Imbert: If not for fuel subsidy, budget could have been balanced

IF IT weren't for the fuel subsidy, Finance Minister Colm Imbert said, Government would have been able to balance the budget.

He made this statement during his contribution at the post-budget forum hosted by the TT Manufacturers Association (TTMA) at the Hyatt Regency on Tuesday.

He was talking about the fiscal deficit which was whittled down from an estimated $9 billion to $2billion.

“This is probably the lowest fiscal deficit that the country has had for about 12 years,” Imbert said.

“We could have balanced the budget, you know, if we didn’t have to put money in the Heritage Stabilisation Fund (HSF) and if we didn’t have to spend $2 billion on subsidising fuel."

In his budget presentation on Monday, Imbert said Government was putting $1.1 billion into the HSF as a result of higher-than-expected fuel prices. He also announced a billion-dollar cap on an estimated fuel subsidy of $1.9 billion, resulting in super and premium fuel prices increasing by $1 per litre, and diesel increasing by 50 cents per litre.

Responding to questions on the fuel subsidy, Imbert said the cap was based on an assumption that the price of oil would stay between $80 and $90.

“The cap is going to work both ways and there is a problem both ways,” he said. “If the price of oil goes up our revenue goes up, but the price of fuel goes up. If the price of fuel goes down, then revenue goes down, but the price of fuel goes down.”

He said if the price drops below the figure that government put on the cap, it would be able to make an adjustment to the cap on the subsidy.

He added that money government would save from the cap in the subsidy, would be used for several other measures that would not have been possible had government not taken that measure.

“We gave a tax concession – we increased the personal allowance from $84,000 to $90,000. Whereas, if you were earning $7,000 a month or less you would be tax-free, now, if you were earning $7,500 a month you would be tax-free. That is going to cost the treasury $450 million. If we increased it from $7,000 to $8,000 it would have cost us $900 million.”

“We have decided to give up that $450 million in revenue and put more disposable income in the hands of consumers and allow them to boost sales in the retail trade and that sort of thing…We couldn’t give that up if we decided to leave the price of fuel at lower rates. That’s one of the trade-offs we did in this budget,” Imbert said.

He said he believes the income tax would have a multiplier effect in terms of GDP.