Thu | Jul 18, 2019

Mark Ricketts | The Budget needed a different emphasis

Published:Sunday | March 24, 2019 | 12:15 AM

The Gleaner’s front-page headline, in an affectionate play on words, dubbed Finance Minister Dr Nigel Clarke ‘Santa Clarke’ essentially capturing his gift-giving Budget.

The minister has received rave reviews from analysts, editorials, the Jamaica Chamber of Commerce (JCC), the Private Sector of Jamaica (PSOJ), and the Small Business Association. Even the Jamaica dollar, making provision for equity and growth in the Budget, has signaled its approval by continuing to strengthen against its US counterpart.

So what am I missing? Somehow something must be wrong with me, or am I just a contrarian?

When I look at Jamaica’s pressing problems at this time, I thought the minister did not use Budget allocations, especially in the area of taxes foregone on real estate transactions, judiciously. It would have been better to use those billions of dollars to make a convincing statement and set a tone that structural impediments, bottlenecks, and social dysfunction, must be addressed forthwith.

Annual Budgets are not just numbers reconciling revenues and expenditures. They are about values and direction, priorities and principles.

For decades, the annual addition to the housing stock, especially for lower middle income workers, has been abysmal. In addition, the income limitations for large numbers of hard working Jamaicans means that their ability to qualify, or even service mortgage payments, irrespective of declines in interest rates and transfer tax foregone, is a pipedream.

Seven hundred thousand people squatting is no accident, and it produces a ramshackle existence, especially in unplanned communities exceeding density requirements. Basic amenities are inadequate, well-being is stifled, and there is little in the way of economic choices in terms of allocation of scarce resources.

The result: large segments of the domestic economy need rehabilitation and revitalisation, and when aligned with tourism enclaves, there is a huge divergence. As such, we are missing higher levels of expenditure, improved security, and economic growth because of inadequate interchange between the domestic economy and the tourism sector.

To emphasise my point, travel to our tourism dominant cities where huge construction of hotels is taking place, and show me the corresponding amenities and mix of high-rise apartments and ground-level housing units, both rental and owner occupied, for the thousands of lower middle income earners in the hospitality sector.

That should be, in any Budget announcement, both an emergency and a priority, especially as so much of our foreign exchange needs, apart from the mining sector, are satisfied by tourism earnings, tourism arrivals, and the Diaspora.

It is not surprising, therefore, that the recent two-tier advisory from the United States State Department warns US travelers about going to places such as Canterbury, Clovers Street, Flankers, Hart Street, Norwood, Rose Heights, in our tourist capital, Montego Bay.

We can deflect the warning as Tourism Minister Ed Bartlett did, saying, “customer-value proposition that Jamaica offers is at such high levels that visitors come with certain knowledge that they are going to be safe because our record of visitor safety is exemplary”.

But we still have to address this at some point.

NO NEW SQUATTING

With Government revenue intake more buoyant than forecast and the country getting a half per cent break in the primary surplus, the Government’s emphasis should have been less on monetary and fiscal policies and more on specific strategies dealing with structural impediments.

This would be done by improving value added and professionalism in the workplace (something I will deal with in a column on education), reducing the divergence between the domestic sector and the tourist enclaves, and confronting head-on, new squatting occurring, while doing research, data-collection, and instituting a long-term programme for correcting this intractable problem as the Government promised.

With that in mind, I thought the Government would repay $10 billion of the $20 billion both governments raided from the National Housing Trust (NHT) for budgetary support. NHT, with replenished resources, taking the lead role with University of Technology’s (UTech) urban and regional planning department, University of the West Indies’ (UWI) engineering department under the indefatigable Paul Aiken, and with many of our local architects and engineers, could create amenity-driven neighborhoods as part of emergency responses to decades of neglect.

A tendency of our governments is to spend heavily on new concepts and shiny ideas and forget bedrock professionals, important institutions, maintenance, and relevant departments. Oftentimes, we lose out on technological applications and modernisation.

I am thinking of our municipalities, and more specifically, our planning departments, which, given our topography and the magnificence of our mountains, our rolling plains, and our sea, should be First World, by virtue of pay, technology, data, field agents, management, professionalism, and performance.

A budget, by virtue of allocating resources, thereby establishing priorities, should have been unequivocal in laying down the gauntlet – no new squatting. Our river banks, our gullies, the fire hazards, legitimising illegality, have to stop.

MAKES NO SENSE

Dr Clarke, who is so bright and imaginative, conceded this reality in his Budget presentation when he said, “we need to rekindle domestic economics, business, and transaction activity if we are to elevate domestic value added and growth”.

He has the right idea but, I believe, used the wrong fiscal tool.

My beef with the minister’s Budget is, how can billions be foregone in stamp duties and taxes on real estate transactions in an already overheated property market where high-end purchasers are driving escalating market prices in an environment where land taxes, as against property taxes, makes absolutely no sense?

Furthermore, for lower middle income earners, in an economy with badly skewed income, reducing transfer tax to help them make a five per cent down payment still leaves them in a quandary as to how to service the mortgage. This move will add nothing to growth and higher-valued employment, which the society badly needs. The housing stock for lower middle income workers should have been increased, and the Budget is where it all begins.

In the weeks ahead, I will look at other Budget weaknesses with education and The Programme for Advancement through Health and Education (PATH), the transportation sector, and agriculture.

- Mark Ricketts is an economist, author, and lecturer. Email feedback to columns@gleanerjm.com and rckttsmrk@yahoo.com.