EDITORIAL - When Mr Shaw speaks
Audley Shaw, the shadow finance minister, can pull out the tried, tested and easy formula to raise rousing cheers when he speaks in the Budget Debate in Parliament today.
He need just, in populist fashion, criticise the $19.3-billion tax package proposed by the Government and argue that Finance Minister Peter Phillips' economic programme will shaft the poor. He was victim of the same device.
But while this may be the easier way, it would be an irresponsible approach on the part of Mr Shaw and indicate a shift from the mature and sensible stance he took in the House recently in backing the possibility of a public-sector wage freeze.
We, of course, are not suggesting there may not be much, either in broad policy or emphasis, in Dr Phillips' programme that is worthy of criticism. In that regard, we expect a fulsome critique from Mr Shaw. What this newspaper will repudiate are claims of easy options and that lifting Jamaica out of its crisis of debt, and on to a path of sustained economic growth, can take place without austerity.
The bald fact is that our national debt of $1.7 trillion, or approximately 130 per cent of gross domestic product, is untenable. More than half of this year's Budget will go to debt servicing. That ratio reaches 80 per cent when wages are added. Little, therefore, is left to finance all the other things required for a secure and orderly society, conducive to investment and economic growth.
Placing the debt on a downward trajectory demands, in the short term, increasing revenue and reducing expenditure. For, as Dr Phillips stressed last week, and Mr Shaw is well aware from his own tenure as finance minister, it is to chase a mirage to claim that the Government should engage in stimulus spending to drive economic growth. That would be to worsen the debt profile, presuming Jamaica could find anyone willing to lend at interest rates that make economic sense.
Jamaica missed an opportunity to place its debt on a more manageable path when it did not impose the requisite fiscal discipline when, during Mr Shaw's tenure, domestic bond holders agreed to debt restructuring.
In that regard, Mr Shaw should lecture Dr Phillips against repeating the mistakes of the past - including during the previous long incumbency of the People's National Party and the subsequent four years that Mr Shaw managed the country's finances.
Mr Shaw should advise Dr Phillips to return quickly to the matter of tax reform with measures to further lower headline tax rates, eliminating special waivers and incentives, and aggressively enhance compliance. The finance minister should be guaranteed Mr Shaw's support in resisting those interests wishing not to pay their fair share.
Mr Shaw should be forthright, too, in explaining to people that services provided by the Government are paid from the taxes collected, or through borrowings, the latter of which is, in the circumstance, untenable.
Like the overhaul of the tax system, public-sector and pension reforms were placed on the agenda by Mr Shaw. Unfortunately, he was unable to get going.
He should insist that Dr Phillips quickly push them to conclusion. Failure on these fronts will undermine Mr Shaw's signal achievement as finance minister: lowering interest rates.
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