUTS VIRTUALLY EVERYTHING AHEAD OF SECURING THE RIGHTS OF THE PEOPLE AND DELIVERING BASIC SERVICES TO THEM DESPITE COLLECTING RECORD TAXES FROM THEM.
CONSEQUENCES OF HIGH DEBT SERVICE & RECKLESS GOVERNANCE
- THE HEALTH SECTOR IS SHORTCHANGED, WHERE CITIZENS NOW HAVE TO PAY SIGNIFICANTLY HIGHER USER FEES AT OUR HOSPITALS, AND OVER 600 PERSONS DIE EACH YEAR FROM KIDNEY AILMENTS FOR WANT OF DIALYSIS AND TREATMENT WHICH THEY CANNOT AFFORD, DUE TO POVERTY. THIS REQUIRES $369 MILLION TO PROVIDE KIDNEY DIALYSIS FREE OF COST TO SAVE THEIR LIVES.
- OUR EDUCATIONAL SYSTEM CONTINUES TO BE SHORTCHANGED, WHEREBY THE GOVERNMENT REFUSES TO HONOUR ITS 2002 PRE-ELECTION PROMISE TO ABOLISH COST-SHARING BY 2005/2006, EVEN AS THE 2004 ISSUE OF THE JAMAICA SURVEY OF LIVING CONDITIONS (JSLC), TELLS US THAT 62 PERCENT OF SCHOOL CHILDREN WHO ARE ABSENT FROM SCHOOL GIVE THE REASON FOR ABSENCE AS “MONEY PROBLEMS”.
- OUR FIRE SERVICES, SHORTCHANGED, WHERE DESPITE THE PROMISE OF THE PRIME MINISTER AND HIS CABINET COLLEAGUES, THE FIRE SERVICES ARE IN A WORSE POSITION THIS YEAR THAN LAST YEAR AND WILL NOT IMPROVE FOR AT LEAST ONE MORE YEAR, DUE TO LACK OF FUNDS, MINISTERIAL NEGLIGENCE AND GROSS DERELICTION OF DUTY.
- OUR GOVERNMENT PENSIONERS ARE SHORTCHANGED, WITH THE GOVERNMENT HOLDING ON TO THEIR MONEY FOR MONTHS, EVEN YEARS, ALTHOUGH IT IS AN ILLEGAL ACT, AS PENSIONERS HAVE THE SAME STATUS IN LAW AS THE PAYMENT OF DEBT OBLIGATIONS.
- OUR TEACHERS, NURSES AND SECURITY FORCES ARE SHORTCHANGED, WITH MEAGRE SALARIES AND ARE BEING CALLED UPON TO HOLD STRAIN WITH AN M.O.U. DESPITE CUMULATIVE INFLATION OF 30 PERCENT OVER THE PAST TWO YEARS.
- OUR HURRICANE RELIEF EFFORTS ARE SHORTCHANGED, WHERE DESPITE FINANCIAL ASSISTANCE TO THE GOVERNMENT ON AN UNPRECEDENTED SCALE, THE SEVERELY DAMAGED HAVE NOT YET ALL RECEIVED ASSISTANCE AND MOST WITH MINOR DAMAGE WILL GET A LITTLE “BUMP” OF SOMETHING A YEAR LATER OR NOTHING AT ALL.
- THE BUDGETARY PROCESS ITSELF IS BEING SHORTCHANGED, WHERE A SECOND BUDGET IS BEING EXPENDED ILLEGALLY AND UNCONSTITUTIONALLY, WITHOUT PARLIAMENTARY APPROVAL OR OVERSIGHT AND WHICH IS AN OPEN INVITATION TO CORRUPTION ON A MASSIVE SCALE.
- IF WE DARE TO ASK QUESTIONS ABOUT THE SHORTCHANGING OF TAXPAYERS WITH WASTEFUL EXPENDITURE, A NEW LEVEL OF ARROGANCE HAS EMERGED WHERE WE ARE TOLD TO SHUT OUR ”DAMN MOUTHS”, AND THE PUBLIC SERVANT IS NOT REBUKED BY EITHER THE PRIME MINISTER OR ANY ONE ELSE, EVEN AS WE ARE LECTURED TO ABOUT OUR VALUES AND ATTITUDES.
- BUT, MOST OF ALL, OUR VERY FUTURE BECOMES SHORTCHANGED, WHEN A STUDENT TELLS HER CLASSMATES “I AM CONVINCED THAT OUR PRESENT LEADERS DO NOT HAVE THE ABILITY OR THE WILLINGNESS TO DEAL WITH THE CRIMINALS ON THE STREETS”, AND SOON AFTER IS BRUTALLY SLAIN FOR A CELLULAR PHONE, THEREBY BECOMING ANOTHER STATISTIC IN THE OVER 1,400 PERSONS BEING MURDERED EACH YEAR.
TRANSPARENCY AND ACCOUNTABILITY
OVER THE YEARS THE CONDUCT OF THE GOVERNMENT HAS CAUSED ME TO FOCUS ON THE ISSUE OF CORRUPTION CARRIED ON OR FACILITATED BY THE GOVERNMENT OF JAMAICA . I DO SO BECAUSE I STRONGLY BELIEVE THAT CORRUPTION IS BECOMING DEEPLY ENTRENCHED IN OUR CULTURE AND WILL LEAD TO FURTHER INDISCIPLINE AND EVEN MORE VIOLENCE.
EVERY YEAR I COME TO THIS HONORABLE HOUSE THINKING AND HOPING, YES HOPING, THE GOVERNMENT OF THE DAY WOULD HAVE THE COURAGE AND TAKE THE NECESSARY CORRECTIVE ACTION TO FIRST ELIMINATE EXISTING CORRUPT PRACTICES AND PUT PROCEDURES IN PLACE TO PREVENT RECURRENCES.
BUT IT APPEARS THAT OUR LEADERS CAN NO LONGER DIFFERENTIATE BETWEEN “RIGHT AND WRONG” – IS IT THAT WE HAVE LOST THE MORAL CAPACITY TO DO SO? OR IS IT THAT OUR CONSCIENCE IS SO DEADENED THAT WE NO LONGER CAN SEE THE POVERTY THAT PRESENTS ITSELF TO US IN SO MANY WAYS?
THE MINISTER ONLY HAS TO LOOK THROUGH HIS OFFICE FROM ANY CORNER HE CHOOSES TO SEE THE POVERTY THAT PERVADES IN THIS SOCIETY, A POVERTY WHICH IS PARTLY CAUSED BY CORRUPTION.
IN FACT, IT APPEARS THAT THE MORE WE SPEAK ON MATTERS OF CORRUPTION THE MORE THE GOVERNMENT APPEARS TO BECOME MORE OBLIVIOUS AND “DON’T-CARE” TOWARD THESE MATTERS. WHERE IS OUR CONSCIENCE AND SENSE OF DECENCY?
THE DEFINITION OF CORRUPTION SHOULD NOT BE LIMITED TO THE CONSTANT BREACHING OF THE COUNTRY’S CONTRACT TENDERING PROCESS FOR THE BENEFIT OF THE PARTY IN POWER, OR THE MASSIVE OVER-RUNS ON PROJECTS, BUT IN THE CONTEXT OF GOOD GOVERNANCE, SHOULD ALSO INCLUDE THE WILFUL INTENT TO DELIBERATELY BREACH LAWS OF JAMAICA, AND MOST IMPORTANTLY TO CONTINUE MISLEADING AND DISRESPECTING THE PARLIAMENT AND BY EXTENSION THE PEOPLE OF JAMAICA.
OFF-BUDGET FINANCING
ONE AREA OF CORRUPTION IS THE PRACTICE, OF “OFF BUDGET” FINANCING. THERE APPEARS TO BE TWO BUDGET SYSTEMS; ONE FOR PARLIAMENT, AND THE “OFF-BUDGET” FINANCING PRACTICED BY THE MINISTER OF FINANCE, KNOWN AS THE “RUN-WID-IT” BUDGET.
THE MINISTER OF FINANCE COMES TO THIS HONOURABLE HOUSE EACH YEAR TO PRESENT A BUDGET BUT SIMULTANEOUSLY HE OPERATES THE “RUN WID IT” BUDGET. THE METHODS USED TO FINANCE THIS “RUN-WID-IT” BUDGET INCLUDES AMONG OTHER THINGS:
- DEFERRED FINANCING
- COMFORT LETTERS
- LETTERS OF UNDERTAKING
- TRADE CREDITORS FINANCING.
THESE FINANCING TECHNIQUES ARE BEING USED OUTSIDE OF THE BUDGETARY PROCESS, NOT IN THE CASE OF EMERGENCY AS THE MINISTER STATED IN HIS BUDGET PRESENTATION, BUT AS A METHOD OF COMMITTING THE TAXPAYERS OF THE COUNTRY TO ADDITIONAL DEBT WITHOUT THE PEOPLES’ REPRESENTATIVES KNOWLEDGE OR APPROVAL AS REQUIRED BY LAW.
A PRACTICE THAT LEAVES ME AS CHAIRMAN OF THE PUBLIC ACCOUNTS COMMITTEE TO WONDER AS TO THE ACCURACY OF THE BUDGET AND QUITE FRANKLY, AS TO WHAT CONFIDENCE WE SHOULD HAVE IN THE BUDGET.
DEFERRED FINANCING
IN THE LATE 1990s, I FIRST BROUGHT THE ISSUE OF DEFERRED FINANCING TO PARLIAMENT NOTING THAT THESE EXPENDITURE ITEMS (RUNNING INTO BILLIONS OF DOLLARS) WERE BEING DONE “OFF BUDGET.”
THIS FORCED AN AMENDMENT TO THE LAW – THE F.A.A. ACT – MANDATING, AMONG OTHER THINGS, THE MINISTER OF FINANCE TO BRING THE DEFERRED FINANCING ARRANGEMENTS TO PARLIAMENT, SETTING OUT THE SCHEDULE OF PAYMENTS ON EACH PROJECT OVER FUTURE BUDGETS. THE LAW REQUIRED THAT THE DEFERRED FINANCING PROJECTS BE APPROVED BY CABINET AND THE FINANCE MINISTER.
THE AMENDMENT ALSO REQUIRES THAT A COPY OF EVERY AGREEMENT SHALL BE TABLED IN PARLIAMENT. THIS HAS NOT BEEN DONE ON ANY OCCASION SINCE THE AMENDMENT WAS PASSED.
IN ANSWER TO QUESTIONS TABLED AT THE PUBLIC ACCOUNTS COMMITTEE OF PARLIAMENT ON MARCH 22, 2005 , ON THE SUBJECT OF DEFERRED FINANCING, THE FOLLOWING WAS STATED BY A DEPUTY FINANCIAL SECRETARY OF THE MINISTRY OF FINANCE AND PLANNING:
“THE MINISTER OF FINANCE AND PLANNING, BY WAY OF MINISTRY PAPERS 52/03 AND 20/04 DATED JULY 11, 2003 AND APRIL 15, 2004 RESPECTIVELY LAID BEFORE THE HOUSE OF REPRESENTATIVES, ALL DEFERRED FINANCING AGREEMENTS ENTERED INTO BY THE MINISTRY.
