Thu | Aug 17, 2017

NHT in crisis, contributors in agony

Published:Wednesday | December 17, 2014 | 12:00 AM

Ruel Reid, GUEST COLUMNIST

I am committed to pursuing relentlessly the reform of the National Housing Trust (NHT) to ensure that our contributors can get housing benefits that they can afford. It is incumbent that the Government change course and respond to the calls of the 75 per cent of contributors who are yet to benefit.

It must also provide the public with the true state of affairs at the NHT and answer truthfully the questions raised by the loyal Opposition. I fully support Audley Shaw and the Opposition in this regard.

We are extremely concerned that coming after the first fiscal year in which an unprecedented amount of money has been removed by the Government from the NHT, $11.4 billion, we are yet to see the tabling of the annual report and financial statements for fiscal year 2013-2014.

Under the Public Bodies Management and Accountability (PBMA) Act, this report should have been tabled in Parliament from July 31 of this year.

Where is the report and why is it that after draft financial statements were presented to the board of the NHT in May of this year, we have not yet seen this report tabled in Parliament?

The prime minister needs to remind the NHT board that under the PBMA Act, it is liable to be fined in a court the sum of $1 million for failure to furnish the report in time.

According to the draft report, the total assets of the NHT at March 31, 2014 is $206.3 billion. When the illiquid long-term mortgage assets representing 81 per cent of NHT's total assets are deducted, the NHT has only $40 billion in remaining assets.

Yet, the Ministry of Finance, supported by the International Monetary Fund, plans to raid the NHT of $45.6 billion over four years, $11.4 billion of which was already paid out in the last fiscal year.

In order for the NHT to pay the $11.4 billion to the Government last year, the minister of finance required the NHT to sell off a third of its investment securities ($7.3 billion) which stood at $21.7 billion in March 2012 and is now down to $14.8 billion in March 2014.

This had to be done because the NHT was unable to secure enough cash from its current operating cash flow.

SEVERE DEPLETION

What is alarming is that this proposed drawdown of $45.6 billion is more than the $40 billion in liquid assets now at the NHT, and will cause a severe depletion of its cash flow assets, and preventing the company from properly discharging its mandate to its contributors.

According to Opposition Spokesperson on Finance Audley Shaw, "To add insult to injury, after 38 years of treating non-refundable employers' contributions as capital injection, it has now decided to change its accounting policy to record non-refundable employers' contributions as income rather than capital".

This is clearly no more than an accounting device to justify this unprecedented raid on the NHT's resources.

Does this now mean that the Government will tax the $11.1 billion of non-refundable employers' contributions last year and also to tax the retroactive amount of non-refundable employers' contributions of $78.9 billion since the start of the NHT?

This was previously non-taxable and dedicated to housing solutions. This has been the employers' non-taxable equity participation in the delivery of houses to employees.

In fact, of the remaining $40 billion in assets, net liquid assets only represent $22.2 billion at the end of March 2014. And when current liabilities are taken into account, a mere $1 billion of net liquid assets remain.

NHT is in a much-depleted cash flow position because its cash liquid reserves have been depleted by the minister of finance with the first annual withdrawal.

Therefore, NHT is totally dependent on the future employers and employees' contributions to fulfil its mission of providing housing to contributors. The continued subsidy to the Ministry of Finance has placed NHT in a financial liquidity crunch and any future subsidy will totally wipe out its much-depleted cash reserves.

This is a scandalous and barefaced raid on the funds held in trust for housing solutions for contributors.

We cannot continue to govern like this. The poor public-sector workers and other contributors deserve better. They need solutions now!

Ruel B. Reid, CD, JP, is an opposition senator.