Shaw's solutions - Opposition spokesman offers alternatives to boost growth, productivity
The national Budget Debate continued last week. Our leaders continue to discuss the policies and issues they believe are important to increase productivity in the country, stimulate economic growth while at the same time balancing the Budget, and achieve other budgetary targets. Opposition Spokesperson on Finance Audley Shaw gave his views on the proposed Budget and revenue measures and suggested alternatives as discussed below.
How did his presentation begin?
Similar to last year, Mr Shaw began by highlighting the current state of the nation's economy - high and rising unemployment rate, increasing from 12.8 per cent in October 2011 to 14.2 per cent in October 2014; unemployment among females has risen from 16.9 per cent to 19.4 per cent over the same period. He commented on the fact that businesses are slow to transfer benefits received from falling oil prices to consumer prices. In 2011 when oil prices were approximately US$95 per barrel, the inflation rate was 6.5 per cent. In 2014, oil prices fell to US$54 per barrel and the inflation rate for the corresponding period is 6.5 per cent.
What about budget expenditures?
He commented on the unreasonable wage freeze that has significantly depleted civil servants' purchasing power. He questions the attainability of proposed wage compensation in light of Jamaica's aim to achieve a wage bill of nine per cent of GDP. Mr Shaw believes the Government has not been prioritising tax spending; Jamaica Information Service has been given a 55 per cent increase in budgetary allocations while the budget for the Ministry of Local Government and Community Development has fallen by more than 15 per cent. He highlighted some tax categories that were not clear and in need of review, including asset tax and minimum business tax.
What about revenue measures?
Mr Shaw doesn't support the new tax packages to generate an additional $10.35 billion which is geared towards helping the country achieve the 7.5 per cent primary surplus target, outlining that the tax package and budget requirement are not explained clearly. He believes that the proposed environmental levy on domestic supply is the wrong tax at the wrong time. Fiscal policy should be designed to help manufacturers, not hinder them. These revenue measures are inconsistent with the country's growth objectives.
What else was a concern?
Mr Shaw believes that there are five public bodies that pose a threat to the country's budgetary process and relationship between Jamaica and the International Monetary Fund and other multilateral agencies. The Government partners with Alcoa and been funding a part of their capital expenditure even though the company continues to operate at a loss. He calls for the Government to outline its plans for the National Water Commission and the Jamaica Urban Transit Company for the upcoming years. He also explained that the National Insurance Company is unsustainable based on his calculations. He recommends that the Government incorporate revenues and expenditures from the National Road Operations Construction Company into the Consolidated Fund.
What did he recommend for growth?
Mr Shaw outlined a 20-point prescription for growth:
1. Government should re-prioritise the Budget, putting more emphasis on early-childhood education. It should also abolish the shift system in schools.
2. Instead of reporting two different totals for the national debt, the Government should increase transparency by using the IMF's recommended method to report the national debt.
3. Try harder to get the foreign currency support pledged to the country under the extended fund facility.
4. Negotiate for multilaterals to purchase Jamaica's US$3 billion PetroCaribe debt at one per cent rate of interest per annum for an extended maturity period of 20 years instead of the original seven-year agreement.
5. Review the fiscal incentive regime to increase global competitiveness.
6. Withdraw the 10 per cent tax proposed to be levied on the business process outsourcing sector.
7. Offer investment tax credit to encourage large foreign businesses to retain a portion of their earnings in the country.
8. Move towards implementing the Caymans Economic Zone.
9. Divest the Kingston Wharves on the premise that the new owners can bring big business to the country.
10. Take swift steps to accelerate the development of downtown Kingston.
11. Encourage commercial banks and lending institutions to lend more affordable to small businesses.
12. Strengthen capital available to the Micro Investment Development and Self Start Fund.
13. Double JAMPRO's budget.
14. Create a formal overseas work programme.
15. Ban the importation of construction workers only to the extent that Jamaica cannot supply local labour to the industry.
16. Address issues regarding the Riverton fire.
17. Ramp up training at HEART/NTA and MIND.
18. Give more power to the auditor general.
19. Provide more funding for the commission of enquiry on the collapse of the financial sector.
20. Reverify the validity of the voters on the voters' list.
- Dr André Haughton is a lecturer in the Department of Economics on the Mona campus of the University of the West Indies. Follow him on twitter @DrAndreHaughton; or email email@example.com