SINCE THEN THE MOFP HAS NOT ENTERED INTO ANY AGREEMENTS REQUIRING THE USE OF THIS METHOD OF FINANCING.
AT THIS TIME THERE ARE NO OUTSTANDING DEFERRED FINANCING AGREEMENTS WHICH WOULD REQUIRE THE APPROVAL OF PARLIAMENT.”
ACCORDING TO THE MINISTRY PAPERS PROVIDED, BOTH PROJECTED THAT THE TOTAL AMOUNT OF FUNDS TO BE PAID IN THE ESTIMATES OF EXPENDITURE FOR FY 2005/2006 TO COVER DEFERRED FINANCING ARRANGEMENTS WAS $567.092 MILLION.
HOWEVER, LAST WEEK THE MINISTER OF FINANCE TABLED ANOTHER MINISTRY PAPER 24/05 ON APRIL 14 TH, 2005 WHICH SHOWS THAT THE AMOUNT TO BE PAID OUT IN FY 2005/2006 FOR DEFERRED FINANCING IS SOME $3.180 BILLION, ALMOST SIX-FOLD THE ORIGINAL AMOUNT PROJECTED.
BUT EVEN THIS DOES NOT PRESENT A TRUE PICTURE OF THE “OFF-BUDGET” ITEMS THAT ARE BEING INCLUDED IN THIS YEAR’S BUDGET. WE ALSO HAVE TO LOOK AT THE IMPACT OF LETTERS OF UNDERTAKING AND COMFORT LETTERS.
THE AUDITOR GENERAL IN HIS REPORT FOR FY2002/03, AND STATEMENTS TO THE PUBIC ACCOUNTS COMMITTEE HAS DRAWN ATTENTION TO THE FACT THAT OVER TIME THE STRICT DEMARCATION LINE BETWEEN DEFERRED FINANCING, LOUs AND COMFORT LETTERS HAVE BEEN CROSSED, AND THE LANGUAGE OF LETTERS OF UNDERTAKING AND COMFORT LETTERS HAVE NOW REACHED THE POINT WHERE THEY ARE TECHNICALLY CONTINGENT LIABILITIES.
IN OTHER WORDS, RATHER THAN SIMPLY BEING A GENTLEMAN’S AGREEMENT, THAT DOES NOT RISE TO THE LEVEL OF A GUARANTEE THAT IS LEGALLY ENFORCEABLE, THE WORDING IN MANY OF THESE AGREEMENTS IS SUCH THAT THEY ARE BASICALLY GUARANTEES THAT IN THE EVENT THAT THE DEBTOR CAN NOT REPAY THE OUTSTANDING DEBT, THE GOVERNMENT WILL ASSUME ITS REPAYMENT.
THAT IS WHY THE PUBLIC ACCOUNTS COMMITTEE HAS SOUGHT A COMPREHENSIVE LISTING OF ALL LETTERS OF UNDERTAKING, COMFORT LETTERS, PROMISSORY NOTES, ETC., WHICH ARE NOW IN PLACE , AND WHETHER OR NOT PRIOR APPROVAL OF PARLIAMENT WAS SOUGHT IN EACH CASE.
THE MINISTER OF FINANCE HAS STATED CATEGORICALLY THAT COMFORT LETTERS ARE ISSUED BY THE M.O.F.P. TO PROVIDE ASSURANCE TO FINANCIAL INSTITUTIONS THAT THE PUBLIC BODIES ASSUMING THE DEBT WILL BE IN A POSITION TO MAKE PAYMENTS WHEN THEY FALL DUE FROM THEIR BUDGETS.
THE REALITY IS THAT WHILE SOME OF THE STRONGER PUBLIC SECTOR ENTITIES SUCH AS PETROJAM, AND THE PORT AUTHORITY HAVE BEEN ABLE TO SUCCESSFULLY REPAY THEIR DEBT OBLIGATIONS, IN RECENT YEARS THE GOVERNMENT HAS HAD TO BRING OUTSTANDING DEBT AND LOSSES ACCUMULATED BY ENTITIES SUCH AS N.W.C., J.U.T.C., SUGAR CORPORATION OF JAMAICA , AND AIR JAMAICA INTO SUCCESSIVE BUDGETS.
A DETAILED ANALYSIS OF THIS YEAR’S ESTIMATES OF EXPENDITURE REVEALS THAT INCLUDED IN THE CAPITAL A BUDGETS OF THREE MINISTRIES IS A TOTAL OF SOME $15.32 BILLION THAT IS BEING BROUGHT ON BOARD IN FY 2005/2005 FOR DEFERRED FINANCING AND LOUs/COMFORT LETTERS WHICH REPRESENT MONEY THAT HAS LONG BEEN EXPENDED WITHOUT THE KNOWLEDGE OR APPROVAL OF PARLIAMENT. ADDED TO THIS IS $3.81 BILLION IN INTEREST, TOTALLING $19.13 BILLION:
MINISTRY OF FINANCE (CAPITAL A) $11.5 BILLION
- Contingent Payments on Guaranteed Loans:
- Air Jamaica - $3.0 billion
- Sugar Co. of Ja. - $2.2 “
- DBJ (Road Works) - $1.2 “
- Deferred Financing
UDC/WHICON with LOU
not in public debt - $1.6 “
$8.32 BILLION
- Repayment of loans/deferred financing projects from Local Commercial Banks including:
- Comfort letter re UWI for $1.7 billion
- Water & Sewage projects
- Working Capital Support for JUTC
- DFF for road works, rehabilitation, &
School construction
-- $2.89 BILLION
- Repayment of loans/debt/deferred financing commitments from other financial/non-financial institutions:
- DFF for road & school construction
- DFF for acquisition of motor vehicles For the security forces
-- $300 MILLION
MINISTRY OF EDUCATION (CAPITAL A) $2.0 BILLION
- North Western Jamaica School Project (Westmoreland, Trelawny, St. James & Hanover – Deferred Financing commitments now falling due:
- Basic Schools -- $ 246 Million
- Primary Schools -- $ 314 Million
- High Schools -- $ 806 Million
$1.366 BILLION
(B) UDC/WICHON St Catherine Schools Project – Promissory Note commitments now falling due:
- Basic Schools -- $ 115 Million
- Primary Schools -- $ 147 Million
- High Schools -- $ 377 Million
$ 639 MILLION
MINISTRY OF TRANSPORT & WORKS(CAP. A) $1.814 BILLION
- Deferred Financing Commitments for Arterial Roads:
- Washington Blvd/Mandela Highway - $61.3 Million
- Trafalgar Rd/Old Harbour/Mt. Rosser - $54.0 Million
- Traffic Mgt/North Coast Highway - $451.8 Million
- UDC/Dredging Sandy Gully/Howard
Cooke Dualization/Eldermire Dr - $1.247 Billion
$1.814 BILLION
SOME MIGHT ARGUE THAT THIS IS NO BIG DEAL, BUT IT IS CLEAR THAT IN RESPECT OF DEFERRED FINANCING THE AMENDMENTS TO THE F.A.A. ACT OF 2002, DO NOT GO FAR ENOUGH TO ACT AS AN EFFECTIVE CONSTRAINT AGAINST THE FISCAL PROFLIGACY OF THE FINANCE MINISTER.
WHAT OBTAINS NOW IN RESPECT OF DEFERRED FINANCING IS THAT EXPENDITURE IS BEING APPROVED “OFF BUDGET” AND COMES ON THE BUDGET YEARS LATER FOR RETROACTIVE APPROVAL BY THE PEOPLES’ REPRESENTATIVES, WITHOUT HAVING BEEN AWARE OF THE EXPENDITURE WHEN IT WAS ORIGINALLY COMMITTED OR WITHOUT PARTICIPATING IN THE EFFECTIVE OVERSIGHT OF THE EXPENDITURE OF FUNDS.
COME CLEAN WITH COMFORT LETTERS
THE MINISTER OF FINANCE AND PLANNING MUST COME CLEAN ON THE ISSUE OF COMFORT LETTERS. AT THE LAST SITTING OF THE P.A.C., WE REQUESTED THOSE LETTERS, IN ORDER FOR THE COMMITTEE AND THE COUNTRY TO SEE THE MAGNITUDE OF “OFF BUDGET” FINANCING TAKING PLACE, AND THERE IS NOW A FAIR DEGREE OF INDICATIVE EVIDENCE THAT THE MINISTER IS SEEKING TO CONCEAL AND COVER UP THE INFORMATION FROM PARLIAMENT AND THE PEOPLE.
HERE IS THE SEQUENCE OF EVENTS THAT LEAD ME TO THIS CONCLUSION:
1. THE FULL LIST OF LOUs AND COMFORT LETTERS WAS REQUESTED OF THE MINISTRY OF FINANCE AND PLANNING.
2. ONLY THE LIST OF LOUs TOTALLING $19.6 BILLION WAS PRESENTED TO THE P.A.C. ON MARCH 22 ND.
3. THE P.A.C. REPEATED ITS REQUEST FOR THE COMFORT LETTERS TO BE TABLED.
4. THE SECRETARY TO THE P.A.C. INFORMED ME THAT THE LIST OF COMFORT LETTERS WERE GIVEN TO THE MINISTER OF FINANCE AND PLANNING LAST WEEK.
5. THE MINISTER OF FINANCE TOLD ME AT THE STANDING FINANCE COMMITTEE THAT HE WOULD TABLE ALL INFORMATION ON LOUs AND COMFORT LETTERS WHEN HE SPOKE IN THE OPENING OF THE BUDGET DEBATE.
6. I CONFIRMED ALL THIS IN WRITING TO THE M.O.F.P. AND COPIED THE LETTER TO THE SPEAKER OF THE HOUSE.
7. THE MINISTER ONLY TABLED PAPERS ON DEFERRED FINANCING AND LOUs LAST THURSDAY, BUT NO COMFORT LETTERS. INSTEAD HE KINDLY SENT ME A WRITTEN DEFINITION OF COMFORT LETTERS.
WHILE THE DEFINITION IS APPRECIATED, I TAKE NO COMFORT IN IT. MINISTER WE WANT THE COMFORT LETTERS.
THE MINISTER OF FINANCE MUST EXPLAIN TO THIS HONOURABLE HOUSE WHY HE REFUSED TO PROVIDE THE INFORMATION REQUESTED DESPITE HIS RECENT STATEMENT IN THE PRESS, I QUOTE:
“THE MINISTRY OF FINANCE AND THE GOVERNMENT HAVE NOTHING TO HIDE AND WILL PROCEED IN FUTURE TO REGULARLY TAKE TO PARLIAMENT FULL INFORMATION ON SUCH LETTERS OF UNDERSTANDING AND COMFORT LETTERS.”
