THE GOVERNMENT HAS lost confidence in itself to correct its fiscal crisis through genuine expenditure adjustment.
As noted below, the social partners felt that there was no flexibility to raise taxes in the economy, yet the Government found a way. The Minister of Finance announced some expenditure cuts in the Budget; then the Prime Minister rode into town to declare no knowledge of the main measures.
It has been apparently missed by most that apart from the announced revenue measures which are to yield almost $200 million, the proposed cuts in transfers are to be replaced “. . . based on proposals which are to be implemented to enhance revenues. . . .” The latter can yield as much as a further $128 million, especially since the Prime Minister’s declaration.
Therefore, last month’s Budget is expected to extract over $328 million from an economy that has no flexibility to raise taxes.
The one thing that the current administration cannot be accused of is its incapacity to play politics.
The strategy is to send the Minister of Finance to confuse the public with his uncertainty and lack of clarity on the budgetary measures; then Prime Minister Stuart follows pleading his innocence and unfamiliarity.
Lest we forget, this was the same strategy used to wriggle out of the privatization debate. The same Minister of Finance had publicly spoken about privatizing specific entities. Then the same Prime Minister, in his usual innocence, announced a different position to the public supported by the advertisements. The political dimension of this current Government must not be underestimated.
By the way, this strategy has the support of trade unions and some equally innocent public relations experts.
In the face of abject failure, these men have not decreased themselves in spite of the mirror images. Instead, they have exalted themselves. No one does it better than the Prime Minister.
It is impossible for Prime Minister Stuart to have attended a meeting of the Extended Subcommittee of the Social Partners, chaired by the Minister of Labour on Friday, July 26, at the Hilton Barbados Resort and not have heard, among other things, the following:
(1) on present trends, the fiscal deficit was projected to be in excess of nine per cent of gross domestic product by the end of March 2014;
(2) the need to raise confidence, productivity and investment levels;
(3) the need to avoid devaluation of the Barbados dollar;
(4) the need to avoid wholesale layoffs in the public sector and
(5) there is no flexibility to raise taxes.
The last matter was certainly not followed. Furthermore, it was intended that the entire reverse tax credit was to be abolished. This makes a mockery of the suggestion that it was cut in half because it was being abused; it was to be cut in full, which means that the final decision was not about abuse at all.
A full month later on August 26, the Director of Finance and Economic Affairs sent a circular to Permanent Secretaries and Heads of Departments which stated, “As announced, it is expected that reductions totalling $50 million would be made in the areas of temporary employees, substitutes and acting.”
This was written almost two weeks after the Budget speech was delivered in Parliament.
The circular from the director further stated, “In addition, please note that you will receive separate advice from the Ministry of the Civil Service [which is under the Prime Minister] on the implementation of the Budgetary Proposals as they relate to human resources.”
The Minister of Finance announced a reduction in the Budget allocation for temporary employees, substitutes and acting of $50 million to which Prime Minister Stuart now pleads ignorance. This is remarkable for a man who chairs the Cabinet and spoke in support of the Budget in Parliament.
The more remarkable statement in the director’s circular is, “However, you should advise the entities for which you have responsibility that if the instructions of the Ministry of the Civil Service are not followed, the Ministry of Finance will not provide any additional funds to cover the salaries of persons who cannot be accounted for in the system.” This statement implies that to reduce the Budget allocation by $50 million, persons will have to be removed from the system and they were. Yet SmartStream was blamed.
The one thing that the political strategy does not inspire is confidence, which is the critical ingredient needed to truly restart the economy.
• Clyde Mascoll is an economist and Opposition Barbados Labour Party spokesman on the economy.
