Sat | Nov 28, 2020

Public sector negotiations will be driven by outcomes says ministry

Published:Friday | October 30, 2020 | 12:16 AM
Auditor General Pamela Monroe Ellis.
Auditor General Pamela Monroe Ellis.

As public sector unions prepare claims for submissions to the Government in December, the Ministry of Finance and the Public Service says that the upcoming round of negotiations will be driven by the outcomes of the comprehensive compensation system review that has been under way for some time now.

The ministry says it is expecting to return to Cabinet with the final report in December.

This explanation from the Ministry of Finance is set out in the auditor general’s examination of the components of the Fiscal Policy Paper (FPP) for financial year 2020-21 Interim Report which was laid before the Houses of Parliament on October 6.

In her review of the report, Auditor General Pamela Monroe Ellis pointed out that the Interim FPP for the current financial year projects wages and salaries to increase to $208.3 billion, or 10.1 per cent of gross domestic product (GDP), outside of the legislated target of 9.0 per cent.

She explained that the ratio remains above target until the financial year 2023-24. The auditor general said that the Interim FPP did not explicitly address any risk related to this line item in the Fiscal Risk Statement.

“We noted from the February FPP that the ministry stated that the current wage contract comes to a close in financial year 2020-21 and that the GOJ (Government of Jamaica) is mindful that arrangements need to be made for the period to follow in order to avoid any settlements contrary to budgeted wage allocations,” she added.

Monroe Ellis said that the February 2020 FPP had projected achievement and maintenance of the legislated target for the medium term. However, she said that the “projections contained within the Interim FPP illustrate sharp variances as it relates to this percentage, underlining the significant fiscal revisions since the start of the COVID-19 pandemic”. Additionally, she said that the expected downward movement in nominal GDP, especially in the context of an economic contraction as a result of COVID-19, will increase fiscal-risk exposure to the wage bill.

Built-in Adjustments

Responding, the finance ministry said that with respect to the medium term, in the absence of any detailed information as it relates to the compensation review, the medium-term wage profile has built-in adjustments consistent with the projected inflation rates.

The finance ministry gave notice to all government agencies and public bodies in May last year that the Public Sector Transformation Programme had embarked on a service-wide compensation review aimed at a comprehensive restructuring of the compensation systems in the public sector.

It says that the new system will provide for clarity, equity, predictability, and simplicity in the administration of compensation across the public sector to include all salaries and allowances.

The auditor general reported that the Interim FPP did not provide an explanation for the overperformance of tax revenue for the April to July period. Instead of identifying causation, the report only indicated the deviations of the components of the tax revenue from the revised budget, Monroe Ellis observed.

“Provision of information regarding the performance of the underlying drivers for tax revenue such as economic output, interest rates, exchange rate, and other macroeconomic variables would have provided us with a basis for determining the reasonableness of the deviation from target for the April to July period,” she said.