WE WILL NOT REST UNTIL WE ARE TOLD THE TRUTH, THE WHOLE TRUTH, AND NOTHING BUT THE TRUTH.
I HEREBY SERVE NOTICE THAT I WILL TABLE FURTHER QUESTIONS IN PARLIAMENT AND SIMULTANEOUSLY FILE FOR INFORMATION UNDER THE FREEDOM OF INFORMATION ACT.
AND THE OPPOSITION IS PREPARED TO GO TO COURT IF NECESSARY TO GET THE INFORMATION ON COMFORT LETTERS.
LEGAL OPINION OF ATTORNEY-GENERAL MUST BE MADE PUBLIC
THE MINISTER OF FINANCE AND PLANNING HAS A DUTY TO RELEASE THE FULL TEXT OF THE LEGAL OPINION OF THE ATTORNEY GENERAL IN RESPECT OF LOUs/COMFORT LETTERS, HAVING REGARD TO THE CONTEXT IN WHICH THE ISSUE IS RAISED AND THE MINISTER’S USE OF THE OPINION AS HIS DEFENCE.
AT ANY RATE, THE QUOTATION FROM THE OPINION USED BY THE FINANCE MINISTER, OFFERS HIM NO PROTECTION.
THE OPINION STATED, INTER ALIA:
“THE TERMS OF SECTION 43 OF THE FINANCIAL ADMINISTRATION AND AUDIT ACT ARE NOT APPLICABLE TO GUARANTEES, UNDERTAKINGS AND OTHER SUCH ARRANGEMENTS THAT ARE NOT INTENDED TO BE PAID DIRECTLY FROM THE CONSOLIDATED FUND. IN THESE CASES, THE GOVERNMENT IS FREE TO CONCLUDE AND WILL BE LEGALLY BOUND BY SUCH ARRANGEMENTS WITHOUT THE NEED FOR PARLIAMENTARY APPROVAL.”
SECTION 43 READ IN ITS ENTIRETY MAKES ITS CLEAR THAT GUARANTEES IN ANY FORM BEING LETTERS OF COMFORT OR LOUs, REQUIRE PARLIAMENTARY APPROVAL AS THE COMMITMENT GIVEN BY GOVERNMENT MAY NECESSITATE PAYMENT FROM THE CONSOLIDATED FUND. I QUOTE:
“NO PAYMENT SHALL BE MADE FROM THE CONSOLIDATED FUND TO ANY PUBLIC BODY BY WAY OF GRANT, CAPITAL CONTRIBUTIONS, LOANS OR ASSIGNMENT OF REVENUE, AND NO GUARANTEE MAY BE GIVEN TO ANY SUCH BODY BEING A GUARANTEE WHICH MAY NECESSITATE PAYMENTS FROM THE CONSOLIDATED FUND, UNLESS –
- THE PRIOR APPROVAL OF THE HOUSE OF REPRESENTATIVES HAS BEEN OBTAINED FOR SUCH PAYMENT OR GUARANTEES;….”END OF QUOTE.
LET US GO NO FURTHER THAN THE LIST OF CONTINGENT PAYMENTS TO WHICH I PREVIOUSLY MENTIONED. THESE WERE BASED ON LETTERS OF UNDERSTANDING. WHETHER IT IS AIR JAMAICA , S.C.J., CONTRACTOR’S PAYMENT, FINANCING FOR SCHOOLS CONSTRUCTION OR THE N.W.C. THAT HAS A POOR TRACK RECORD OF PAYMENT, IT WOULD BE STRETCHING IT TO SAY THAT THESE GUARANTEES “WERE NOT INTENDED TO BE PAID DIRECTLY FROM THE CONSOLIDATED FUND.”
WITHOUT EXCEPTION, THESE ARE ALL BODIES THAT HAVE EITHER BEEN IN A CONTINUAL LOSS POSITION OR NOT INCOME-EARNING COMPANIES THAT CAN SERVICE THEIR OWN DEBT.
IN ADDITION, THE MINISTER HAS PROVIDED DEFERRED FINANCING THROUGH D.B.J FOR APPROXIMATELY $4 BILLION, FOR SMALL ROAD CONTRACTORS. THE MINISTER OUGHT TO HAVE KNOWN THAT THIS ITEM SHOULD HAVE BEEN INCLUDED IN THE BUDGET IN THE YEAR THE PROGRAMME COMMENCED.
SO FROM THE VERY OUTSET OF ISSUING THEM WITH LETTERS OF UNDERSTANDING, IT WAS KNOWN THAT THESE WOULD BECOME BUDGET ITEMS IN DUE COURSE.
THIS LATEST “OFF BUDGET” EXERCISE MUST BE ADDRESSED.
PUBLIC BODIES
MR. SPEAKER, GIVEN THE FACT THAT SUCH LARGE SUMS OF UNAPPROVED FUNDS ARE BEING EXPENDED TO KEEP SELECTED PUBLIC SECTOR BODIES AFLOAT, IT IS NECESSARY THAT WE EXAMINE IN BRIEF THE STATE OF AFFAIRS OF SOME OF THESE ENTITIES.
A BRIEF REVIEW OF THE MINISTRY PAPER 21/05 CONCERNING THE JAMAICA PUBLIC BODIES AND INFORMATION PROVIDED BY THE MINISTER OF FINANCE REVEAL THE FOLLOWING LOSSES WHICH MUST BE FUNDED IN SOME MANNER:
- BANK OF JAMAICA HAS CASH LOSSES AS AT MARCH 31, 2005 OF APPROXIMATELY J$15.08 B. THE GENERAL RESERVE FUND OF THE BANK OF JAMAICA WILL NOT BE SUFFICIENT TO ABSORB THESE LOSSES SO IN ACCORDANCE WITH THE BANK OF JAMAICA ACT THESE LOSSES WILL HAVE TO BE FUNDED FROM THE CONSOLIDATED FUND OR THROUGH THE ISSUING OF SECURITIES. THE MINISTER SHOULD INFORM PARLIAMENT OF HIS PLAN TO DEAL WITH THOSE LOSSES.
- THE SUGAR COMPANY OF JAMAICA ACCUMULATED LOSSES IS APPROXIMATELY J$7B BEFORE CONSIDERING THIS YEAR’S LOSS WHICH I UNDERSTAND FROM THE VARIOUS INTEREST GROUPS WILL BE SIGNIFICANT AND COULD BE OVER $600 MILLION.
- THE NATIONAL WATER COMMISSION – LOSSES WAS ESTIMATED AT J$606.36B FOR FINANCIAL YEAR 2004/2005. MINISTER I NEED TO KNOW THE ACCUMULATED LOSSES AS AT MARCH 31, 2005 .
- NATIONAL HOUSING DEVELOPMENT CORPORATION – LOSSES FOR 2004/2005 ARE ESTIMATED AT J$260M. AGAIN, WE NEED TO KNOW THE ACCUMULATED LOSSES. IN FACT, THE REPORT STATES THAT THE OPERATION PRIDE FUND WILL NOT BE ABLE TO FUND INTEREST EXPENSE OF J$290 M AS THE FUND IS DEPLETED. HOW WILL THE OPERATION PRIDE PROJECT BE FUNDED?
- JAMAICA URBAN TRANSIT COMPANY – ESTIMATED LOSSES FOR 2004/2005 WAS $589 M AND PROJECTED LOSSES FOR 2005/2006 IS $978 M TOTALLING $1.567 B.
- AIR JAMAICA – DEBTS OF US$650 M OR J$40.3 B.
- MANY OTHER BODIES SUCH AS THE COFFEE BOARD, COCOA BOARD, ETC., WITH LOSSES OF APPROXIMATELY J$250M
HOW WILL THESE LOSSES, APPROXIMATING $64.3B, BE FUNDED IN 2005/2006 AND WHAT ARE THE IMPLICATIONS FOR FUTURE BUDGETS?
SUGAR COMPANY OF JAMAICA
IN 1994 THE G.O.J. PRIVATIZED THE SUGAR INDUSTRY. IN 1998 THE GOVERNMENT WAS FORCED TO RE-ACQUIRE THESE ENTITIES GIVEN THEIR FINANCIAL STATUS AND THEIR IMPORTANCE TO THE COUNTRY, IN PARTICULAR RURAL COMMUNITIES.
SINCE 1998 THE G.O.J. HAS WRITTEN-OFF OR ABSORBED J$5B IN DEBTS; CURRENTLY, THE ACCUMULATED LOSSES ARE APPROXIMATELY J$7B.
IN MINISTRY PAPER 21/05 THE COMPANY PROJECTED A LOSS OF J$112M FOR 2004/2005. MINISTER, IN LIGHT OF THE HURRICANE AND THE DROUGHT WHAT ARE THE PROJECTED LOSSES FOR THIS CROP? MANY PERSONS IN THE INDUSTRY HAVE SUGGESTED THAT THE LOSS FOR THIS YEAR COULD BE AS HIGH AS $600 M. IS THIS CORRECT?
EVERY DAY I HEAR THE FARMERS AND STAKEHOLDERS COMPLAINING ABOUT THE SUGAR COMPANY.
IN FACT, I HEARD YOUR OWN MINISTER OF AGRICULTURE COMPLAINING ABOUT THE MANAGEMENT OF THE COMPANY. SO DID YOUR PARTY COLLEAGUE, THE CHAIRMAN FOR THE ALL-ISLAND CANE FARMERS ASSOCIATION, COMPLAINING ABOUT THE LACK OF MANAGEMENT AT THE S.C.J., YET TO DATE I HAVE NOT HEARD ONE SINGLE WORD FROM YOUR MINISTRY OR THE GOVERNOR OF THE B.O.J. WHO IS THE CHAIRMAN OF THE S.C.J. ON THIS ISSUE.
I WOULD LIKE TO REMIND YOU THAT SCJ EMPLOYS APPROXIMATELY 8,000 WORKERS, SEVERAL THOUSANDS OF FARMERS, AND CONTRACTORS, ALL OF WHOM ARE LOOKING TO YOUR GUIDANCE AND LEADERSHIP ON THIS IMPORTANT COMPANY TO RURAL FOLKS. I WOULD LIKE FOR THIS HOUSE TO BE PRESENTED WITH A COMPLETE REPORT ON THE INDUSTRY INCLUDING A TURNAROUND PLAN FOR THE NEXT TWO YEARS.
AIR JAMAICA
MR. SPEAKER, NEXT TO F.I.N.S.A.C., WHICH COST THE TAXPAYERS OF JAMAICA OVER $130 BILLION AND COUNTING AND POSSIBLY THE MOST MASSIVE “OFF BUDGET” EXPENDITURE NOW TAKING PLACE, AIR JAMAICA LOOMS LARGE AS A MAJOR FINANCIAL PROBLEM WITH CONSEQUENCES FOR THE ECONOMY FAR EXCEEDING THE DEBT OBLIGATIONS BEING ASSUMED BY GOVERNMENT.
