Let the debate begin

 

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Category: Trinidad Economy Date: 14 Jan 96


“I look at the budget and say praise the lord,” says Rhonda Maingot of the Living Water Community. Michael Arneaud from the Chamber has pronounced it “the most creative budget we’ve ever seen.” Errol McLeod is “encouraged” on behalf of the Trade Union Movement, as is British Gas, a major investor. For the first time in many years, a budget has been passed which has had the thumbs up by a broad section of the population. Finance Minister Brian Kuei Tung has managed to maintain the confidence of business and investors and give the man in the street hope. Yes, he can juggle!

 

But there are concerns. Frank Rampersad is worried about a possible rise in inflation and pressure on the exchange rate over tax cuts. He feels a more comprehensive social programme should have been put in place. McLeod agrees, saying the Budget focused on economic growth rather than development. Ken Valley finds the Finance Minister’s projections of 4.5% growth in 1996 “unrealistic.” But Minister Brian Kuei Tung has his back covered, by not giving too much detail, he has given his government flexibility to manoeuvre. The budget debate begins tomorrow.

 

OVERVIEW

 

Michael Arneaud, President, Trinidad & Tobago Chamber of Industry and Commerce:

We found it to be the most creative budget we’ve ever seen - The Chamber is very appreciative of the fact that he was able to pull together a comprehensive review in such a limited time. He was not only technically sound, but communicated what he had to say clearly. We thought his approach very positive and delivery excellent - a well balanced budget. Despite the fact that the Minister was able to give a little bit here and there he was able to raise revenue by over a billion dollars over last year. I’m hoping he will be able to achieve surplus, but life is not cast in concrete - we have to wait and see.

 

Frank Rampersad, Economist and former Permanaent Secretary in the Ministry of Finance:

His macro economic framework is healthy. I agree with his assessment of the oil situation. It is credible. He also made the right noises in the area of generating a fiscal surplus of 300 million dollars. He hasn’t told us his foreign economic policy. Government has to take a more positive role in transforming the economy. I do not see how he arrived at the growth rate of 4.5 percent (which traditionally causes an increase in inflation) and even if he does, the 11% increase in revenue seems unrealistically high. I don’t want to be too critical because I want to give him a chance to see what he will do. He’ll have to come back in June or July and review the budget.

 

Ken Valley, Opposition Parliamentarian:

I am pleased with the tax concessions. I am, however, concerned that the Minister is basing his budget on a growth of 4.5 % in 1996. (Growth for the last two years has been about 3.5%, the highest figures for the last ten years.) I am unclear as to his position on unassembled cars. The road worthiness of those vehicles are questionable. What happens for instance to a stolen vehicle. Can it be registered for $20-30,000?

 

Stephen Haynes, Financial Administrative Manager, British Gas:

We are encouraged. The 1996 budget has addressed the importance of exchange rate stability and controlled inflation for the business environment. It indicated that the government is keen to attract and maintain international investors. On the energy front, British Gas will be monitoring very closely any changes to the institutional arrangements of energy related organizations, particularly the Ministry of Energy and the National Gas Company.

 

Errol Mc Leod, President General, Oilfield Workers Trade Union:

We are encouraged. I cannot say it is a sweetheart or an election budget because workers reactions are mixed, some are happy, others not. The Minister of Finance seemed to want to address all demands and concerns raised by the various sectors and I think in doing that he may have omitted to fully establish the philosophical background against which his budget was formulated. The question of generating economic development as opposed to economic growth has not been very clearly defined. There are a number of policy issues which need to be addressed so we have a clear idea of the direction in which the country is heading for sectors, such as agriculture and energy around which so much revolves. I suppose the debate might help to address that.

 

POVERTY

 

Frank Rampersad:

Rampersad started off by identifying real issues of societies, poverty, unemployment and income disparity but did not follow through with this in the budget. He talked about the social situation without the net for vulnerable, single parents and old age pensioners. In crime he has addressed prison, police and judicial reform but should have focused on a social programme which will prevent people from committing crimes in the first place.

