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Leaders speak out in Supplementary Estimates of Expenditure debate
published: Sunday | December 23, 2007
Rudolph Brown/Chief Photographer
Prime Minister Bruce Golding (right) consults with Minister of Finance and the Public Service Audley Shaw during a recent sitting of the House of Representatives.
Edmond Campbell, News Coordinator
For hours, parliamentarians debated the First Supple-mentary Estimates of Expenditure for the 2007/2008 fiscal year in Gordon House on Tuesday.
The gruelling and extensive debate saw the top brass of the leadership on both sides of the House weighing in on the discussion.
At the end of the debate, members of the House approved the $22 billion Supplementary Estimates.
Leading the charge for the Government was Minister of Finance and the Public Service, Audley Shaw.
He began by citing some of the challenges faced by the new administration since it took office in September, which, he said prompted the need for the tabling of the First Supplementary Estimates of Expenditure.
According to Mr. Shaw, the challenges included the provision of additional relief efforts to persons affected by the hurricane.
He highlighted the flood rains in October, which led to severe damage to the road network islandwide.
Mr. Shaw also mentioned additional budgetary requirements, some of which were inherited from the previous administration.
Prime Minister Bruce Golding, Opposition Leader Portia Simpson Miller, Opposition Spokesman on Finance, Dr. Omar Davies, and Leader of Opposition Business, Dr. Peter Phillips, participated in the debate.
The following are excerpts from the debate, beginning with Mr. Shaw.
Projected fiscal deficit
The original budget was developed against the background of a projected fiscal deficit of 4.5 per cent of GDP or approximately $35 billion. A revised deficit forecast has now been presented with a $42.98 billion projected deficit or 5.5 per cent of GDP.
It must be noted, Mr. Speaker, that that 5.5 per cent represents a one per cent increase over the original projected fiscal deficit target of 4.5 per cent by the previous government.
What we have been able to do now, which I would really categorise as a small miracle, Mr. Speaker, in the sense that we have taken a situation with all of these challenges that we have faced - hurricane, floods, additional budgetary items inherited, increase in price of oil on the world market - that despite all of these things, we have put on the table today an increase in the budget of $22.137 billion.
Having regard to the financing arrangement that we have in place, we are able to contain the increase in the deficit by a mere one per cent.
I want to point out that there are basically three main segments of the original amount of $15.4 billion that had been the carry-over from the previous government. That figure has been reduced to some $11.2 billion, with a variety of actions that have had to be taken by the Government, including the postponement of the Montego Bay Convention Centre.
The Prime Minister, when he was Leader of the Opposition, announced that we would abolish tuition fees, and I am now pleased to announce that as part of this Supplementary Estimates, not only is it in the estimates, but already, parents who were promised the refund of their school fees for September, have already received, their cheques.
Overall, in terms of the additional expenditure, it is the intention, in order to keep the deficit to the targeted level of 5.5 per cent (of GDP), this amount of $22 billion will be financed in the following way:
1. Four point five billion dollars from the proceeds of the sale of a portion of our shares in PETROJAM.
2. Transfer of Universal Access Fund into the Consolidated Fund - $2.8 billion.
I should indicate, Mr. Speaker, that the transfer of these funds was in fact authorised by the former minister of finance, and it was in keeping with the request of the Auditor General that this should be done.
We want to give the assurance to the stakeholders in the Universal Access Fund that this is not going to be put in the Consolidated Fund to be taken out in any arbitrary way. It is going to be a special account in the Consolidated Fund - and the purposes for which it is intended, that is what it will be used for.
3. Reduce the granting of non-charitable waivers - $200 million is expected from this.
4. Transfer of interest accrued on Government of Jamaica deposits of $400 million.
5. Settlement with Carreras of $1.7 billion.
6. Five point two billion dollars is targeted from revenue intake.
7. Borrowing of $7 billion to close the gap.
Our intention is to run a tight ship between now and the end of the fiscal year. Indeed, it is going to be the mantra of the financial administration of this government.'
We were able to manage the foreign-exchange market to a point where, over the past three weeks, we have seen relative stability in the exchange rate.
