Mariano Browne
A budget speech is a major opportunity for a government to outline its economic objectives and the mechanisms to achieve them. Ultimately, these objectives can be reduced to primary goals. These are to maintain law and order and achieve sustainable economic growth that benefits all citizens. Trinidad and Tobago faces five critical obstacles to achieving these objectives.
First, the secular decline in natural gas production; second, the high level of national debt; third, the scarcity of foreign exchange; fourth, the need to develop a credible strategy to reduce economic dependence on natural gas; fifth, an ageing population. The speech is also a political document and therefore full of rhetorical bombast. This may play well to the gallery but is insufficient to create the measures to achieve sustainable growth.
The last administration spent its ten years in office complaining about its inheritance and its predecessor’s failure to address the root causes of the country’s challenges. The administration’s two budget speeches and the rancour of the debate indicate no change in this approach. The reality is that addressing these challenges requires a sequenced approach involving short-, medium-, and long-term plans. And they require a consistent approach and policy. One reason for China’s huge developmental success over the last 50 years is its commitment to long-term planning and adjusting policies as required to adapt to changing circumstances.
However difficult the circumstances, a government is elected to solve the problems it inherited. Complaining that the previous administration left $10 billion in unpaid VAT and tax refunds, or that $70 billion in debt must be paid or rescheduled over the next four years, is an empty complaint. The current administration owns these problems and was elected to solve them. Businesses’ and households’ cash flow is poorer by $10 billion in unpaid VAT refunds. As one accounting firm noted in its review of the budget speech, fiscal slippage is not abstract. It appears as tighter liquidity, higher financing costs, slower State payments, or pressure for higher taxes. How and when will the minister repay these outstandings to the public? Although the minister highlighted this issue, the solution was unaddressed.
Fiscal slippage is a consistent, but understated feature of the budget speech. Significant cash flow demands are ignored or swept under the table. Unpaid backpay to the public sector for the period 2014 to 2019 amounts to billions. The minister avoids quantifying the amount, preferring to assume unpaid amounts due to public servants will remain unpaid. At the same time, the Prime Minister excoriates public servants for a fair day’s work for a fair day’s pay and says “lazy” and unproductive public servants will be fired.
Administrations come and go, but the machinery of the state and public sector employees are key to implementing any policy or plan. Indeed, public servants manage the State’s execution machinery. Achieving any government’s objectives is dependent on the performance of public sector employees. How will this administration’s plans be affected if public servants are not motivated to perform or are discouraged by this public scapegoating? This question becomes more important when one considers public sector pay and employment conditions.
How will the public sector be managed or reformed if the government is serious about addressing the five key challenges identified above?
In 2026, public sector employees, except those in senior positions covered by the improved payments agreed in the last Salary Review Commission’s report, are on 2020 salaries. Furthermore, backpay obligations implicit in the union agreement for the period 2014 to 2019 are now being “renegotiated”.
A union agreement is a binding legal obligation. The Chief Personnel Officer cannot unilaterally abrogate it. Renegotiating the payment mechanism for the unpaid amount to a non-cash offer is unusual. Salary obligations are based on cash, and any “non-cash instruments” (bonds?) used to settle these obligations must ultimately be convertible into cash. How does this affect the industrial relations climate and negotiations for the pay agreement for the outstanding six-year period of 2020-2025? Is this how responsible employers operate? Which union or employee would consider such treatment fair?
The minister commits to strengthening the UNIMED Group Health Plan, which is part of the terms and conditions for monthly-paid officers of the Civil Service, the Teaching Service and certain officeholders within the purview of the Salaries Review Commission. Health plans of this nature require employees to contribute to the plan, while the employer also makes a matching or larger contribution. He notes the “injection” of $20 million into the Group Health Plan. Clearly, the plan is in deficit, and the employer (the State) is not meeting its financial obligations. That translates into unpaid claims and long waits for medical treatment refunds. If this is how the State treats its employees, wilfully ignoring conditions of service, what does the Prime Minister’s threat to public servants convey?
These are basic issues which could affect the execution machinery and the five challenges identified above. Perhaps, this administration assumes public sector employees are irrelevant and will do as they are told, and that everything will proceed as usual. Part 3 next week will examine the five challenges.
Mariano Browne is the Chief Executive Officer of the UWI Arthur Lok Jack Global School of Business
