Gordon Robinson | Beyond tribal politics
Any analysis of 2018-19's Budget must be done in the context of Jamaica's current reality and recent economic history.
That context begins in January 2012 when the PNP swept to power via the JLP's mangling of the Dudus-Manatt Phelps & Phillips fiasco to find:
- Debt-to-GDP ratio exceeded 140% for the first time (at last?);
- Jamaica was an IMF pariah and, consequently, shunned by all international funding agencies;
- National budgeting was impossible unless Jamaica returned to some semblance of fiscal sanity.
The reconstruction of Jamaica's finances, under the IMF whip, was led and managed by Finance Minister Peter Phillips. Against all odds, Phillips negotiated a new IMF deal; reined in the trend towards fiscal lunacy; significantly reduced the debt-GDP ratio; and exceeded all IMF targets.
The problem was a lack of growth (realistically impossible with the fiscal restrictions), so a perceived-to-be arrogant PNP, led by an increasingly aloof, almost reclusive Portia, was fired by an electorate relying on a 'superbly'-engineered JLP trick, including promises of a revenue-neutral $1.5-million income tax threshold; accountability for Cabinet members based on strict job descriptions; and crime so low that citizens would "sleep with their windows open".
None of the above came to pass as massive tax hikes dominated the JLP's first two Budgets; no ministerial job description has been published; while a new chief justice was warned to perform or else; and violent crime increased to frightening proportions, resulting in one full-fledged and two mini states of emergency.
The tax trick was exposed when sanity returned to the JLP after it became Government, and, to be as kind as possible, recognised the reality of Jamaica's fiscal catastrophe. However, because politicians are hostile to transparency, exposure of one trick morphed into the creation of another as massive tax hikes were imposed under the guise of a policy of replacing direct with indirect taxation.
DWL! Since when is gas tax indirect? Every citizen, especially the middle and lower classes, must pay it. Since when is GCT on residential electricity indirect taxation? Only the homeless and those using kerosene lamps don't pay a light bill and government-imposed ad valorem SCT on kerosene. GCT on electricity bills brings no equity, nor does it further the concept of indirect taxation. It further marginalises the middle class, who were squeezed financially by a boa constrictor of a government that didn't care for them or their inability to afford to defend themselves in court or turn on a security light.
So it was the middle class, the backbone of every civilised society, that was adversely affected by the oppressive tax hikes of 2016 and 2017, NOT wealthy individuals or corporations who engage expensive accountants to grease the path to their Audi dealers chortling at TAJ as they go. Future fiscal policy genuinely reliant on indirect taxation would include 25% GCT being charged on all consumer goods and services, balanced by the abolition of income tax on individuals (company profits tax can remain) and of GCT on professional services.
After six years of oppressive fiscal policy, Jamaica's debt/GDP ratio has been reduced to 105%; debt servicing to 46% of budget; and 2017-18's revenues significantly exceeded targets. But this didn't happen without severe trauma, especially to the "most vulnerable". In THAT context, the puerile "no new taxes" hymn; the arrogant desk-thumping by JLP MPs; the posturing by Clown-Prince-a-Yard, Audley Shaw; and the gleeful celebrating by JLP hacks everywhere are inappropriate, churlish and insensitive. But, what's new?
I expected Shaw to apologise to Jamaicans for Government's deceit, covered up by oppressive taxation whose double whammy enabled improved fiscal space and the opportunity to chant "no new taxes". Why deny Shaw his moment? Because the truth is, Government dare not impose another new tax in this its third Budget as a tax revolt would be the likely reaction. So the announcement was inevitable, and the only credit Government can claim is to have recognised this.
In that context, this is a welcome budget that could, if strictly implemented, begin to claw Jamaica back to economic stability. Increased allocations to national security, social services, and infrastructure are applauded. But will they be efficiently used? Citizens must monitor diligently to ensure, for example, that no more phantom cars are ordered (and paid for) from suppliers unable to perform and no more roads are built so inefficiently that businesses are destroyed or motorists subjected to huge repair bills and inconvenience. Macroeconomic stability is nice, but microeconomic benefit nicer.
Growth projections remain problematic. Shaw relied on resumed production of iron and steel at Alpart by JISCO but overlooked our reward for abandoning international principle and sucking up to the USA at the UN over Jerusalem, which was a 25% tariff on steel and aluminium exports to America.
In furtherance of that cowardly foreign policy, we earnestly made goo-goo eyes at Rex Tillerson, only to see him unceremoniously booted from office five minutes later. Further reliance on the North-South and South Coast Highway projects fails to understand that benefits depend on early completion (unlikely) and come with negative consequences for small towns bypassed.
Montego Bay perimeter road; Naggo Head Technology Park; and Morant Bay town revitalisation projects are in planning stages and wriggled their way into Shaw's Budget presentation due to an infectious verbal discharge affecting all politicians called PUSS (Premature Utterance Stimulus Syndrome). With regard to the recurrent side of the Budget, despite the "no new taxes" mantra, I see it's to be partly financed by a "special distribution of US$101.0 million from the PetroCaribe Development Fund."
This isn't that fund's purpose and it continues the reckless disregard for development fund savings by governments for 40 years. Remember gazillions paid into the Capital Development Fund by the bauxite levy, then frittered away on recurrent expenditure?
The Opposition unveiled a new Budget Debate opening batsman on Tuesday when Mark Golding played his maiden innings. His first hour at the crease appeared more like a stump speech for the 2016 election campaign, which he must've forgotten the PNP lost. Looking and sounding like a man auditioning for party leader, he covered every portfolio but his own, handing out plaudits to responsible former ministers and assessing national priorities. But just as the audience was falling asleep like Sabina Park when Geoffrey Boycott batted, he warmed to his task and delivered some telling blows, especially on the subject of growth. He said:
"PNP doesn't see the quest for growth in the same way as Government. The JLP model is to set up an Economic Growth Council comprised mostly very wealthy businessmen. We see the drive for growth as part of a broader vision of national development involving the active participation by all stakeholders who make up our society. The small businesses, the farmers, the trade unions, the transport operators, the public service, the churches, the entertainers who are so influential over the minds of our youths. All of these groups need to be brought into a truly national drive for higher levels of economic growth as part of a strengthened participatory democracy. Without sustained, inclusive, and equitably distributed economic growth, prosperity will remain but a fleeting illusion to be pursued but never attained ... .
"The Opposition is committed to growth which is in harmony with the fundamental principles of social justice, equality of opportunity, and a Jamaica that works for all. Without this, growth will not lead to greater national prosperity, but will merely serve to enrich those with capital, more often than not foreigners, while most Jamaicans are left to wonder why they cannot achieve their hopes and dreams in the land of their birth.
Both political parties must be involved in this process for it to be successful, and for that to happen will require authentic bipartisanship deliberately fostered in the national interest. Authentic bipartisanship means honest dealings with each other, both in meetings where the public isn't present and in the public domain. Mere lip service will achieve nothing positive. Nice-sounding words are too often undermined by behaviour which remains tribal and divisive. Both sides are guilty of that. We must turn the page and move beyond that approach to our politics."
This is the sort of enlightened approach I've been clamouring for. Let's hope it spreads and winning a future election doesn't lead to Alzheimer's.
Time's up! We must stop playing tribal political games benefiting nobody but tribalists. A sustainable way forward based on national consensus is a bipartisan imperative. So when the euphoria from the "no new taxes" Budget evaporates and the middle class returns to the stress of life in Jamaica, my question remains: Who ensures fiscal responsibility continuation post-IMF?
Peace and love.
- Gordon Robinson is an attorney-at-law. Email feedback to email@example.com.