YET, IN AN ALMOST TWO-HOUR LONG SPEECH, THE MINISTER OF FINANCE DID NOT MENTION THE NATIONAL AIRLINE EVEN ONCE.
ON SEVERAL OCCASIONS THE MINISTER HAS PROMISED A FULL REPORT ON THE STATE OF AFFAIRS AT AIR JAMAICA . NO SUCH REPORT IS FORTHCOMING.
BUT SINCE THE GOJ TOOK OVER CONTROL OF THE AIRLINE THE LOSSES SEEM TO BE GETTING WORSE. FOR THE MONTH OF FEBRUARY ALONE, THE AIRLINE LOST US$15.0 MILLION.
IN LIGHT OF A RECENT STATEMENT ISSUED BY THE HON. GORDON ‘BUTCH’ STEWART, WHICH DIRECTLY CONTRADICTS INFORMATION PROVIDED TO PARLIAMENT BY THE FINANCE MINISTER, AND IN THE INTEREST OF TRANSPARENCY, IT BECOMES EVEN MORE CRITICAL THAT A PROPER ENQUIRY IS CARRIED OUT OF AIR JAMAICA, SETTING OUT THE CIRCUMSTANCES THAT LED TO LOSSES AND DEBT ACCUMULATION RUNNING REPORTEDLY AS HIGH AS $54 BILLION.
THIS STUDY IS PARTICULARLY NECESSARY FOR THE FOLLOWING REASONS:
- WHAT WAS THE TRUE FINANCIAL IMPACT OF SOME ELEVEN EVENTS LISTED BY MR. STEWART ON THE BOTTOMLINE OF AIR JAMAICA ? INCLUDING THE F.A.A. CATEGORY II, 9/11 TERRORIST ATTACK, DEFECTIVE RADAR EQUIPMENT, INTERNATIONAL WARS AND CIVIL DISTURBANCES IN JAMAICA , FUEL PRICES AND RECENT HURRICANES?
- WHAT SPECIFIC ACTION WAS TAKEN BY THE MINISTER OF FINANCE AND THE GOVERNMENT TO DEAL WITH THE PROBLEM LISTED IN QUESTION ONE(1)?
- HAVING REGARD TO THE CLAIM BY MR. STEWART AND THE A.J.A.G. GROUP THAT THE MINISTRY OF FINANCE RECEIVED DETAILED MONTHLY REPORTS ON THE AIRLINE’S FINANCIAL STATUS AND THAT THE FINANCE COMMITTEE WAS CHAIRED BY A GOVERNMENT REPRESENTATIVE, AND OTHER REPRESENTATIVES ON THE COMMITTEE INCLUDED THE GOVERNOR OF THE BANK OF JAMAICA AND THE PRESENT EXECUTIVE CHAIRMAN OF AIR JAMAICA, MR. VIN LAWRENCE, DOESN’T THE MINISTER HAVE A DUTY TO EXPLAIN HIS OBVIOUS NEGLIGENCE IN DEALING WITH THIS PROBLEM ON A TIMELY BASIS?
DOES THE MINISTER OF FINANCE NOT HAVE A DUTY AND AN OBLIGATION TO REPORT TO THIS HONOURABLE HOUSE, THE REASONS FOR THE PRESENT STATE OF AIR JAMAICA AND WHAT SPECIFIC PLANS ARE IN PLACE TO RESCUE THIS IMPORTANT NATIONAL ASSET FROM ANY FURTHER DETERIORATION OF ITS IMAGE IN THE INTERNATIONAL MARKETPLACE?
MINISTER, YOUR SILENCE ON AIR JAMAICA IS DEAFENING. THE OPPOSITION IS DEMANDING A FULL AND COMPLETE REPORT ON AIR JAMAICA , ESPECIALLY IN LIGHT OF NEW REPORTS THAT THE AIRLINE IS NOW BEING SERIOUSLY MISMANAGED, WHICH THREATENS TO COMPLETELY WRECK ITS FUTURE.
THE EFFECT OF OFF-BUDGET FINANCING
THIS PARALLEL OR “RUN-WID-IT” BUDGET REPRESENTS A CORRUPTION OF THE BUDGETARY PROCESS TO AN EXTENT NEVER SEEN BEFORE. THIS PRACTICE MUST STOP. THE IMPLICATIONS FOR THIS COUNTRY ARE TOO GRAVE TO ALLOW THIS PROCESS TO CONTINUE. SOME OF THE IMPLICATIONS ARE:
- A MASSIVE SUPPLEMENTAL BUDGET IN THE SHORT-TERM WHICH I BELIEVE WILL HAVE TO BE FUNDED BY ADDITIONAL TAX MEASURES.
THE CONTINUING INCREASE OF OUR DEBT STOCK. IN 1996 AT THE COMMENCEMENT OF THE “OFF BUDGET” FINANCING, THE LOAN STOCK TO COMMERCIAL BANKS
- WAS J$4B BY 2005 THIS HAD INCREASED TO J$12.2B AN INCREASE OF 300%. IF WE USE BASIC GEOMETRIC PROGRESSION ANALYSIS IT APPEARS THAT THIS STOCK OF DEBT WILL INCREASE TO J$16B BY THE NEXT BUDGET, AN INCREASE OF 30%.
- THE CLEAR AND PRESENT DANGER OF UNDERSTATING OUR EXPENDITURE AND THE IMPACT ON THE BUDGET.
THE OPPOSITION WILL NOT CONTINUE TO ALLOW THE GOVERNMENT TO DEFER EXPENDITURE OF THIS COUNTRY TO THE FUTURE FOR THE SOLE PURPOSE OF MEETING ITS POLITICAL AGENDA.
DYOLL DEMISE
I WISH TO LOOK AT TWO OTHER AREAS THAT IMPACT ON ISSUES OF TRANSPARENCY AND ACCOUNTABILITY – DYOLL INSURANCE AND THE AUDITOR GENERAL’S REPORT TO THE END OF 2004. IN RESPECT OF DYOLL, I WISH TO ASK THE FOLLOWING QUESTIONS OF THE MINISTER OF FINANCE:
- WHEN WERE YOU AWARE OF THE DYOLL FAILURE, AND DID YOU TAKE A PROPOSAL TO CABINET FOR US$20 MILLION TO ASSIST THE COMPANY?
- WHEN DID THE F.S.C. KNOW OF THE FAILURE AND WHY WAS CORRECTIVE ACTION TO PROTECT THE CREDITORS AND MINORITY SHAREHOLDERS NOT TAKEN EARLIER?
- IS THE F.S.C. CONDUCTING ITS OWN INVESTIGATION ON REPORTS OF ILLEGAL INSIDER TRADING?
THE AUDITOR GENERAL’S REPORT FOR FINANCIAL YEAR ENDED MARCH 31, 2004
IN THE AUDITOR GENERAL’S REPORT FOR THE YEAR ENDED MARCH 31, 2004, THERE ARE CERTAIN ISSUES RAISED THAT HAVE QUITE CORRECTLY CAUSED CONCERN WITH THE OPPOSITION AND IN THE PUBLIC, AS TO THE IMPLICATIONS FOR THE MANNER IN WHICH THE FINANCIAL AFFAIRS OF THE COUNTRY ARE BEING MANAGED BY THE MINISTER AND MINISTRY OF FINANCE AND PLANNING.
I WILL SINGLE OUT FOUR SUCH ISSUES.
- THE MINISTRY OF FINANCE ILLEGALLY HELD ON TO $1.1 BILLION WHICH SHOULD HAVE BEEN PAID DIRECTLY TO THE NATIONAL HEALTH FUND FOR USE IN SUBSIDIZING THE COST OF DRUGS FOR RECIPIENTS.
- THE A.G. COMPLAINED ABOUT 6 LOANS TOTALLING US$6.0 MILLION AND J$3.68 BILLION THAT WERE GUARANTEED BY LETTERS OF COMMITMENT, THAT WERE THEN BEING SERVICED WITHOUT ANY FORMAL APPROVAL OF PARLIAMENT THEREBY VIOLATING THE LAWS OF THE LAND.
- THERE WERE DELAYS OF UP TO 11 MONTHS IN THE PAYMENT OF APPROVED GRATUITY AND PENSION TO RETIRED PUBLIC OFFICERS TO AUGUST 2004, 482 GOVERNMENT PENSIONERS OR THEIR BENEFICIARIES WERE OWED $254 MILLION.
PENSION PAYMENTS – LIKE DEBT SEVICING – IS A STATUTORY EXPENDITURE AND AS SUCH SHOULD BE A PRIORITY CHARGE ON THE CONSOLIDATED FUND.
AND
- AMAZINGLY, THE AUDITOR GENERAL WAS UNABLE TO VERIFY RECEIPT INTO THE CONSOLIDATED FUND OF $15.82 BILLION AND US$176.9 MILLION REPRESENTING FINANCIAL INSTRUMENTS ISSUED BY THE GOVERNMENT AND WHICH FORMED PART OF THE PUBLIC DEBT.
THE INABILITY OF THE AUDITOR GENERAL TO CARRY OUT THIS VERIFICATION IS A SERIOUS MATTER, BECAUSE AS I UNDERSTAND IT THIS MATTER HAS STILL NOT BEEN CLEARED UP. WHERE DID THIS MONEY GO? THIS COUNTRY MUST BE TOLD.
IF THESE ISSUES ARE NOT PROPERLY RECORDED IT UNDERSTATE REVENUE, EXPENDITURE AND THE STOCK OF DEBT AND ARE NOT NECESSARILY UTILIZED FOR THE PURPOSE FOR WHICH IT WAS INTENDED.
THE MINISTER OF FINANCE AND PLANNING, WHO IS CHARGED WITH THE FIDUCIARY DUTY TO PROTECT THE REVENUE OF THE COUNTRY, HAS A DUTY TO CLEAR UP THIS ANOMALY AND TO EXPLAIN THE OTHER ISSUES RAISED BY THE AUDITOR GENERAL.
EXPENDITURE BUDGET
HURRICANE IVAN RELIEF INADEQUATE
THE HURRICANE ‘IVAN’ RELIEF EFFORT HAS BEEN CHARACTERIZED BY MORE ADMINISTRATIVE BUREAUCRACY AND PUBLIC RELATIONS FANFARE THAN BY RAPID AND FAIR ASSESSMENT OF DAMAGE AND THE IMPLEMENTATION OF EXPENDITURE RELIEF EFFORTS.
THOUSANDS OF JAMAICANS WHO MADE REPORTS OF DAMAGE TO HOUSES AND FARMS HAVE NOT BEEN ASSESSED BY GOVERNMENT AGENCIES.