The challenge is to grow our way out of our debt. We've got to have policies where we have more investment and more earnings that can put more people to work and lift the productivity levels of our people.
Dr. Davies
Much of the financing which he (Shaw) has outlined to us is at best creative accounting and imaginative.
If he is going to stick by his commitment with regard to the Universal Access Fund, as well as the receipts for the sale of 49 per cent of PETROJAM, these funds are not available to do things, they are not available to fix roads. Those are funds that are in the Consolidated Fund only in terms on nomenclature; but these are not available to the minister to do anything.
So, if the attempt to produce a reduced deficit by citing these funds, it may serve accounting purposes, but it is not going to fool anybody, either in the House or externally.
The additional expenditure of $22 billion, it will not be possible for the minister to make the 5.5 per cent deficit target unless there are additional revenue sources which he has not informed us about, or unless he intends to have significant cuts in expenditure.
Putting that additional $7 billion or $8 billion, which is approximately one per cent of GDP in as revenue, it may be a useful accounting gimmickry, but it does not serve the purpose of giving the Government additional resources to expend.
Unbudgeted expenditure
When the Prime Minister spoke of the figure of $16 billion, he instructed the Minister of Finance to send to me the details of that. I am making a point about the way in which technical people speak about unbudgeted expenditure.
If the intention of the ministry were to hide items under unbudgeted expenditure, how could this list sent to me by the minister on the instruction of the Prime Minister, include expenditure for clean-up after Hurricane Dean, post-Hurricane Dean clean-up for the Solid Waste Management of $150 million, additional benefits to PATH beneficiaries $182 million?"
'What was meant to be a technical statement has been twisted for political gain and it is running the risk, Mr. Speaker, of bringing the technical people into political crossfire. We don't want to do this.
To be fair to the Minister of Finance, he has been seeking to toe the line; I encourage him to continue on that path.
The technical team is too valuable an asset for us to risk bringing them into this crossfire. Let us not do that.
Public sector MOU
Let me state on behalf of the Opposition that we support and we wish for a new memorandum of understanding. It is imperative not just for industrial peace, but in order to provide the minister with an opportunity to construct the next budget that there is a MOU in place.
It's not going to be easy because the workers have faced a very difficult period and what was projected to have been a seven per cent inflation for the fiscal year will be perhaps quite close to twice that amount.
It is imperative that the administration stop seeking to blame the Opposition for the challenges. Being government means that you deal with the challenges that you face at this particular point in time.
The confidence of the market will not be won by seeking to blame someone else. The confidence of the market will only be won by putting forward a credible programme. Let us not try to disguise the real deficit. Let us not try to inflate the revenues.
The minister needs to come clean. He needs to tell us what is the real deficit figure.
Bruce Golding
The member from St. Andrew South can be as euphemistic as he wants to be. The fact of the matter is that when you issue a letter in June, two and a half months after you have passed the Budget, where you say, 'This serves to advise you that pursuant to Cabinet decision, Cabinet has approved the business plan which involves assuming the responsibility for servicing the debt and that is not in the budget, somewhere between then and March 31, it has to be put in.
So, this business of giving the impression that there was no excluded expenditure, that all of this was just a fiction, we are trying to find excuses. The member knows that that is not so, but you have to bend the facts to fit the propaganda.
Mr. Speaker, we inherited a government that was in persistent fiscal tension. Ask the member which was the last year he was able to produce a fiscal surplus.
The truth of the matter is that the fiscal management of this country has been in deep trouble for a long time.
That government has never had to deal with $100 a barrel oil, never had to deal with it. They have never had to deal with the kind of commodity price aggression that we have had to contend with.
The inflationary pressure did not begin after September 3. The member had projected that inflation for this fiscal year was going to be seven per cent. In May, inflation was 1.3 per cent, in June, 0.8 per cent, in July, one per cent, in August one per cent. Now, there is no way you can achieve a seven per cent inflation when you're running one per cent or 0.8 per cent. The pressure started from before.
You blame us for devaluation, and when I spoke about the rate at which the Budget was calculated, he tries to be in his reprimanding tone. The fact of the matter is that if the results of the lottery are out, then you don't need to know what is the combination of the balls, because it is out already.
