Budgetary priorities and passing the 'people's test'


Wednesday, March 14, 2018

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In the latest Don Anderson polls, Audley Shaw, minister of finance, was ranked as one of the lowest-performing ministers of the Andrew Holness-led Administration, on par with the embattled Minister of National Security Robert “Bobby” Montague. In a way, this is to be expected; for both ministries are hard to run.

The polls are a snapshot of people's thinking at a given time, but I do not think the low assessment of Shaw is a fair assessment, given credence to his work at the ministry and what he has been able to accomplish in the ongoing stabilisation of the economy and setting it on a trajectory for growth.

People in Jamaica have very segmented interests and tend to judge others on the basis of those interests. So, if the teachers do not get what they want in the ongoing wage negotiations there is no adjective sufficient enough to describe Shaw. If the dollar is devaluing rapidly, expect the members of the productive sector to call him out. And we could go on ad infinitum, but I believe the point is made.

With his excellent team at the ministry, Shaw has performed creditably in his portfolio. They do not always get it right, but he knows that it is their hard work and fixity of purpose in carrying out the policies of the Government that has garnered the success so far. This he rightly acknowledged in his presentation to Parliament, and they are to be commended for their work.

The country's fiscal coordinates are in order. Unemployment is trending down. The country's macroeconomic position has never been in a healthier state. Targets set by the International Monetary Fund or otherwise are being met and surpassed. Tax revenues have overperformed expectations to the tune of $5 billion — the first in 16 years.

Yes, there is a lot to cheer about in this budget, but the persistent, blinkered and traditional naysayers prefer to look at the half-empty glass. Indeed, there are those in the Opposition who see only gloom and doom and can only remember the halcyon days of Peter Phillips's tenure at the ministry. This blind partisanship is perhaps to be expected, but it is in fact a disservice to the people who need to know the truth.

Take, for example, the tax break in the budget. There are those like the economist Ralston Hyman who argue that consumption is the highest-driving variable in the economy. If this is so, then he should have been happy with the announcement of no new taxes in the budget, since this will leave more money in the pockets of people, especially producers, and should thus drive aggregate demand. Instead, what you got from him and Ronald Thwaites, in their in their post-budget analysis on Power 106, was scorn and derision of a budget that they claimed did not inspire confidence and was “pure fluff”.

If Shaw had announced a slew of taxes, the hue and cry of how “wicked” the Government is would be heard on Mount Everest. There would have been the cry that growth is being stifled and that the poor man is being made to feel the brunt of the Government's savagery.

But what can I say. I am a mere armchair economist.and perhaps I should stick to religion. But the facts are what they are. The finance minister has kicked off the 2018-19 Budget Debate in fine style. He is to be congratulated for a well-thought-out budget and for signalling the Government's desire for growth. By announcing a tax-free budget the road is being further paved for the growth targets to be reached. He has continued to place a great deal of confidence in the continuation of the robust collection of tax revenues that has picked up pace over the last two years. It is undoubtedly this that gave the Government the confidence to see increased tax revenues as a trade-off for new taxes. This can only prove to be helpful in the short and medium term.

The Government has rightly seen the prudence of allocating more resources to the national security and justice ministries. The nexus between fighting crime and the efficient disposal of cases in the courts is now becoming palpably clear. It is interesting that there is a convergence taking place between the appointment of a new chief justice and a new commissioner of police. If I were superstitious I would see this as an alignment of the stars. There is universal consensus that the appointment of these two gentlemen to their respective posts is what the 'gods' ordered. If they turn out to justify people's hopes in them this will be all for the better. Crime is a drag on the economy, which the experts suggest shaves five per cent from the nation's gross domestic product. If the experts are right, and crime can be cauterised and brought to manageable levels, can you imagine what this could do to the country's economic prospects?

As I am on this, there are those who have called for the head of Robert “Bobby” Montague, minister of national security, as Herod's wife did for that of John the Baptist. One does not share the view that he should be removed from his portfolio at this time. Many of those who are demanding his head have little appreciation for the work that any minister of national security in Jamaica must perform. Montague has brought a level of zeal and understanding to the portfolio, and if one is willing to study his plans for national security and look at them through unblinkered eyes, one would be more appreciative of his worth in the ministry. Again, I ask, as I have done in this space before, who in the present Government or in the constellation of the Jamaica Labour Party would you put there? How long would such a person last before we demand his or her head? Let's be serious here.

But back to the budget. One of the important areas of Shaw's presentation was his appeal to the banks to move more robustly in lowering their lending rates in tandem with the Bank of Jamaica's doing so. My only caution to the minister is that a mere appeal for them to do so will not work. Bankers are never in the habit of being moved by moral suasion. Neither are they given to being shamed into action. Ways must be found to get them to conform. Handing out more bank licences may help, but this is definitely no panacea as banks have a way of cartelising to keep the status quo in their favour.

The vexing matter of bank fees and what should be done with dormant accounts was not given much attention. Did anyone know that the Bank of Nova Scotia is charging $1,385 to do a RTGS (Real Time Gross Settlement)? This system was introduced by the Bank of Jamaica as a convenient way of transferring money between banks for customers. It can save you the time and fee involved in purchasing managers' cheques and, in most instances, can be effected within the same business day.

One can understand the need for a bank to charge a fee for this purpose. The problem with Scotiabank is that for now they are charging almost 500 per cent more than their closest competitor to do this transaction locally. This was done to me, and I am told that this is standard operating procedure. National Commercial Bank attempted to raise its fee on this transaction and my understanding is that they have had to rescind it. It is time that the banks become more central to the growth trajectory of the country, rather than operate as mere margin gatherers or Shylocks on sthe backs of a beleaguered public.

Shaw has characterised his presentation as a way of passing the people's test. This harks back to a frequent criticism his party made of the Portia Simpson Miller-led Administration of attending to fiscal targets and ignoring the pain of these policies to the people. The increased allocation to the Ministry of Education is a statement that the Government is mindful of the need for the ongoing development of the nation's human capital. Now that the economy has been placed on a solid footing more resources must now go the robust development of our social capital.

Dr Raulston Nembhard is a priest and social commentator. Send comments to the Observer or




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