- IN SOUTH EAST CLARENDON, ONE OF THE AREAS WORST HIT BY HURRICANE ‘IVAN’ WAS THE ROCKY POINT DIVISION WHERE HUNDREDS OF PEOPLE WERE LEFT HOMELESS AND AN ESTIMATED 90 PERCENT OF ALL HOMES WERE DAMAGED.
IN THIS VERY PARLIAMENT, PROMISES WERE MADE THAT BY THE END OF DECEMBER OVER 200 HOUSES WOULD BE CONSTRUCTED ON A NEW SITE TO HOUSE VICTIMS. TO DATE NOT ONE HOUSE HAD BEEN BUILT.
- IN WEST RURAL ST. ANDREW OF 1,540 PERSONS WHO REPORTED THEIR DAMAGE TO THEIR M.P., ONLY 300 HAVE APPEARED ON THE LIST TO RECEIVE ASSISTANCE SOME TIME IN THE FUTURE.
AND
- IN NORTH EAST MANCHESTER , OF 2,200 PERSONS REPORTING DAMAGE TO AGRICULTURAL CROPS, ONLY 1,100 WERE VISITED AND ONLY 550 APPEAR ON A LIST TO RECEIVE ASSISTANCE. AND ONLY A SMALL NUMBER OF PERSONS HAVE SO FAR RECEIVED ASSISTANCE WITH HOUSE REPAIRS DESPITE OVER 2,000 PERSONS REPORTING FROM MAJOR TO MINOR DAMAGE.
THESE ARE JUST SAMPLES OF THE LACK OF RESPONSIVENESS OF THE GOVERNMENT IN THE RELIEF EFFORTS.
BY THEIR OWN ADMISSION, THE O.N.R. WILL TRY TO COMPLETE ASSISTING THOSE ON THEIR LIST OF SEVERELY DAMAGED HOUSES BY THE END OF APRIL, A FULL SEVEN MONTHS AFTER THE PASSAGE OF ‘IVAN’.
AND MOST PEOPLE WITH MINOR DAMAGE, MIGHT GET SOME ASSISTANCE UP TO ONE YEAR AFTER ‘IVAN’ WHILE THOUSANDS WHO GENUINELY SUFFERED WILL RECEIVE NO ASSISTANCE AT ALL.
THE RELIEF EFFORTS HAVE BEEN HIGHLY OVER-RATED AND HAVE BEEN MARKED BY A HIGH DEGREE OF INSENSITIVITY AND LACK OF URGENCY.
THE VEXING CASE OF THE FIRE SERVICES
A GROSS DERELICTION OF MINISTERIAL DUTY
DURING THE YEAR 2004/2005, DESPITE THE PROMISE OF THE PRIME MINISTER WHO GAVE THE UNDERTAKING THAT ADEQUATE RESOURCES WOULD HAVE BEEN PROVIDED TO THE FIRE SERVICE, THE CAPITAL BUDGET OF $115 MILLION WAS ONCE AGAIN SAVAGELY CUT TO $53 MILLION, WITH $45 MILLION BEING PUT ON HOLD TO BEGIN THE CONSTRUCTION OF A NEW FIRE STATION AND LEAVING ONLY $8.0 MILLION WHICH WAS MADE AVAILABLE LAST DECEMBER TO REPAIR TRUCKS. (SEE APPENDIX A - STATUS OF FIRE SERVICES)
THIS IS TAKING PLACE WHILE THE FIRE SERVICES HAVE FURTHER DETERIORATED TO THE POINT WHERE IT HAS BECOME A NATIONAL DISGRACE. PEOPLE’S LIVES AND PROPERTY ARE AT RISK, HUNDREDS OF MILLIONS OF DOLLARS OF PROPERTY HAVE BEEN LOST AND EVEN THE SAFETY OF OUR FIREMEN AND WOMEN ARE NOW AT RISK DUE TO THE GROSS NEGLIGENCE OF THIS GOVERNMENT.
THE MINISTER OF FINANCE MUST EXPLAIN
IN THE PAST WHERE THERE ARE EMERGENCIES, THIS GOVERNMENT, AS PREVIOUS GOVERNMENTS HAVE DONE, HAS WELL ESTABLISHED PRECEDENT FOR APPROACHING FOREIGN GOVERNMENTS FOR ASSISTANCE TO EXPEDITE SPECIAL ARRANGEMENTS TO DEAL WITH GENUINE EMERGENCIES.
IT WAS NO DOUBT FOR THIS REASON THAT IN 2003 THE GOVERNMENT OF JAMAICA ESTABLISHED CONTACT WITH THE GOVERNMENT OF FRANCE , SEEKING THE ASSISTANCE OF THE FRENCH GOVERNMENT IN THE ACQUISITION OF FIRE TRUCKS.
THIS WAS ON THE BASIS THAT THE FRENCH RENAULT TRUCKS ARE AMONG THE MOST RELIABLE TRUCKS IN BOTH THE FIRE AND SOLID WASTE FLEET IN JAMAICA .
AS A RESULT OF THE GOVERNMENT’S REQUEST, THE FRENCH RESPONDED WHEREBY THE FRENCH EX-IM BANK, COFACE, BACKED A FINANCING ARRANGEMENT WITH RENAULT TO PROVIDE 41 FIRE TRUCKS TO THE GOVERNMENT WITH A 2-YEAR MORATORIUM, ONE (1) YEAR MORATORIUM MORE THAN WHAT WAS STATED BY THE MINISTER OF FINANCE IN HIS SPEECH ON THURSDAY AS HIS REQUIREMENT IN THE BIDDING PROCESS.
THIS ARRANGEMENT RECEIVED THE BLESSINGS OF THE MINISTRY OF FINANCE PERSONNEL AND THE NATIONAL CONTRACTS COMMISSION, ON THE BASIS THAT THIS WAS AN EMERGENCY, THE TERMS WERE FAVOURABLE, IT WAS A BI-LATERAL AGREEMENT WITH FRANCE , AND ON THIS BASIS THEY WERE PREPARED TO RECOMMEND THE CONTRACTS.
ARANGEMENTS SUCH AS THIS HAVE WELL ESTABLISHED PRECEDENT, WHERE HIGHLY SPECIALIZED VEHICLES ARE NEEDED ON CONCESSIONARY TERMS, ON AN EMERGENCY BASIS, FROM A RELIABLE SOURCE WITH PROVEN TRACK RECORD.
INDEED, FIRE TRUCKS AND COMPACTORS WERE ACQUIRED FROM THE FRENCH AND AUSTRIAN GOVERNMENTS IN THIS MANNER SINCE THE 1970s, AND BUSES HAVE SIMILARLY BEEN ACQUIRED AND A $4.0 BILLION TRANSPORTATION TERMINAL IS ALSO ABOUT TO BE DONE ON A SIMILAR BASIS.
AND IN THE MOST RECENT PRECEDENT, 20 GARBAGE COMPACTORS WERE REQUIRED FROM FRANCE IN A BILATERAL AGREEMENT 2 YEARS AGO. (SEE MINISTRY PAPER 81/03)
HAD THE MINISTER OF FINANCE PROCEEDED WITH THIS ARRANGEMENT, WE WOULD ALREADY HAVE 41 FIRE TRUCKS IN THE SYSTEM TODAY.
WHILE WE ARE MINDFUL OF TRANSPARENCY, THIS MUST BE BALANCED WITH THE GENUINE EMERGENCY NEEDS OF THE PEOPLE.
WITH PRECEDENT AND THE ABSOLUTE URGENCY OF THIS SITUATION, THE AWARD OF THIS CONTRACT WITHOUT TENDER WAS JUSTIFIED AND APPROVED BY THE NATIONAL CONTRACTS COMMISSION.
BUT, MR. SPEAKER, THE MATTER DOES NOT END THERE. THE MINISTER OF LOCAL GOVERNMENT ADVISED THIS HONOURABLE HOUSE THAT THE TRUCKS WERE NOT ORDERED BECAUSE THE TALKS WITH THE FRENCH GOVERNMENT HAD “BROKEN-DOWN”.
I WISH TO ASK THE MINISTERS OF FINANCE AND PLANNING AND LOCAL GOVERNMENT TO EXPLAIN TO THIS PARLIAMENT THE BASIS ON WHICH THE TALKS HAD BROKEN DOWN AND EXACTLY WHEN?
AND IN YOUR ANSWERS CAN YOU EXPLAIN THE BASIS ON WHICH YOUR MINISTER OF INFORMATION ANNOUNCED IN A POST-CABINET MEETING THAT THE FRENCH WERE AWARDED THE CONTRACT AND TRUCKS WOULD BE DELIVERED IN MONTHS, ONLY TO BE FOLLOWED BY A WITHDRAWAL OF THE STATEMENT?
IN THESE CIRCUMSTANCES, THE DELAY OF 12 MONTHS TO EVENTUALLY DECIDE ON A BIDDING SYSTEM AND TO WAIT FOR ANOTHER 10-12 MONTHS FOR DELIVERY OF THE TRUCKS IS INEXCUSABLE AND IS A GROSS DERELICTION OF MINISTERIAL DUTY WHICH SHOULD BE CONDEMNED BY THIS PARLIAMENT.
IT APPEARS MANIFESTLY CLEAR THAT A DIFFERENT TYPE OF POLITICS HAS ENTERED THE BUSINESS OF ACQUIRING FIRE FIGHTING EQUIPMENT. IT APPEARS THAT FIGHTING FIRES HAS BEEN PUT ON HOLD WHILE – A NEW FIRE RAGES – THE FIRE OF INTERNAL LEADERSHIP POLITICS AT OLD HOPE ROAD – PLACING LIFE AND PROPERTY AT RISK IN THE PROCESS.
COST-SHARING SCHEME
IN THE RUN UP TO THE 2002 GENERAL ELECTIONS, MEMBERS WILL RECALL THAT THE JAMAICA LABOUR PARTY ANNOUNCED THAT IT WOULD BE ABOLISHING SCHOOL FEES IMMEDIATELY AFTER IT WON OFFICE. THE COUNTRY GREETED THIS ANNOUNCEMENT WITH APPLAUSE, BECAUSE THERE ARE FEW AREAS OF GREATER TRAUMA AND IRRITATION THAN FINDING SCHOOL FEES EVERY YEAR. MR. SPEAKER, THE GOVERNMENT OPPOSED THE POSITION AND A HEATED DEBATE FOLLOWED.
A FEW MONTHS BEFORE THE GENERAL ELECTION, THE PRIME MINISTER ANNOUNCED THAT THE GOVERNMENT WAS ACCEPTING THE JLP PROPOSAL AND SCHOOL FEES WOULD BE ABOLISHED. HE WENT FURTHER, MR. SPEAKER. HE SAID IT COULD NOT BE DONE IN ONE YEAR, BUT WOULD BE PHASED IN OVER THREE YEARS, AND THE COUNTRY COULD BE ASSURED THAT BY THE 2005/2006 BUDGET, SCHOOL FEES WOULD BE ABOLISHED.