Assistance to the poor
Despite the fiscal constraints, despite the pressures that we are under, despite the demands that are there, we have identified within the fiscal arrangements $500 million that we want to use to ensure that we get to those persons who are (most affected by the rising food prices).
We have to find an institutional mechanism to get to these people. Quite frankly, it's a matter that I would like, minister, I would like you to consult with your counterpart and to see to what extent we can put our minds together and come up with the most effective means to responding to this project.
I know that there are some people who claim to speak with divine authority, when they tell us that that divine authority tells us that you (the Opposition) are going to be there (in Government). Let us listen to the right God, because He will never mislead us.
Dr. Peter Phillips
I would venture to say that given the urgency of the price effects from inflation that he (Mr. Golding) speaks of, something could have been done even through the PATH programme to provide some targeted relief.
The path of inclusiveness, the path of consensus building is not a path to depart from. It is not something to support today and dispense with tomorrow.
As far as the numbers go ... don't try to make the figures say what they are not saying, because in the end, all of us will pay the price and these numbers need to be credible.
Portia Simpson Miller
The Prime Minister made certain references, which had nothing to do with the Supplementary Estimates, and I feel compelled to say something.
He mentioned inflation rates of 2005 and 2006, and then he mentioned certain months. The then minister of finance said what was the inflation rate for 2006 at the end of the year; he failed to respond to that.
Well, the inflation rate last year was 5.8 per cent and the projection for this year was that it would end at about seven per cent.
I am very happy that the Government is considering doing something about the impact of price increases. The point is, though, that while he mentioned $500 million that certainly is not reflected in the Supplementary Estimates.
Nonetheless, we welcome it because we understand the suffering of minimum-wage earners and a number of vulnerable people in the society.
The Ministry of Labour and Social Security is well equipped to deal with any programme of assistance coming to the people.
When this side is in power or that side is in power, it does not change the global conditions.
As leaders, we must manage the conditions, and the increase in prices is certainly the remit of the Government to deal with to cushion the impact on the poor of this country.
published: Sunday | December 23, 2007
Rudolph Brown/Chief Photographer
Prime Minister Bruce Golding (right) consults with Minister of Finance and the Public Service Audley Shaw during a recent sitting of the House of Representatives.
Edmond Campbell, News Coordinator
For hours, parliamentarians debated the First Supple-mentary Estimates of Expenditure for the 2007/2008 fiscal year in Gordon House on Tuesday.
The gruelling and extensive debate saw the top brass of the leadership on both sides of the House weighing in on the discussion.
At the end of the debate, members of the House approved the $22 billion Supplementary Estimates.
Leading the charge for the Government was Minister of Finance and the Public Service, Audley Shaw.
He began by citing some of the challenges faced by the new administration since it took office in September, which, he said prompted the need for the tabling of the First Supplementary Estimates of Expenditure.
According to Mr. Shaw, the challenges included the provision of additional relief efforts to persons affected by the hurricane.
He highlighted the flood rains in October, which led to severe damage to the road network islandwide.
Mr. Shaw also mentioned additional budgetary requirements, some of which were inherited from the previous administration.
Prime Minister Bruce Golding, Opposition Leader Portia Simpson Miller, Opposition Spokesman on Finance, Dr. Omar Davies, and Leader of Opposition Business, Dr. Peter Phillips, participated in the debate.
The following are excerpts from the debate, beginning with Mr. Shaw.
Projected fiscal deficit
The original budget was developed against the background of a projected fiscal deficit of 4.5 per cent of GDP or approximately $35 billion. A revised deficit forecast has now been presented with a $42.98 billion projected deficit or 5.5 per cent of GDP.
It must be noted, Mr. Speaker, that that 5.5 per cent represents a one per cent increase over the original projected fiscal deficit target of 4.5 per cent by the previous government.
What we have been able to do now, which I would really categorise as a small miracle, Mr. Speaker, in the sense that we have taken a situation with all of these challenges that we have faced - hurricane, floods, additional budgetary items inherited, increase in price of oil on the world market - that despite all of these things, we have put on the table today an increase in the budget of $22.137 billion.
