DLP Budget for Next Tuesday – Placebo Panacea or, “Spoonful of Sugar makes the Medicine go down” (Fake Prescription to Silence Bajans)?
Barbados is fortunate to have had some giants as Prime Minister and Minister of Finance. Persons like: Tom Adams; Owen Arthur and Errol Barrow easily come to mind. By all accounts, these men were not ‘bluffers,’ neither did they ‘beat around the bush!’ The entire country could rely on them because there was a feeling that they knew exactly what to do and when! Oh, how have things changed!!!
Barbados has been under DLP rule for almost four years now and yet, the DLP’s check-list of achievements is so un-flattering that it does not convey that the Government knows what it is doing or what to do, to get the country out of the mess it manufactured in large part. In fact, you could say that: ‘the DLP is an “upside-down Government in reverse” – those things that should be up are down and those that should be down are up.
As an example, unemployment, the cost of living, crime and inflation – should all be down but they are not. The foreign exchange earning sectors should be producing but they are not. Real incomes; consumer and investor confidence should be up but they are not. Little wonder that, (despite access to the fatted calf) even die-hard Dems, also feeling the pressure in their pockets, are asking whether the DLP is fit to run the economy because it just does not seem to be: “up to the job!”
Let’s be as fair to the DLP, as we can. The recent Moody’s downgrade is evidence that the policies contained in its Medium Term Fiscal Strategy (MTFS) are simply not working. Yet, that strategy is the DLP’s best idea but it is clearly not good enough. The deficit was supposed to come down, but it went it significantly. The national debt is increasing and not for capital works projects or to build productive capacity – as would be expected. The simple reality is that the DLP is borrowing to pay day-to-day bills. Given the DLP’s dangerous economic mismanagement of the Barbados economy, the brutal reality is that there is no painless way out of the mess it has manufactured.
The simple reality is that the policies of this DLP Government are making things even worse than they need to be. With the society already ‘taxed to the max,’ the DLP has no alternative but to reduce expenditure. Spending significantly more money than it has for the past four years and adding more entitlements without the creation of matching enterprises – was always going to cause problems. But its plan to cut public expenditure is to take more money out of a contracting economy – already in trouble due to a lack of consumer and investor confidence.
The result will be that any tinkering on the expenditure side will have to be match by increased revenue. However, the problem is that the society is not reasonably capable of paying more taxes at this time. The nightmare for the Government may be to reduce taxation by the amount of any expenditure cut. But, given the questionable record of the DLP Government, which many believe – does not know what it is doing (and has therefore exposed the society to unnecessary hardship) there is no guarantee that any attempt by it to get a grip on public finances – will engender confidence and encourage private spending to replace the cuts in public spending, it proposes.
The DLP likes to blame the global financial crisis but the discussion has gone way beyond that. This is where monetary policy kicks-in and – in the up-coming budget, the Minister of Finance should have a lot to say, especially given the S&P downgrade of the United States and efforts by China, Australia and the Swiss – to keep the value of their respective currencies, below the US dollar. The issue of pegging therefore seems relevant.
In order for the upcoming budget to make sense, especially given that the DLP’s MTFS is yet to – the Minister will have to announce measures to reduce the debt; the deficit; the cost of living as well as measures to get the foreign exchange earning sector moving and the key performance indicator (KPI) trending in the right direction. He must also announce (1) a job loss prevention plan or (2) a job creation initiative. Perhaps, the private sector would have asked for a reduction in Corporation Tax. I suspect that any similar courtesy to the Small Business Sector (would most likely) also receive support from the Opposition.
Given the severe hardship, which DLP policies have created in our society, I would expect the Minister of Finance to adjust the Land Tax rates or bands and adjust Old Age Pensions; the Reversed Tax Credit, payments for Welfare Recipients; Person with Disabilities and HIV/AIDS – upwards, over a three-year period. Clico Policy Holders in Barbados and the OECS will also be listening.
Any Opposition with well-honed-skills would immediately ask the Minister about the status of that $80 million BNOC debt. This is important, especially since it was the excuse used to increase the Excise Tax. If the BNOC debt has, in fact been repaid, then the Excise Tax should immediately be slashed, or reduce to reflect the amount already repaid, especially since the Government would, essentially – now be collecting money illegally. This would either require a refund (hardly likely) or a Validation Act (seems more logical).
I would also expect a reduction in road taxes, especially since it was said in the 2008 Budget that road taxes were being increased to pay for the same ABC highway, which the DLP also borrowed $165 million for. It was said then that in a full financial year, increased Road taxes would yield $34 million in a full financial years.
While I do not anticipate any reduction in the VAT, a sharp Minister of Finance – who understands the need to promote good health and wellness, healthy active and productive ageing – would announce a date for the implementation of a Wellness Allowance and, what would comprise the revised basket also containing nutritious foods. Given the increase in crime, a waiver on the installation of surveillance equipment, similar to water tanks – would, no doubt, be welcomed by the law-abiding element within our society.
Generally, I think Barbadians will want to hear, what exactly it is, that a DLP Admin will allege it can do in the next two years when it obviously lacked the capacity to – in the past 4. Aware of that fact, next Tuesday the DLP will deliver an instant sugar rush of feel-good. The absurdity is: the nastier things are getting, the more the DLP seems to be sticking to its outrageous story that the global financial crisis is to blame. The sad reality is though – the DLP really does not have a plan B. The up-coming Budget is just a distraction to give false hope.
The Medium Term Fiscal Strategy was the DLP’s Master Plan A and its big idea. Two years after, it is crystal clear for all to see that the DLP’s best is simply not good enough! Therefore, what you will hear next Tuesday – will be yet another variations of that plan A, which is to spend less and tax more in the expectation that at some point the economy will grow and in the meantime Moody’s and Standard & Poor’s will downgrade some other unfortunate countries, rather than the-badly-mismanaged-DLP’-Barbados, and despite its perilous fiscal crisis.