BUT THE GOVERNMENT HAS RETREATED FROM THE COMMITMENT GIVEN, TO THE PARENTS AND CARE-GIVERS OF THE QUARTER MILLION CHILDREN IN THE SECONDARY SCHOOLS OF JAMAICA . THE GOVERNMENT HAS DECIDED TO CONTINUE WITH SCHOOL FEES, REFUSING TO GIVE UP THE $900 M THAT IT WOULD COST.
IT IS GENERALLY ACCEPTED THAT POOR ATTENDANCE IS ONE OF THE PRINCIPAL CAUSES OF THE POOR ACADEMIC RESULTS AT EVERY LEVEL OF OUR SCHOOL SYSTEM. IT IS KNOWN THAT WHILE JAMAICAN SCHOOL CHILDREN FROM SOME INSTITUTIONS ARE ABLE TO BEAT THE WORLD, SIGNIFICANT NUMBERS REMAIN ILLITERATE AND INNUMERATE.
MR. SPEAKER, THE GOVERNMENT’S OWN SURVEY OF LIVING CONDITIONS STATES THAT MONEY PROBLEMS ARE RESPONSIBLE FOR 62% OF OUR CHILDREN BEING ABSENT FROM SCHOOL. WE DID NOT NEED ANY SURVEY TO KNOW THIS.
MR. SPEAKER, WE ARE THE ONLY COUNTRY IN CARICOM WHOSE CHILDREN FACE THIS INDIGNITY AND PROBLEM. SCHOOL FEES WERE ABOLISHED IN THE OTHER TERRITORIES LONG BEFORE THEY GAINED INDEPENDENCE . JAMAICA WAS THE FIRST IN INDEPENDENCE , BUT CONTINUES TO BE THE LAST TO PROVIDE THIS CRITICAL TOOL TO EMPOWER OUR CHILDREN.
UNFORTUNATELY, THIS INCIDENT ALSO PROVIDES AN EXAMPLE OF THE OFFICIAL SOURCES OF AUTHORITY RENEGING ON A FIRM COMMITMENT – BREAKING TRUST WITH THE PEOPLE, USING THE POWER OF OFFICE TO TAKE PARTISAN ADVANTAGE OF THE PEOPLE BY MAKING A SOLEMN PLEDGE IN THE COURSE OF AN ELECTION CAMPAIGN, AND THEN, DESPITE SPENDING BILLIONS OF DOLLARS ON PROJECTS OF LITTLE INTEREST TO THE CITIZENS, TELLING THEM AND THEIR CHILDREN, “SORRY, NEXT TIME. IT HOT, BUT HUSH.”
LET ME WARN THEM, MR. SPEAKER, THAT WHEN PEOPLE LOSE TRUST IN PUBLIC OFFICIALS, THAT IS UNDERMINING THE VERY BASIS OF DEMOCRACY, AND THOSE WHO SOW THE WIND, MUST UNDERSTAND THAT THEY WILL REAP THE WHIRLWIND.
STUDENTS’ LOANS
WHILE WE ARE ON THE SUBJECT OF EDUCATION THE G2K GROUP HAS CARRIED OUT A STUDY THAT REVEALS SERIOUS INADEQUACIES THAT WILL NOT BE ADDRESSED BY THE MINISTER’S ANNOUNCEMENT OF A NOMINAL REDUCTION IN INTEREST RATES TO 12% AND A INCREASE IN THE POOL OF FUNDS.
THE G2K STUDY REVEALS THAT STUDENTS FROM THE POOREST GROUP RECEIVE THE LOWEST AMOUNT OF STUDENT LOANS, AND THIS IS IN PART DUE TO THEIR BEING ASSESSED AS UNABLE TO REPAY THE LOANS.
IN ADDITION, NOT ONLY DO MORE OF THESE STUDENTS NEED TO BE GRANTED LOANS, BUT THEY NEED MORE FUNDS TO COVER LIVING EXPENSES AS WELL AS TUITION. THE MINISTER NEEDS ALSO TO INTERVENE AND SIGNIFICANTLY REDUCE INTEREST RATES AT THE S.L.B. TO BRING IT IN LINE WITH INTERNATIONAL STANDARDS OF 5-6% FOR SUCH PROGRAMMES.
JAMALCO
I WISH FOR THE FINANCE MINISTER TO PROVIDE A MORE DETAILED UPDATE ON THE INVESTMENT EXPANSION PLANS FOR THE JAMALCO PLANT AT HALSE HALL, INCLUDING A FIRM TIMETABLE FOR IMPLEMENTATION.
THIS REQUEST COMES AGAINST THE BACKGROUND OF PERSISTENT REPORTS THAT THE PROJECTED COST OF THE PROJECT WAS SOME US$700 MILLION, BUT IS NOW HIGHER. AND THAT TO DATE, THE BOARD OF THE PARENT COMPANY, ALCOA HAS NOT APPROVED THE PROJECT.
HOW CAN IT BE THAT A PROJECT THAT HAS NOT YET EVEN BEEN APPROVED BY THE BOARD OF DIRECTORS, HAS BEEN ANNOUNCED WITH SUCH CERTITUDE AND FANFARE BY THE PRIME MINISTER AND THE FINANCE MINISTER?
AND CAN THE MINISTER ADVISE WHEN THE NEW PLANNED START-UP DATE IS FOR THIS PROJECT SINCE FEBRUARY 2005, PREVIOUSLY ANNOUNCED START-UP DATE HAS OBVIOUSLY FALLEN THROUGH?
WHITEHOUSE HOTEL
MR. SPEAKER, LAST YEAR, THIS HONOURABLE HOUSE APPROVED LOAN GUARANTEES FOR THE CONSTRUCTION OF A HOTEL IN WHITEHOUSE, WESTMORELAND. THE COST WAS INITIALLY ESTIMATED AT US$60 MILLION AND LATER REVISED TO US$70 MILLION.
AFTER MANY MONTHS OF DELAY IN COMPLETING THE CONSTRUCTION, LEADING TO DELAYS IN DELIVERY OF THE FULLY COMPLETED HOTEL TO THE LESSEE, THE SANDALS CHAIN, THE FOLLOWING IS NOW THE SITUATION AT THE PROJECT WHICH SPELLS NOTHING BUT GRIEF ONCE AGAIN FOR THE TAXPAYERS OF THIS COUNTRY.
- THE OVERRUN ON THE PROJECT, FOR WHICH THE SCOPE OF WORK HAS NOT CHANGED, IS NO LONGER US$10 MILLION FROM THE ORIGINAL FIGURE OF US$60 MILLION. THE OVERRUN IS NOW REPORTEDLY US$45 MILLION, MOVING THE TOTAL COST OF THIS PROJECT TO US$105 MILLION. AN OVERRUN, MR. SPEAKER, OF J$2.8 BILLION THAT WILL NOW HAVE TO BE PAID BY JAMAICAN TAXPAYERS.
- AS WE SPEAK, THERE ARE MATERIALS ON THE WHARF THAT ARE NOT BEING RELEASED BY THE SUPPLIERS BECAUSE THEY ARE AWAITING PAYMENT BEFORE RELEASE.
- THE SUBCONTRACTS THAT WERE AWARDED WITHOUT TENDER ON THE PROJECT READS AS A ‘WHOS WHO’ OF THE PEOPLES’ NATIONAL PARTY – SUBCONTRACTS THAT HAVE ALL EXCEEDED THE BUDGET FOR THE SERVICES REQUIRED.
- AND THE PROJECT DIRECTOR REPORTEDLY RECEIVES BETWEEN 2 AND 3 PERCENT AS HIS FEES, OR ROUGHLY BETWEEN $130 AND $195 MILLION. (MAYBE WE SHOULD SHUT OUR “DAMN MOUTHS” AGAIN)
THE OPPOSITION IS DEMANDING A COMMISSION OF ENQUIRY INTO THIS SCANDALOUS STATE OF AFFAIRS AT WHITEHOUSE HOTEL BECAUSE THE STENCH OF CORRUPTION RUNS DEEP AND WIDE. THIS MUST BE ONE OF THE MOST EXPENSIVE HOTELS IN THE WORLD.
FURTHER INVESTIGATION NEEDED INTO AWARD OF CONTRACTS
THE OPPOSITION IS CALLING ON THE CONTRACTOR GENERAL AND THE AUDITOR GENERAL OF JAMAICA , TO CARRY OUT SPECIAL INVESTIGATIONS INTO THE AWARD OF CONTRACTS TO A SELECT NUMBER OF COMPANIES AND INDIVIDUALS.
THESE COMPANIES AND INDIVIDUALS (THE DETAILS OF WHICH WILL BE SUBMITTED TO THE CONTRACTOR GENERAL AND AUDITOR GENERAL) CONTINUALLY RECEIVE MAJOR CONTRACTS WITHOUT COMPETITIVE TENDER AND THEN PROCEED TO AWARD SUBCONTRACTS WITHOUT COMPETITIVE TENDER IN AN INCESTUOUS AND CORRUPTLY INTERCONNECTED WAY, AND THE TAXPAYERS END UP PAYING HUNDREDS OF MILLIONS OF DOLLARS IN OVERRUNS.
MR. SPEAKER, THERE IS CORRUPTION INSPEAKABLE IN OUR LAND. AND IF THE COUNTRY DOES NOT UNITE TO FIGHT IT, PEOPLE WILL CONTINUE TO DIE FOR WANT OF BASIC HEALTHCARE, CHILDREN WILL BE DEPRIVED OF BASIC EDUCATION AND OUR LIFE AND PROPERTY WILL BE AT RISK DUE TO LACK OF RESOURCES, WHILE WE WITNESS A SMALL GROUP OF HIGHLY CONNECTED INDIVIDUALS GORGING THEMSELVES IN A BANQUET OF BENEFITS WHILE QUALIFIED PROFESSIONALS HAVE NO OPPORTUNITY TO BID ON CONTRACTS, AND IN CIRCUMSTANCES WHERE THE VALUE FOR MONEY RECEIVED IS QUESTIONABLE.
THE REVENUE PROGRAMME
TAXATION
IN MAY 2003 THE MINISTER OF FINANCE AND PLANNING ESTABLISHED A TAX REFORM COMMITTEE WITH THE MAJOR PURPOSE OF OVERHAULING THE EXISTING TAX STRUCTURE. THE TERMS OF REFERENCE ARE LONG AND EXHAUSTING BUT TWO STRUCK ME:
- FIRST AND MOST IMPORTANT, THE RECOMMENDATIONS SHOULD BE REVENUE NEUTRAL. WHAT DO WE MEAN BY REVENUE NEUTRAL? THE TAXES BEING PROPOSED MUST NOT CHANGE THE TOTAL TAX REVENUE THAT IS, THE NET EFFECT OF THE RECOMMENDATIONS MUST NOT INCREASE OR DECREASE THE MINISTER’S REVENUE EXPECTATIONS.
- THAT THE COMMITTEE MUST NOT FOCUS ON TAX ADMINISTRATION.
