EDITORIAL: Back to the economy
Now that we have, with appropriate dignity laid our departed former leader to rest, Prime Minister Freundel Stuart and his new administration can now return their full attention to the tasks of dealing with the economic problems confronting the society.
The Governor of the Central Bank recently told us that we had a reasonable level of foreign reserves, and this disclosure obviously provides some level of comfort. Yet it is also clear that tackling the fiscal deficit is a matter which requires further action and that the Government will have to be looking even more seriously at the revenue side of the equation, since some major cuts in expenditure have already taken place.
That the recession has lasted longer than we thought it might have, has not helped the local economy, since Government’s revenues have shown a decline consequent on less local business activity.
That itself is a result of less buoyant economies in those countries from which we gather our tourists and from whom we attract our international financial business. Revenues have therefore taken serious blows, from decreased activity in both the domestic and international aspects of the economy.
It is cold comfort to us that the major and more resilient economies of the United States and Britain are faced with similar problems, but this recession is international, and political leaders everywhere are facing some of the most challenging political decisions which they make for the national well-being only to be confronted with a public opinion fuelled by the opinions of voters who seem more concerned with their individual welfare.
The new administration will therefore have to decide on increased revenue.
At least that much seems clear, and the Value Added Tax seems to be a prime target for an increase in the rate. Inevitably there may be a howl and cry since the VAT hits the poor and rich alike with the same weight.
So long as service is rendered or the goods bought, the VAT is payable, except in the case of items and services exempted from that tax. To a party which loudly proclaims its concern
and interest in the plight of the small man, this may be a bitter pill to swallow, but the VAT has the advantage of being an activity tax and increased activity in the run-up to Christmas may commend it to the Minister of Finance.
There may be other options available to the Government, but whatever programme of revenue increase is decided upon, a large helping of political will is going to be required, and it is here that politics may intrude.
Both the Ministries of Finance and Economic Affairs are now concentrated in a single pair of hands.
That is not a matter of Mr Stuart’s making and the reappointment of all the Cabinet ministers of the Thompson administration in the peculiar circumstances cannot preclude consideration of a reshuffled Cabinet which bears the stamp of Mr Stuart.
It is not impossible to contemplate a key Ministry like Finance returning to the care of he who happens to be Prime Minister, since that has been our history.
Fiscal policy and matters of the Budget are peculiarly within the province of the Minister of Finance and sometimes the introduction of controversial new policies and the raising of unpopular taxes may cause rifts between the minister and his Prime Minister.
The amelioration of the present crisis will require the Prime Minister and his Minister of Finance, not only to be singing from the same song sheet, but also in the same key.
Whatever happens, we urge the Government to carefully assess the options, and to decide upon the option which best addresses this country’s problems. The medicine may be painful and bitter, but sometimes every Government has to place the national interest far ahead of any political concerns. Such a time is now.