Having regard to the financing arrangement that we have in place, we are able to contain the increase in the deficit by a mere one per cent.
I want to point out that there are basically three main segments of the original amount of $15.4 billion that had been the carry-over from the previous government. That figure has been reduced to some $11.2 billion, with a variety of actions that have had to be taken by the Government, including the postponement of the Montego Bay Convention Centre.
The Prime Minister, when he was Leader of the Opposition, announced that we would abolish tuition fees, and I am now pleased to announce that as part of this Supplementary Estimates, not only is it in the estimates, but already, parents who were promised the refund of their school fees for September, have already received, their cheques.
Overall, in terms of the additional expenditure, it is the intention, in order to keep the deficit to the targeted level of 5.5 per cent (of GDP), this amount of $22 billion will be financed in the following way:
1. Four point five billion dollars from the proceeds of the sale of a portion of our shares in PETROJAM.
2. Transfer of Universal Access Fund into the Consolidated Fund - $2.8 billion.
I should indicate, Mr. Speaker, that the transfer of these funds was in fact authorised by the former minister of finance, and it was in keeping with the request of the Auditor General that this should be done.
We want to give the assurance to the stakeholders in the Universal Access Fund that this is not going to be put in the Consolidated Fund to be taken out in any arbitrary way. It is going to be a special account in the Consolidated Fund - and the purposes for which it is intended, that is what it will be used for.
3. Reduce the granting of non-charitable waivers - $200 million is expected from this.
4. Transfer of interest accrued on Government of Jamaica deposits of $400 million.
5. Settlement with Carreras of $1.7 billion.
6. Five point two billion dollars is targeted from revenue intake.
7. Borrowing of $7 billion to close the gap.
Our intention is to run a tight ship between now and the end of the fiscal year. Indeed, it is going to be the mantra of the financial administration of this government.'
We were able to manage the foreign-exchange market to a point where, over the past three weeks, we have seen relative stability in the exchange rate.
The challenge is to grow our way out of our debt. We've got to have policies where we have more investment and more earnings that can put more people to work and lift the productivity levels of our people.
Dr. Davies
Much of the financing which he (Shaw) has outlined to us is at best creative accounting and imaginative.
If he is going to stick by his commitment with regard to the Universal Access Fund, as well as the receipts for the sale of 49 per cent of PETROJAM, these funds are not available to do things, they are not available to fix roads. Those are funds that are in the Consolidated Fund only in terms on nomenclature; but these are not available to the minister to do anything.
So, if the attempt to produce a reduced deficit by citing these funds, it may serve accounting purposes, but it is not going to fool anybody, either in the House or externally.
The additional expenditure of $22 billion, it will not be possible for the minister to make the 5.5 per cent deficit target unless there are additional revenue sources which he has not informed us about, or unless he intends to have significant cuts in expenditure.
Putting that additional $7 billion or $8 billion, which is approximately one per cent of GDP in as revenue, it may be a useful accounting gimmickry, but it does not serve the purpose of giving the Government additional resources to expend.
Unbudgeted expenditure
When the Prime Minister spoke of the figure of $16 billion, he instructed the Minister of Finance to send to me the details of that. I am making a point about the way in which technical people speak about unbudgeted expenditure.
If the intention of the ministry were to hide items under unbudgeted expenditure, how could this list sent to me by the minister on the instruction of the Prime Minister, include expenditure for clean-up after Hurricane Dean, post-Hurricane Dean clean-up for the Solid Waste Management of $150 million, additional benefits to PATH beneficiaries $182 million?"
'What was meant to be a technical statement has been twisted for political gain and it is running the risk, Mr. Speaker, of bringing the technical people into political crossfire. We don't want to do this.
To be fair to the Minister of Finance, he has been seeking to toe the line; I encourage him to continue on that path.
The technical team is too valuable an asset for us to risk bringing them into this crossfire. Let us not do that.
Public sector MOU
Let me state on behalf of the Opposition that we support and we wish for a new memorandum of understanding. It is imperative not just for industrial peace, but in order to provide the minister with an opportunity to construct the next budget that there is a MOU in place.