LET ME FOCUS ON THIS LATTER TERM OF REFERENCE BY, FIRSTLY, EXAMINE THE MAIN PROBLEM OF THE TAX SYSTEM, THE EFFICIENCY OF THE MINISTRY OF FINANCE IN COLLECTING THE HIGH TAXES ALREADY IMPOSED ON THE JAMAICAN PEOPLE.
THE COMMITTEE REPORTED THAT THE CURRENT TAX ADMINISTRATION IS WEAK: GOVERNMENT DEPENDS ON P.A.Y.E., WITHHOLDING TAX AND G.C.T. FROM A SMALL GROUP OF FIRMS. THE POTENTIAL TAXPAYERS APPEAR TO OPERATE ON A BASIS OF “CATCH ME IF YOU CAN”, WHERE AS THE TAX ADMINISTRATION OPERATES ON THE BASIS OF “OVER KILLING THE REGULAR TAXPAYERS”. IN ADDITION, THE SYSTEM IS AD HOC AND OVER COMPLICATED.
COLLECTION EFFORT
THE COMMITTEE’S REPORT HIGHLIGHTED THE TAX EFFICIENCY COLLECTION OF THE MINISTRY OF FINANCE AND PLANNING AS FOLLOWS:
- P.A.Y.E. – 50%. THAT IS, THE G.O.J. COLLECT 50% OF THE TAX DUE AND PAYABLE. AND VERY FEW RETURNS ARE MADE BY SELF-EMPLOYED PERSONS.
- G.C.T. 55% - THAT IS, G.O.J. COLLECTS 55% OF THE TOTAL TAX DUE AND PAYABLE.
- CORPORATE INCOME TAX – THIS YOU WILL NOT BELIEVE, 17%. THAT IS G.O.J. COLLECTS 17% OF THE TOTAL TAX PAYABLE BY CORPORATIONS.
- PROPERTY TAX – 40% – THAT IS THE GOVERNMENT COLLECTS LESS THAN 40% OF THE TAX DUE AND PAYABLE.
- CUSTOMS– 50%. THAT IS, THE GOVERNMENT OF JAMAICA COLLECTS LESS THAN 50% OF THE TAX DUE AND PAYABLE.
THE COMMITTEE REVIEWED SEVERAL TAX NEUTRAL PACKAGES AS PRESENTED BY THE CONSULTANTS FROM ANDREW YOUNG BUSINESS SCHOOL AND ONE PACKAGE, THE STRUCTURAL AND REBALANCING PACKAGE, WAS PRESENTED TO THE MINISTER OF FINANCE AND PLANNING ON NOVEMBER 30, 2004.
THE REPORT CATEGORICALLY STATED THAT THE “PACKAGE SHOULD NOT BE CONSIDERED SIMPLY AS A “MENU” OF REFORM OPTIONS FROM WHICH PEFERRED POSITIONS MAY BE SELECTED”. IT APPEARS TO ME, THAT THE MINISTER OF FINANCE AND PLANNING, IN HIS USUAL STYLE, HAS DECIDED TO DO OTHERWISE DESPITE THAT THE FACT THAT THE RECOMMENDATION WAS BASED ON AN ECONOMIC MODEL IN WHICH ALL THE VARIABLES WERE “ HANGED”TOGETHER.
GCT
IN HIS PRESENTATION ON THURSDAY, THE MINISTER OF FINANCE IN REGARDS TO TRANSFER OF ITEMS FROM ZERO RATED TO EXEMPT STATED:
“IT WILL HAVE NO IMPACT ON PRICE LEVELS AS NO G.C.T. WILL BE CHARGED ON FINAL SALES“.
IT IS ECONOMIC REASONING LIKE THIS THAT HAVE KEPT US IN THE ECONOMIC “MUDDLE” FOR THE LAST 15 YEARS. THE TAX EXPERTS WILL CONFIRM THAT THE MOVEMENT OF THESE ITEMS FROM ZERO RATED TO TAX EXEMPT WILL RESULT IN AN INCREASE IN THE PRICE OF THESE ITEMS IN ORDER TO PROTECT THEIR PROFIT MARGINS. MY CALCULATED ESTIMATE IS THAT THE INCREASE WILL RANGE FROM 10 TO 30% DEPENDING ON THE ITEM.
MR. SPEAKER, THIS NEW TAX IS EXPECTED TO GENERATE J$3.6B. THIS IS A TAX ON POOR PEOPLE IN PARTICULAR THE POOR SMALL FARMERS WHO ARE STRUGGLING TO SURVIVE IN THIS HIGHLY COMPETITIVE WORLD. LET ME HIGHLIGHT SOME OF THE ITEMS WHICH WILL BE AFFECTED BY THIS CHANGE.
AGRICULTURE – ANIMAL FEEDS, MACHETE, FARM FORKS, HOES, PLANTING MATERIAL CHEMICALS, FERTILIZERS, INSECTICIDES, HERBICIDES, ETC.
HEALTH – PRESCRIPTION DRUGS, CONTRACEPTIVES, TAMPONS, GOODS ACQUIRED FOR HOSPITALS , LABORATORY APPLIANCES, CRUTCHES, INVALID CARRIAGES, ARTIFICIAL LIMBS.
EDUCATION – SCHOOL BOOKS, SCHOOL BAGS, EXERCISE BOOKS, GOODS AND SERVICES ACQUIRED BY THE UNIVERSITY OF THE WEST INDIES, MAGAZINES.
PLACE OF WORSHIP – ALTAR BREAD AND WINE, DECORATIONS.
GCT ON CONSTRUCTION
MR. SPEAKER, THIS TAX INCREASE OF 4% WILL SEE THE COST OF PURCHASING A HOME INCREASE AND ALSO, RENT. I RECOMMEND THAT THE MINISTER CONSIDER THE PROPOSAL BY THE COMMITTEE TO REDUCE TRANSFER TAX FROM 7.5% TO 5%, AND ALSO THE ELIMINATION OF STAMP DUTY. THIS REDUCTION/ELIMINATION OF TAXES WILL REDUCE THE COST OF TRANSFERRING PROPERTIES BUT MORE IMPORTANTLY INCREASE THE INCIDENCE OF TRANSACTIONS AND, AS SUCH, INCREASE THE GOVERNMENT’S REVENUE TAKE.
I ALSO WOULD LIKE TO RECOMMEND TO THE MINISTER THAT A HOUSING ALLOWANCE BE INSTITUTED FOR THE YOUNG WORKING POPULATION WHO WILL BE AFFECTED BY THIS INCREASE IN TAX ON CONSTRUCTION. FINDING SUITABLE HOUSING IS ONE OF THE GREATEST PROBLEMS BEING FACED BY YOUNG JAMAICANS. THIS HOUSING ALLOWANCE SHOULD TAKE THE FORM OF A MORTGAGE BREAK IN INTEREST PAYMENTS FROM P.A.Y.E. INCOME.
HOTEL STAFF GRATUITIES
MR. SPEAKER, AS MOST MEMBERS OF PARLIAMENT IN THE TOURIST AREAS KNOW THE AVERAGE WORKER IN THE TOURISM INDUSTRY DOES NOT EARN A LOT OF MONEY. AS AN EXAMPLE, A TRAINEE MANAGER FRESH OUT OF THE UNIVERSITY EARNS APPROXIMATELY J$40,000 PER MONTH AND IS EXPECTED TO PAY STUDENT’S LOAN OF J$22,000 PER MONTH.
MANY OF THESE WORKERS DEPEND ON THEIR GRATUITY PAY TO FUND THEIR WEEKLY EXPENSES OF TRAVELING, AND MEETING DAILY WORK RELATED EXPENSES. AS WE ALL KNOW, THE ROADS IN JAMAICA ARE IN TERRIBLE CONDITION EXPECT FOR THE HIGH PRICED TOLL ROADS, AND AS SUCH, TRANSPORTATION COSTS ARE HIGH.
A WORKER IN A HOTEL WITH 50 ROOMS AND A GRATUITIES POOL OF $6.9M WILL BE AFFECTED BY THE MINISTER’S PROPOSAL TO “CAP” GRATUITIES TO 5%, INSTEAD OF THE EXISTING 10%. AS SUCH, AN EMPLOYEE’S INCOME WILL BE REDUCED BY J$24,326 PER YEAR. SO A LITTLE IS GIVEN BY WAY OF THE TAX THRESHOLD AND MUCH IS TAKEN AWAY BY WAY OF G.C.T. AND GRATUITY.
TYPICAL HOTEL WORKER
Before Tax New Tax Measures
ANNUAL SALARY 208,000 208,000 - gratuity
GRATUITY 72,613 48,287 - reduced by
$24,326
TOTAL $280,613 $256,287 or 33.5%,
resulting
in an overall
reduction in
pay of 8.5%.
IMPACT ON HOTELS
- INCREASE IN G.C.T. RATE ON HOTELS IS DISPROPORTIONATE TO OTHER INCREASES IN G.C.T. AND WAS NOT A RECOMMENDATION OF THE MATALON TAX REFORM COMMITTEE;
- TOURISM REMAINS THE ONLY EXPORT INDUSTRY THAT PAYS G.C.T. ON ITS SALES;
- EFFECT ON A TYPICAL ALL-INCLUSIVE HOTEL WILL BE TO INCREASE THE BURDEN OF OUTPUT G.C.T. BY APPROXIMATELY 40%;
- THE HUGE EFFECT WILL NOT BE LIMITED TO LARGE HOTELS. ALL HOTELS WILL BE AFFECTED, FURTHER HAMPERING THE DEVELOPMENT OF THE SMALL HOTEL SECTOR.
TAX INCENTIVES FOR PRODUCTION
MR. SPEAKER, I WILL BE ADDRESSING THE ISSUE OF TAXATION IN MUCH GREATER DETAIL IN THE FUTURE, IN PARTICULAR, THE TAX COMMITTEE’S RECOMMENDATIONS AND REPORTS. ONE AREA THAT I WILL BE FOCUSING ON, INTENSELY, IS HOW WE CAN USE TAXATION TO ENHANCE PRODUCTION AND EFFICIENCY.
TAXATION STRATEGY CANNOT BE LIMITED TO THE CONSTANT NEED FOR FINANCING CORRUPTION AND WASTE AND THE EVER-WIDENING STOCK OF DEBT. WE NEED TO BE A LOT MORE EXPANSIVE IN OUR THINKING.
IN CONCLUDING, I MUST POINT OUT THAT GIVEN THE COMMITTEE’S RECOMMENDATIONS FOR TAX NEUTRALITY, AS REQUESTED BY THE MINISTER OF FINANCE, I AM CONCERNED AS TO THE MINISTER’S APPROACH OF ONLY IMPLEMENTING THOSE ASPECTS OF THE PROPOSAL WHICH GENERATE NEW TAXES.
