THE ISSUE: Accurate records critical
The state of Government’s finances and its ability to fund important programmes and policies have come to the fore during the current economic recession.
Like many of its counterparts in the region and internationally, the Freundel Stuart Administration has struggled to find revenues at a time when demands for its financial support continued to climb.
The end effect was a series of “fiscal consolidation” measures, some already implemented and others to be introduced in the future.
Loosely defined, public finance and public budgeting refer to the role governments play in the economy, including the funds they spend and earn, and debt – what they owe people and companies.
In Barbados’ case, in recent times such issues have dominated public discussion. The talk has included Government’s ability to continue paying for education, health care and various social services.
Restructuring the operations of statutory corporations that are duplicating services, divesting state-owned assets in the expectation that they will be more efficiently managed by the private sector, and increasing the effectiveness of tax collection through measures like the establishment of the Barbados Revenue Authority have been among the solutions discussed and in some cases enforced.
Minister of Finance and Economic Affairs Chris Sinckler addressed such issues in March when speaking during debate on Government’s “budget” the Estimates of Revenue and Expenditure 2014-2015.
He said, for example, that unless the millions of dollars Central Government paid yearly to statutory organisations was reduced it could be economically disastrous.
“In 2005-2006, subsidies and transfers were $782.1 million and $821 million in 2006-7, $977.8 million in 2007-8, $1.137 billion and over another $1 billion in 2008-09 and 2010. This shows that expenditure has been growing, whilst the revenue has been shrinking. These things began from around 2005 to show up structural problems in the government finances,” he said.
“A study was done by a Governor of the Central Bank and it spoke about the need for Government reform. He made the point that Government was too big and that 36 cents of every dollar was going to pay wages and salaries and that you had to do something because if you did not address the issue along with other issues Barbados has within the economy, structurally it will come back to haunt us.
“The main point that I am saying is that he recognised then, as did many other people, that we had some fundamental structural issues to address. But at that time we were basking in the glory of the great expansion, money was flowing, drinks were being bought, all was well and we believed that we could postpone dealing with these fundamental issues.”
Another important issue, one raised by Auditor General Leigh Trotman in his 2013 annual report, was the difference between Government’s actual earnings and spending versus what it projected in its budget.
Using the example of the 2012-2013 financial year, Trotman said, “The actual deficit for the 2012-2013 financial year as reported by the Treasury was $826.1 million or $490 million greater than was originally budgeted. Transfers to state enterprises and retiring benefits increased by $215 million. In addition there was a shortage of $226 million in revenue and these accounted for the majority of the shortfall.
“It should be noted that the deficit was actually higher than stated in the Accountant General’s Report, which did not take into consideration the transfers to state enterprises which were recorded as advances.”
When it released the first quarter economic review last week, the Central Bank, through main spokesman Governor Dr DeLisle Worrell, said “the deficit in the fiscal year just ended was larger than expected at 11.3 per cent, mainly because of a $245 million fall in revenue”.
“Corporation tax was down by $80 million, VAT $65 million and personal taxes $15 million. The main item of expenditure increase was interest costs, which were up $47 million. Transfers to public institutions were at the same level as in the previous fiscal year.”