Rejecting austerity

IN HER first post-cabinet address, and after days of her ministers crunching the numbers, Kamla Persad-Bissessar signalled on May 8, her administration’s rejection of austerity measures. Salaries and pensions are, effectively, ring-fenced.

Grants – such as for child healthcare and school laptops – will be revived. Instead of an immediate programme of extensive budgetary cuts, the deficit will be funded. The sovereign wealth fund is to be tapped. The Central Bank overdraft will be utilised. Refinanced will be treasury bills. Expect more borrowing.

This is good politics. It might also be good economics, but only in the right conditions.

Now is not the time to slash the earnings of ordinary people. Pausing recent increases for teachers – who settled for five per cent – or reversing course on public servants’ expectation of a ten per cent pay hike would not only damage consumer spending but also morale and social cohesiveness.

To boost the mood of workers is not to guarantee higher productivity; but it is certainly a necessary precursor to greater delivery.

And yet, the PM’s announcement of a move to cap vehicle purchases by parliamentarians and end the allocation of state-funded housing for cabinet members is a significant concession.

Both measures send the correct signal, especially given that MPs, like citizens, will not face cuts. The government does not intend to resile from the SRC’s recommended salary increases.

However, the problem of revenue generation amid a darkening global economic picture suggests other concessions could come in the upcoming mid-year review. That review, due in mere weeks, must assume the heft and significance of a full-fledged budget.

Davendranath Tancoo, Mrs Persad-Bissessar’s Minister of Finance, should do more than simply gallery about the state of the treasury – as is standard when a new government comes to power.

We must hear, in clear and unequivocal terms, exact details of the plans, policies and strategies to be implemented to maintain spending while shoring up revenue.

Part of this must involve greater clarification on matters such as tax collection, now that the TTRA is to be scrapped. Mrs Persad-Bissessar signalled a range of regulations that will be put in place to bolster the Inland Revenue Division and the Customs and Excise Division.

She also once more signalled a move to look for fresh regional avenues in relation to the energy sector. Fair enough.

But we also need outside-of-the-box thinking closer to home. For instance, could laptops not be provided to students by using corporate donors instead of through millions in state spending? How will food imports be reduced?

Rejecting austerity might work. But only with a proper plan to make it just one part of a bigger vision. We expect much from the mid-year review.