Dennis Chung, ContributorAS WE approach the 2005/6 year we can be certain that the finance minister plans to balance the budget this year, that is, expenditures will equal revenues.
This also brings with it implications for what expenditures are going to be like in the next fiscal year. Over the past few weeks we have witnessed numerous fires, which it is obvious that the fire services do not have the capacity to fight. Additionally, we know that going into the next fiscal year we are already significantly behind the budgeted revenue numbers.
Implied in this fall off in revenue are the options of either turning out a much higher than projected deficit or delaying payments.
In the end it is a combination that will win. What this means is that going into 2005/6 the government faces challenges of (1) reforming the revenue system to ensure projected revenues are met; and (2) expenses incurred in 2004/5 fiscal year will have to be paid.
The latter will reduce even further the amount of money available for expenditure in 2005/6. As I have said before, this emphasises the need for the government to implement accrual accounting as by not doing so we are only fooling ourselves.
PROJECTED EXPENDITURES AND REVENUES
In the face of these challenges we are aware of the need for increased expenditure on social services, which in recent times have been very evident in the fire services.
In the current fiscal year we have budgeted expenditures of $196 billion against revenues of $176 billion. If we apply the projected inflation of 9 per cent to the expenditures then we are faced with projected expenditures of $214 billion in 2005/6. This implies that revenues will have to move by $38 billion or 22 per cent in order to meet the recurrent and capital expenditures. Of the $196 billion only $8.5 billion is on capital expenditure, and of the remaining recurrent expenditure approximately 51 per cent is for interest payments, which leaves approximately 49 per cent on programmes and salaries. Of this amount approximately 67 per cent is on wages and salaries. If this is applied to the projected $214 billion it means that interest will be $109 billion, salaries $70 billion and programmes only $35 billion.
I say deliver the services that government is supposed to as we must never forget the purpose of government. Government's primary responsibility should be to ensure that certain basic services are provided to the people and that human rights are maintained.
Over the years we have seen government's purpose move away from these primary objectives and become nothing more than debt managers.
If Jamaica had a measurement system for government, what would it show after more than forty years of independence? Has our government delivered on the promise of political independence? If the answer is no, then it must be determined that governments have failed Jamaica. This is my opinion if no one else's.
It is this consideration that the finance minister must take into the 2005/6 budget. As he prepares his budget he must ask the question of what are government's primary responsibilities and seek to ensure that these are delivered in the upcoming budget. In other words, appropriate amounts must be allocated to the basic services in order of their priority. First and foremost, security must be among the primary concerns along with the fire services and basic infrastructure. The approach should be to ask what is required to deliver adequate services in these areas (I do agree that we cannot afford world class services). If these cannot be delivered then it is difficult to justify the reason for government.
TAX REFORM NEEDED
In light of our situation, however, it is going to be difficult to meet our basic expenditures, and so not only must we reduce the (1) unnecessary expenditures and (2) waste within government but also work on increasing the revenue side. One may ask how this will happen and my answer will be that we must implement the tax reform recommendations coming out of the Matalon committee. Already we have wasted enough time in debates and public relations surrounding the recommendations. It is now time to implement as the 2005/6 budget is already upon us and unless we reform the tax system we will again see a deficit of revenues, which will be in a more crucial year for Jamaica.
I do not want to give the impression that I am all too happy with a fuel tax or additional GCT, but if we seriously examine our options do we have a choice? Let me emphasise, however, that it is not acceptable to implement the measures that will increase revenue without the recommended tax reductions and increased allowances also. It would be unconscionable to do so. There has been a lot of talk surrounding equity and that indirect tax is regressive rather than progressive. We need to wake up to the reality that if we do not seriously reform our tax system, and soon, we will all suffer and the less fortunate even more in the long run.
As Dr. Davies goes into the 2005/6 budget year it is important for him and his colleagues to remember what the primary purpose of government is, and prepare the budget with that in mind. We cannot go into another year of less than adequate resources being provided for security, education, the fire services and other basic services.
The true test of whether government has failed or succeeded is not whether we can achieve a balanced budget or access more international funding. The real indicator of government (and any other person) success is whether or not they have achieved the primary purpose of their existence.
E-mail: dra_chung@hotmail.com
