Tuesday’s Budget offered Barbadian workers, households and businesses no ease from the obvious pressures.
Its biggest and potentially most damaging initiative is the designing of a borrowing package from the National Insurance Board to three statutory entities – the University of the West Indies, the Transport Board and the Barbados Tourism Authority – and Needham’s Holding Limited to allow for financing of $110 million during the course of this financial year.
This initiative is indicative of the nature of the Budget; it speaks to the cosmetics and not the substance of the issues affecting the Government’s accounts. The fiscal cyst cannot be covered up by applying a Band-Aid this year. The real question is, what will happen in the next financial year and beyond? The answer is the inevitable decay that lies beneath the Band-Aid.
In his typical lofty way that is not matched by a breadth of knowledge in the area, the Minister of Finance and Economic Affairs asserted that the borrowing “will address the level of current transfers made to these entities”. The borrowing simply offers a dressing; it does not address the deep tissue issues that lie beneath the wound. The truth is that such cosmetic treatment cannot bring healing to the severe fiscal hole into which the Government has descended.
It is important in understanding the application of Band-Aid to this major cavity that since November last year Minister Chris Sinckler identified an 18-month period for the VAT increase to assist in the healing. Since then almost ten months have passed, and the evidence at page 20 of the Budget suggests that the fiscal condition has deteriorated for the first six months of this year when compared with the corresponding period of 2010.
So far, all kinds of methods have been used to suggest improvement in the Government’s fiscal condition; the last economic review reported for the two months of fiscal year 2011/12 which is the period April and May. This was in an attempt to convey a positive impression. The fiscal deficit of $359.1 million on page 20 was not compared to the first six months of 2010, again for obvious reasons. Comparison would have shown a worsening fiscal position for this year in spite of the budgetary measures of November 2010.
Day does run till night catch it!
If the budgetary position had not worsened, why would a Minister of Finance bring another Budget less than ten months later? Furthermore, why in the face of substantial pressure on the backs of Barbadians was the minister not in a position to offer relief that is obviously needed? The answers to these two questions do not require you to be a trained economist.
The minister is correct that the Government has taken the downgrade of Moody’s seriously, notwithstanding the initial irresponsible comments made by him and the Governor of the Central Bank. However, the major initiative to which I referred at the beginning is not sufficiently bandaged to escape the eyes of a layman, far less a specialist.
Perhaps more so than at any other time in the politics of Barbados, there is an intellectual divide that is both encouraging and engaging. The Democratic Labour Party has abandoned the wisdom of Errol Walton Barrow in understanding that the provision of social entitlements is constrained by the Government’s fiscal capacity. In fact, it is to this very clear wisdom that Michael Manley referred in separating Barrow from the rest of the Caribbean leaders in the period 1960 to 1976.
On the other hand, the Barbados Labour Party still has in its bosom Owen Arthur who masterminded a programme of social entitlements in concert with an economy that demonstrated the capacity to sustain such a programme. However, what is most noteworthy is that the same man was able to identify and articulate prior to and during the last general election campaign that such entitlements would be stretched to be accommodated in a new economy.
If the truth about the fiscal condition is not fully revealed but instead is being concealed to suggest that comments by certain trained economists are designed to misguide, then time becomes the enemy of those who seek to misguide. Thus far, time has not been my enemy and truth has certainly been my friend – so, time will tell!