It's not going to be easy because the workers have faced a very difficult period and what was projected to have been a seven per cent inflation for the fiscal year will be perhaps quite close to twice that amount.
It is imperative that the administration stop seeking to blame the Opposition for the challenges. Being government means that you deal with the challenges that you face at this particular point in time.
The confidence of the market will not be won by seeking to blame someone else. The confidence of the market will only be won by putting forward a credible programme. Let us not try to disguise the real deficit. Let us not try to inflate the revenues.
The minister needs to come clean. He needs to tell us what is the real deficit figure.
Bruce Golding
The member from St. Andrew South can be as euphemistic as he wants to be. The fact of the matter is that when you issue a letter in June, two and a half months after you have passed the Budget, where you say, 'This serves to advise you that pursuant to Cabinet decision, Cabinet has approved the business plan which involves assuming the responsibility for servicing the debt and that is not in the budget, somewhere between then and March 31, it has to be put in.
So, this business of giving the impression that there was no excluded expenditure, that all of this was just a fiction, we are trying to find excuses. The member knows that that is not so, but you have to bend the facts to fit the propaganda.
Mr. Speaker, we inherited a government that was in persistent fiscal tension. Ask the member which was the last year he was able to produce a fiscal surplus.
The truth of the matter is that the fiscal management of this country has been in deep trouble for a long time.
That government has never had to deal with $100 a barrel oil, never had to deal with it. They have never had to deal with the kind of commodity price aggression that we have had to contend with.
The inflationary pressure did not begin after September 3. The member had projected that inflation for this fiscal year was going to be seven per cent. In May, inflation was 1.3 per cent, in June, 0.8 per cent, in July, one per cent, in August one per cent. Now, there is no way you can achieve a seven per cent inflation when you're running one per cent or 0.8 per cent. The pressure started from before.
You blame us for devaluation, and when I spoke about the rate at which the Budget was calculated, he tries to be in his reprimanding tone. The fact of the matter is that if the results of the lottery are out, then you don't need to know what is the combination of the balls, because it is out already.
Assistance to the poor
Despite the fiscal constraints, despite the pressures that we are under, despite the demands that are there, we have identified within the fiscal arrangements $500 million that we want to use to ensure that we get to those persons who are (most affected by the rising food prices).
We have to find an institutional mechanism to get to these people. Quite frankly, it's a matter that I would like, minister, I would like you to consult with your counterpart and to see to what extent we can put our minds together and come up with the most effective means to responding to this project.
I know that there are some people who claim to speak with divine authority, when they tell us that that divine authority tells us that you (the Opposition) are going to be there (in Government). Let us listen to the right God, because He will never mislead us.
Dr. Peter Phillips
I would venture to say that given the urgency of the price effects from inflation that he (Mr. Golding) speaks of, something could have been done even through the PATH programme to provide some targeted relief.
The path of inclusiveness, the path of consensus building is not a path to depart from. It is not something to support today and dispense with tomorrow.
As far as the numbers go ... don't try to make the figures say what they are not saying, because in the end, all of us will pay the price and these numbers need to be credible.
Portia Simpson Miller
The Prime Minister made certain references, which had nothing to do with the Supplementary Estimates, and I feel compelled to say something.
He mentioned inflation rates of 2005 and 2006, and then he mentioned certain months. The then minister of finance said what was the inflation rate for 2006 at the end of the year; he failed to respond to that.
Well, the inflation rate last year was 5.8 per cent and the projection for this year was that it would end at about seven per cent.
I am very happy that the Government is considering doing something about the impact of price increases. The point is, though, that while he mentioned $500 million that certainly is not reflected in the Supplementary Estimates.
Nonetheless, we welcome it because we understand the suffering of minimum-wage earners and a number of vulnerable people in the society.
The Ministry of Labour and Social Security is well equipped to deal with any programme of assistance coming to the people.
When this side is in power or that side is in power, it does not change the global conditions.
As leaders, we must manage the conditions, and the increase in prices is certainly the remit of the Government to deal with to cushion the impact on the poor of this country.