CDF and the Budget

Martin Henry, Contributor

On the day that Minister of Finance Dr Peter Phillips presented his delayed Revenue Budget, West Portland MP Daryl Vaz was in The Gleaner castigating the paper for castigating him over his valiant defence of the Constituency Development Fund (CDF) during the Standing Finance Committee's debate of the Estimates of Expenditure tabled earlier.

Nothing drew the tongues of MPs on both sides of the House during that spirited debate of the Estimates of Expenditure more than the slashing of their beloved CDF.

The delay of the Budget from the customary early April presentation, which I have resolutely supported, turned out to be a damp squib, as the main reasons which I thought justified a delay failed to be resolved and to be adequately dealt with in the minister's presentation.

But, first, the CDF and MP Vaz.

In many ways, Daryl Vaz is a model MP running a model constituency. And if the Jamaica Labour Party had a dozen more like him, the party might still not have won but would have been much less battered in the last general election.

Vaz says he regularly outspends the CDF allocated to him; and, as a rich businessman, can afford to add his meagre take-home MP salary - all of $262,006.91 - to the pool of funds from the CDF and from private-sector donations. Those private-sector gifts in West Portland are one more reason for the declaration of contributions made to politicians and political parties. Money does buy influence.

Contrary to the folklore myth of the MP generally enriching himself from the office, most MPs, not just a well-to-do Vaz, end up subsidising the office. It is hell for a poor person to represent a constituency as MP or caretaker. The CDF is a great cushion for the MP, and so the big fight to hold on to it.

Highest margin of victory

In the 2009 dual-citizenship by-election, the member for West Portland, who has never lost an election since he entered politics in 1986, polled record votes in that constituency and won the highest margin of victory by any candidate in any election there, at a time when the unpopular Government to which he was attached, he said, was dealing with a recession.

Vaz boasts that West Portland has the largest and most equipped of all 63 constituency offices and is staffed by four people, including a driver with a dedicated vehicle to quickly respond to the needs of constituents. The office in Buff Bay "has fax machines, telephones, computers and staff on hand to interact with my constituents who know that it is open five days per week when many other constituency offices across the island are open just one day," MP Vaz proudly reports. There is even a "satellite" constituency office in Hope Bay.

But the very excellence of the West Portland report speaks loudly against the CDF.

Why shouldn't every single constituency office in this country, which is a government, not party, office, have equivalent facilities paid for, as a matter of course, from state resources dedicated to the purpose? The West Portland offices, "built by Labour", are so attached to Vaz personally that it is difficult to imagine a separation.

And what happens to those areas of 'development' which have not been selected or which cannot be covered by what is really a private NGO, the West Portland Development Fund, which is nonetheless partly stocked with state revenue?

These are the kinds of things that the people's representatives should be vigorously debating and demanding in the House of Representatives, not retention of the CDF.

Constitutional objection

Patches of the language of the Vaz report further indicts the CDF without any further intervention by opponents like The Gleaner and me: "my CDF spending"; "serve the people and they will serve you"; "all CDF spent by me"; "the pool of state funds that I spend in my constituency". With all due respect to the development taking place in West Portland, as seen through the eyes of the can't-lose parliamentary representative, there is a fundamental constitutional objection to members of the legislature being granted discretionary and personal spending power over portions of state revenue. It disrupts the separation and balance of power among the branches of government which the Constitution intended.

But here comes the clincher from a representative who has never lost an election: "I confess to you a certain selfishness," Vaz rebuts The Gleaner. "I strive to win elections, and I know the only way to do so is to give the best service I can to the constituents." "Serve the people and they will serve you!" The problem is when this is done with state resources in the hands of the MP, it is just about impossible to argue against the inference of The Gleaner, as the hard-working and very productive West Portland MP bitterly attempts to do, that, the CDF can be used "to buy influence in the constituency and perpetuate patronage politics". It certainly would be useful hearing from the PNP caretaker and his supporters.

Budget delay not worth its while

The Budget was reasonably delayed, I believed, at least to allow a new agreement with the IMF and to present the estimates of revenue on a platform of tax reform. Neither was achieved up to last Thursday. The delay was, therefore, wasted.

We knew already that more of this year's Budget over last year's would be going to pay down the debt. But more than 40 per cent of revenue for 2012-2013 is projected to come from more borrowings.

Meanwhile, the Government is proposing to freeze, but not to peg down, the second biggest item of expenditure, public-sector salaries. Waivers have been properly pushed back; but a more complicated system of GCT, with a maze of exemptions, has been concocted, despite a one percentage-point lowering of the rate to 16.5 per cent. For political reasons, not sound economic ones, the executive and the Parliament find no favour in the simplified evidence-driven system proposed by the Private Sector Working Group for a lower GCT rate on all goods and services with targeted subsidies to the poor.

The Government is seeking to raise $23.4 billion more, largely by increasing tax rates on the usual riding horses like liquor and operating motor vehicles.

Meanwhile, the gold mine of property taxes remains largely untapped. We can know that a Government is really serious about tax reform when it sets sensible rates and vigorously seeks to collect close to 100 per cent of this most basic of taxes.

Government should be seeking to lower the personal and corporate income tax rates even more radically and to up the personal income tax exemption threshold to much more than the $505,312 which the minister announced as some great gift to the harassed PAYE taxpayer. The new level is for income of just under $10,000 a week. These adjustments would leave more money for investment and economy-stimulating consumption in people's hands, while Government pushes to collect all that is due.

Good move to slap a flat fee of $60,000 per year on all registered companies. Flat-profit tax rates, with some reasonable actuarial determination, should now also be levied upon the members of all registered professional and trade groups, from cosmetologists to doctors.

The tax breaks are really quite minimal and are political appeasement rather than real economic benefits. Beef patties join other patties on the tax roll, as do salt fish and milk products. But chicken (not the one in the patty, though) and sanitary napkins stay off. Travel allowance, a time-honoured tax shelter, is now to be taxed.

More than likely, the average citizen will now be net-paying more taxes when the little relief is balanced against the increases. Could someone with greater competence than I please run the metrics?

Government can safely peg down expenditure quite significantly by passing on to consumers of a wide range of public services only periodically used and for which collection is possible, actuarially determined real costs plus, say, 20 per cent.

'Raid' NHT some more!

Media and the Opposition were lying in wait for the raid of the NHT. This newspaper, in its online news update right after the presentation by the minister of finance last Thursday, headlined one of its stories 'NHT raided', which reported: "The Government is to dip into the coffers of the National Housing Trust (NHT) to help to fund the Budget. The NHT is being called upon to contribute $4 billion."

But then as the story progressed, it turns out that the "raid" was a bit of a letdown, but could not be let go after the hype of expectation. And it was most reasonable after all, for "some $3 billion will come from outstanding taxes being paid over to the Government and $1 billion will be in the form of infrastructure development for specified housing schemes". The very thing the NHT was set up for.

I have been proposing, for some time, that more "raids" be carried out on sequestered special funds holding billions of dollars of public money, even more than on the NHT, which is really private contributors' savings for housing benefits which most of them can never qualify for under current rules. The TEF, UAF, HEART Trust, etc, should properly be called upon to fund broadly related research and development, education and training, infrastructural development, and small-business financing to help the whole country forward. Why, for instance, could HEART Trust funds not be used for capitalising graduates, small businesses, and delivering R&D solutions in relevant areas?

Martin Henry is a communications specialist. Email feedback to columns@gleanerjm.com medhen@gmail.com.