THOSE MEASURES THAT REDUCE TAXES ARE TO BE IMPLEMENTED ON, IT WOULD APPEAR, DURING A PERIOD OF 18 MONTHS TO 4 YEARS. FURTHER, IT SHOULD BE NOTED THAT ONE OF THE MAIN RECOMMENDATIONS OF THE COMMITTEE TO REDUCE THE SHORT-TERM IMPACT ON THE POOR PEOPLE OF THIS COUNTRY, AS A RESULT OF THE TAX PACKAGE IS THE IMPLEMENTATION OF A SOCIAL FUND.
I NOTICE THE MINISTER’S DEAFENING SILENCE ON THIS RECOMMENDATION, DESPITE A NET INCREASE OF $9.35 BILLION OF NEW TAXES THAT WILL IMPACT MOST SEVERELY ON POOR PEOPLE, NOT ONLY IN TERMS OF FOOD AND DRUGS, BUT IN TERMS OF THEIR ECONOMIC LIVELIHOOD.
WANTED: A MODEL THAT PROMOTES BROAD-BASED ECONOMIC DEVELOPMENT
MR. SPEAKER, THE MINISTER OF FINANCE AND PLANNING IN HIS OPENING PRESENTATION HAD THIS TO SAY ABOUT THE FAILED ECONOMIC MODEL OF THE PAST 12 YEARS. (QUOTE)
“NO ONE NEEDS TO TELL ME THAT THE ECONOMIC MODEL IS IMPERFECT AND THAT THERE ARE REMAINING DIFFICULTIES. BUT IT MUST BE QUITE CLEAR BY NOW, TO EVERYONE, EXCEPT THOSE WHO REFUSE TO SEE, THAT AFTER A LONG SEARCH WE HAVE THE MAKINGS OF A WORKABLE ECONOMIC MODEL.” (END QUOTE).
THE FINANCE MINISTER IS NOW OPENLY ADMITTING, DESPITE HIS STOUT DEFENCE OF HIS “ECONOMIC MODEL” OVER THE YEARS, THAT –
- HE HAD BEEN INVOLVED IN A LONG SEARCH FOR AN ECONOMIC MODEL
- AFTER 12 YEARS AS MINISTER OF FINANCE AND PLANNING, ALL HE CAN NOW TELL US IS THAT HE HAS “THE MAKINGS OF A WORKABLE ECONOMIC MODEL”.
THE RESULTS OF THIS SEARCHING OR GROPING IN THE DARK HAS BEEN:
- THE COLLAPSE OF THE FINANCIAL AND PRODUCTIVE SECTORS OF THE ECONOMY.
- THE DESTRUCTION OF THE LIVES AND PROFESSION OF MANY ENTREPRENEURS WHO DARED TO BELIEVE IN JAMAICA AND TAKE RISKS, AND MANY OF WHOM HAVE LONG LEFT OUR SHORES FOR A LESS HOSTILE ECONOMIC CLIMATE.
- THE IMPOSITION OF PUNITIVE ECONOMIC POLICIES THAT NOW KEEP JAMAICA IN A STATE OF PERSISTENT UNDER-DEVELOPMENT BARELY AVERAGING 1 PERCENT PER YEAR GROWTH OVER THE PAST 12 YEARS.
ECONOMIC DIVERSIFICATION NEEDED
A NEW ECONOMIC MODEL THAT IS BASED ON SENSIBLE MACRO-ECONOMIC POLICIES IS NEEDED TO DRIVE THIS ECONOMY TOWARDS REAL ECONOMIC GROWTH AND ECONOMIC DEVELOPMENT.
THE REASON FOR THIS IS THAT THE ECONOMY NOW RESTS ON A FRAGILE BASE IN WHICH ONLY TOURISM AND THE BAUXITE/ALUMINA SECTORS OFFER REAL GROWTH POTENTIAL IN THE SHORT-TERM.
THESE AREAS ARE EXPANDING BECAUSE THEY ARE DRIVEN BY FOREIGN DIRECT INVESTMENT (F.D.I.), AND NEW GLOBAL DYNAMICS.
WHAT IS NOW NEEDED ARE POLICIES THAT WILL ENCOURAGE BROAD-BASED INVESTMENT BY JAMAICAN ENTREPRENEURS FROM NEGRIL POINT TO MORANT POINT, WHERE GOVERNMENT REDUCES INTEREST RATES SO THAT INVESTORS CAN BORROW MONEY IN LOW DOUBLE DIGITS OR SINGLE DIGIT RATES.
THE ECONOMY MUST ONCE AGAIN BE DIVERSIFIED TO THE POINT WHERE SECTORS SUCH AS INFORMATION TECHNOLOGY, MANUFACTURING, AGRICULTURE, AGRO INDUSTRY, FURNITURE AND CRAFT, CAN BE REVIVED SO THAT THE EXPORT CAPACITY OF THE COUNTRY CAN BE REBUILT ALLOWING FOR SIGNIFICANT JOB-CREATION AND FOREIGN EXCHANGE EARNINGS.
IN ORDER TO DO THIS, THE GOVERNMENT MUST PUT IN PLACE STRATEGIES THAT CAN INCREASE THE COMPETITIVENESS OF JAMAICAN PRODUCERS.
AMONG THE ISSUES THAT MUST BE ADDRESSED TO ACHIEVE THIS COMPETITIVENESS IN THE GLOBAL MARKETS ARE, LOW INTEREST RATES, LOWER UTILITY COSTS, BETTER EDUCATION AND TRAINING OF THE WORK FORCE, PRODUCTIVITY INCENTIVES, EXPORT AND MERCHANDIZING SCHEMES, TO NAME A FEW.
THE JAMAICA LABOUR PARTY HAS CONSISTENTLY PUT FORWARD SPECIFIC PROPOSALS FOR A REVIVAL OF THE ECONOMY. THE GOVERNMENT AND THE FINANCE MINISTER HAVE STEADFASTLY FAILED TO TAKE ON BOARD THESE TRIED AND PROVEN TECHNIQUES OF EFFECTIVE GOVERNANCE.
THE HANSARD REPORTS OF PARLIAMENT SHOW THE DETAILED ALTERNATIVES PUT FORWARD BY THE OPPOSITION, INCLUDING OUR PROPOSALS FOR:
- A FORENSIC EFFICIENCY AUDIT OF GOVERNMENT AND ALL ITS AGENCIES;
- BORROW LOW COST MONEY FROM MULTILATERAL INSTITUTIONS AND REPLACE A BLOCK OF MATURING DEBT INSTRUMENTS WITH THIS IN ORDER TO PROPEL A MORE AGGRESSIVE DOWNWARD MOVEMENT OF INTEREST RATES. GOVERNMENT MUST, OVERTIME, REDUCE ITS RELIANCE ON EURO AND GLOBAL BOND RATES AT 10-12 PERCENT. THESE RATES WILL GUARANTEE THAT OUR HIGH INTEREST RATES WILL CONTINUE INDEFINITELY.
- THE DEVELOPMENT BANK OF JAMAICA SHOULD EMBRACE ITS CORE BUSINESS OF PROVIDING LOAN FUNDS TO THE PRODUCTIVE SECTOR, INCLUDING SMALL BUSINESSES AND SMALL FARMERS. THE P.C. BANKS IN RURAL JAMAICA NEED TO BE REVIVED.
WE NEED TO BUILD SUPERHIGHWAYS OF PRODUCTION TO GIVE JAMAICANS AN OPPORTUNITY TO CREATE WEALTH FOR THEMSELVES.
BUT THE TIME IS FAST COMING WHERE WE OF THE JLP WILL HAVE TO IMPLEMENT THESE SENSIBLE POLICIES THAT CAN LIFT THE JAMAICAN SHIP OF STATE ENSURING THAT JAMAICANS AT EVERY LEVEL GET AN OPPORTUNITY :
- FOR AFFORDABLE HEALTH CARE
- FOR INVESTMENT AND ENTREPRENEURIAL OPPORTUNITIES
- FOR REASONABLE JOB OPPORTUNITIES
- FOR A PEACEFUL AND CRIME-FREE SOCIETY
- FOR A WEALTHY SOCIETY IN WHICH VALUES AND ATTITUDES ARE RESTORED TO PRIDE OF PLACE .
CONCLUSION
MR. SPEAKER, I HAVE SOUGHT IN THIS PRESENTATION TO DEMONSTRATE THE DESTRUC-TIVE EFFECTS OF POOR GOVERNANCE.
I HAVE DEMONSTRATED THAT FOR TOO LONG THE GOVERNMENT HAS ACTIVELY AND SYSTEMATICALLY BEEN INVOLVED IN THE CORRUPTION OF THE BUDGETARY PROCESS, WHEREBY IT HAS ENGAGED IN THE CONDUCT OF TWO BUDGETS, ONE SEEN AND THE OTHER UNSEEN, OPENLY VIOLATING THE CONSTITUTIONAL REQUIREMENT THAT PARLIAMENT MUST APPROVE ALL EXPENDITURE, INCLUDING LOANS, BEFORE THE MONEY IS SPENT.
IN THE PROCESS, THERE HAS BEEN LACK OF TRANSPARENCY AND A STEADY INCREASE IN CORRUPTION IN THE PUBLIC SECTOR DUE TO LACK OF OVERSIGHT AND THE IMPLEMENTATION OF ADEQUATE SAFEGUARDS.
IN THIS PROGRAMME OF BUDGETARY DECEPTION, THERE HAS BEEN LITTLE EMPHASIS PLACED ON PUTTING IN PLACE ECONOMIC DEVELOPMENT POLICIES THAT GENERATE WEALTH FOR THE PEOPLE. THE RESULT IS – SPIRALLING DEBT AND DEEPENING POVERTY.
WE MUST MAKE A COMMITMENT TO CHANGE THE COURSE ON WHICH WE ARE EMBARKED, IRRESPECTIVE OF WHO FORMS THE GOVERNMENT AND WHO SITS AS FINANCE MINISTER.
WE MUST RESOLVE TO OBEY THE LAWS OF THE LAND THAT WERE LAID DOWN BY OUR FOREFATHERS, SO THAT WE CAN BUILD NEW RESPECT FOR CITIZENSHIP, LAW AND ORDER.
WITH HOPEFUL AND CONTRITE HEARTS LET US DEDICATE OURSELVES TO RESCUING OUR FUTURE.
I END WITH A FAVOURITE PRAYER THAT I CONSIDER APPROPRIATE:
“MAY GOD GRANT US THE SERENITY TO ACCEPT THE THINGS WE CANNOT CHANGE, MAY HE GIVE US THE COURAGE TO CHANGE THE THINGS WE CAN, AND GIVE US THE WISDOM TO KNOW THE DIFFERENCE BETWEEN WHAT WE CAN AND CANNOT CHANGE.”
AUDLEY SHAW, M.P.
OPPOSITION SPOKESMAN ON FINANCE AND
THE PUBLIC SERVICE
TUESDAY, APRIL 19, 2005
