Correction & Clarification
In the editorial carried in The Sunday Gleaner, it was stated that Dennis Meadows is an opposition senator when it should have in fact stated that he is a former opposition senator.
We regret the error
Once lawyers are involved, outcomes are never certain. Peter Phillips needs certainty in his negotiations with the International Monetary Fund (IMF).
In that respect, this newspaper agrees with the move by the Government to bolster with legislation its plan to extract nearly J$46 billion - J$11.4 billion a year over four years - from the National Housing Trust (NHT). Access to cash is critical if the Government is to meet the fiscal deficit targets laid out by the IMF, and identifying a non-debt source of it is one of the preconditions for getting an agreement with the Fund.
But while in favour of the Government's broad strategy on the matter, we harbour doubts about the tactics being employed. They are not clean enough to preclude potential legal challenges.
The issue here is that a recently formed organisation called Citizens Action for Principle and Integrity (CAPI), whose principal, Dennis Meadows, a former opposition senator, has questioned the ability of the Government to take money from the NHT, whose resources are held in trust for its contributors.
The Government, apparently, has legal opinion to the contrary. This notwithstanding, Dr Phillips, the finance minister, has tabled a bill in Parliament to amend the NHT Act to allow for the payment to be made to the central treasury. It is the same strategy used in 2005 by the former People's National Party (PNP) administration, which again forms the Government, when it asked the NHT to contribute J$5 billion to the education system.
A critical point to be made here is that, prudently managed, the allocation of the NHT money to the Consolidated Fund won't sink the Trust.
Strong inflow of cash
At nearly J$200 billion, the NHT assets substantially outstrip its liabilities. Further, based on a payroll of three per cent on employers and a two per cent 'contribution' - repayable after seven years - by employees, the NHT has a strong inflow of cash.
Its contributions for the fiscal year just ended should be around J$20 billion, more than J$11 billion of which should have come from employers. Contributors who have received mortgages from the NHT were projected to pay up $14 billion.
The Trust's inescapable obligation is the estimated J$3 billion a year it refunds employees. Then there is what it allocates each year - mostly in mortgages - to housing.
Put baldly, the NHT is cash-rich. It is against this backdrop and what former Prime Minister Bruce Golding calls the fiscal dilemma facing the Government that the administration's call on the NHT has to be viewed.
Mr Golding previously opposed seeking 'grants' from the NHT. He agrees with those who insist on its special obligation as a trust with a specific mandate to deliver houses and shelter-related facilities to its members. The proposed parliamentary amendment, allowing the withdrawal of the capital, is presumed to remedy any mischief caused by the action. In 2005, nobody challenged this presumption.
No chance should now be taken. Too much is at stake.
Our suggestion, therefore, is for the NHT board, reinforced by an act of Parliament, to declare a moratorium/holiday on contributions by employers.
At the same time, for the next four years, a special IMF payroll levy, equivalent in value to that forgone by the NHT, should be imposed on firms for payment into the Consolidated Fund.
That should put the matter beyond certainty.
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