 

Errol McLeod:

I think zero rating several basic foods is most welcome, as is raising non-taxable income from $16,000 to $20,000. It will assist people on the lower rungs of the economic ladder. The allocation to social programmes for those considered below the poverty line is positive. But they must define clearly what programmes they are taking about, how it will be funded and the general parameters under which the programmes are going to be applied. On the $90 million allocation to public servants, some people will always put unemployed people against those who have jobs. They are invited to consider that public servants have not had wage and salary adjustments for about 10 years now and they have had to meet price increases, a number of them have lost their houses because they could not continue to service their mortgages.

 

Rhonda Maingot, Living Waters Community:

I look at the budget and I say “Praise the Lord.” I’m sure the poor will feel a little lighter today. The $300 million allocation shows a lot of political will to assist the poor of the country which is what we’ve been hoping for many years. The removal of VAT goes straight to the poor. That doesn’t need to go through an organisation. They can get relief straight away. For the last 10 years, governments have had a feeding programme for those who have nothing. I hope this will continue. The other social programmes need to be formulated and will take longer to put in place.

 

Ken Valley:

I think the Minister talked the talk without walking the walk. When we analysed the budget, there was the question of poverty, unemployment, and crime - one does not see policy coming through. The PNM concentrated on enlarging the cake and we felt we were able to concentrate on social programs. There was the concept of the social net of $1.1 billion which we put in place afler two years of economic growth.

 

JOBS

 

Frank Rampersad:

He is not clear on how employment will be generated. The real problem in this country are people who have to scrunt for a ten days. He has to find a way of converting them into entrepreneurs. Is he going to expand or transform URP? Although the manufacturing sector generated jobs in the 60’s and 70’s, in 1996 the future lies in the service sector. Apart from land distribution, I am not too clear on his agricultural policies. His macro economic frame is good and the budget was very positive to investors. But I don’t see where jobs are coming from in the short term.

 

Stephen Haynes:

Foreign investment does generate jobs because of the sustained demand for labour for producing and developing hydrocarbons. Exploration jobs are more sporadic.

 

TAXES

 

Michael Arneaud:

He cut a lot of taxes. Reducing the corporate tax from 38% to 35% will only increase his revenue in the long run. We have been saying, “Don’t kill us with tax rates. Drop the tax rate and you will collect more dollars.” A low tax rate stimulates the economy, helps business to grow, creates employment and more people pay taxes. It works. 

 

Frank Rampersad:

I am not in favour of tax cuts. It increases income inequality and does not promote investment. I am worried about the balance of payments effects on the budget. He has reduced taxes on imported goods which will open a flood of imports which don’t match exports. I looked at figures of VAT collection and it has not changed for years even though the economy grew. He can’t expect revenue on that score. He got more money on company taxes in 1995 because the price of methanol went up last year but now it’s down again.

 

SAVINGS

 

Mike Arneaud:

I have a different outlook to people who hang their hats on theory. He was wise to reduce the two top rates, which puts more dollars in the hands of consumers, allows them options to save invest or spend and contribute to VAT. It goes in the economy and things turn around. The rate of inflation held down to single digit (5%) because of a responsible and educated public. We are doing better than any country in the Caribbean and most in the world purely by good communications by powers that be and a responsible public. You must be living in the past if you think people will just run out the door and spend as soon as they have extra money. Facts in front of me don't say that. But he should have introduced some relief for life insurance premiums to encourage the public to save, especially since insurance policies are a way for poor people to leave money for children.

 

PUBLIC SERVANTS

 

Errol McLeod:

The $90 million allocated to deal with debt owed to public servants is encouraging although not satisfactory. Nothing was said about paying public secretor employees their correct salaries which will prevent a further accumulation of debt owed to them. I think the government has sent signals that it is prepared to enter into meaningful dialogue with the PSA aimed at settling the issue once and for all. I hope all parties will approach the matter with maturity.

 

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All Articles Copyright Ira Mathur