There is more than one way to skin a cat, the saying goes. Peter Phillips, Jamaica's finance minister, is unlikely to be ignorant of that aphorism. He may now be forced to exercise it.
A substantial part of the fiscal consolidation programme agreed by Dr Phillips and the International Monetary Fund (IMF) negotiators last week rests on a plan to extract around J$11.4 billion a year, over the next four fiscal years, from the National Housing Trust (NHT).
That contribution by the NHT, in conjunction with increased and better collection of taxes - including the J$15.9-billion package unveiled among the prior actions being taken as part of the IMF deal - is aimed at pushing Jamaica's primary surplus of 7.5 per cent of gross domestic product (GDP). That larger intent is to begin to control our national debt, now at an unmanageable 140 per cent of GDP.
But the programme relating to the NHT is already subject to speculative jabs and is very likely to face all-out attack. A group calling itself Citizens Action for Principle and Integrity and Hugh Wildman, a lawyer who thrives on these kinds of fights, are threatening to go to court for a declaration that tapping the NHT for this type of budgetary support would be unconstitutional. They argue that it would be a breach of the property rights of the members of the trust - all the contributors - notwithstanding a 2005 amendment to the law that ostensibly allowed the then administration to take J$5 billion from the NHT to support education. The political Opposition has signalled its support for the contrary position.
The NHT was established to provide homes and mortgages to its contributors. It is funded by a two per cent refundable contribution from the incomes of employees, matched by a three per cent, non-refundable payroll tax on employers.
In 2011-2012, its assets reached J$175.4 billion and had total contributions of J$19.6 billion. These figures were projected to move to J$194.6 billion and J$20 billion this year, plus mortgage reflows of $14 billion. Its total housing expenditure in recent years has been around J$25 billion.
can provide budgetary support
The bottom line is that in the absence of effective demand to drain its resources, the NHT, if prudently managed, has the asset strength and is sufficiently liquid to provide the budgetary support that it is being asked to make. And it should.
Indeed, in 2008, this newspaper proposed a contribution holiday on firms, allowing them to invest the savings in the business and kick-start the economy. It is an error that that didn't happen.
We again suggest an employers' payment holiday or a lowering of their contribution to the fund, but with a twist. This time, we propose that the savings from the NHT rebate be channelled into another tax pot, say, the education tax that flows into the Consolidated Fund. Last year, the payroll tax on firms 'earned' the NHT more than J$10 billion.
To achieve that end, we propose, the legislature would have to approve the holiday/new rate on NHT contributions as well as a higher rate for the education tax. Government should get on with the job and short-circuit potential court action.
The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: email@example.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.