Budget 2019 shows the benefits of fiscal discipline


Budget 2019 shows the benefits of fiscal discipline


Friday, March 22, 2019

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As the main presentations of the budget wrapped up Wednesday, one could say that this budget was different, and an improvement, from those in the past. We heard from the finance minister, Opposition spokesman on finance, leader of the Opposition, and the prime minister, and all presentations, I think, had some good and not so good points. But this is the nature of debates, which should be a process used to get us to the best outcome.

This is a part of the democratic process, as both Government and Opposition offer contending views, which we as the public must digest and analyse and, through our advocacy, make our voices heard so that our “political servants” will listen and make sure that policy reflects what is in the best interest of the country.

My view is that we have started to see that happening, for a variety of reasons, as demonstrated in this just concluded budget debate. I have written in the past about a book called Why Nations Fail, which makes the point that nations that succeed do so because they develop strong institutions that ensure that there is a check on the governmental and political processes. I have further made the point in the past that I believe that Jamaica's future will get better because we have been developing that institutional capacity to keep a check on political and other excesses.

What has been missing in the past (which I have also argued) was the awareness of the public, which has improved significantly as more people listen to the debate and are much more aware of policy consequences. This is supported by our enviable press freedom environment.

It is this development, I think, that has led us to what, in my view, has been the best budget debate I am aware of. In 2013, when Peter Phillips made the decision to craft an IMF and economic programme, which would be the foundation of all we are achieving today, some people said that he had no choice because his back was against the wall. I disagree with that. He could have gone the route that many other countries have before (the latest being Venezuela) and continued the path of fiscal indiscipline.

I believe he made that decision because of our press freedom and the fact that Jamaicans were much more aware, and by then we had started to develop very strong institutional capacity. The people of Jamaica and the Opposition would not have allowed him to do otherwise, and to his credit he took the decision in the face of a lot of criticism and made a decision many would have crumbled under.

It is against this background that we must see the 2019/20 budget debate, and the benefits we are seeing now in the removal of the distortionary taxes and others outlined by the prime minister. The prime minister outlined the following main points:

* Expansion of the NHF coverage to include Lupus, which may not seem like a big deal to many but shows me that if we did not embark on the fiscal discipline policies, then we would be thinking of raising SIN taxes as we have done so many times in the past, and not be able to expand the benefits.

* Interest rates on NHT loans to go down, as well as the loan maximum to increase. This again shows the benefit of fiscal discipline and good governance, as without that we would not have been able to give this benefit to the Jamaican people. We have boasted of interest rates coming down in the past but have not been able to do something similar without taking back with the other hand.

* New governance rules for public sector bodies (transparency in the appointment and competency profiles in particular) show that the institutional capacity we have developed over the years is finally causing proper governance to enter the public sector. This is one of the most fundamental things that can be done for the improvement in governance in the country.

The closing by the finance minister also included him making some tweaks to the budget, when he said that there would be a flat stamp duty of $100 for transactions under $500,000 and $5,000 for amounts above, and that people with revenue of under $10 million would have the option of remaining registered to collect GCT (I can't imagine why they would, as not being registered is more beneficial). What this demonstrates is the importance of the contribution made by the Opposition, which is what a debate should be about.

Over this week, the news as it relates to the allegations at the Ministry of Education, Youth and Information, and the resignation of Ruel Reid as minister and from the Senate overshadowed the presentations made by both the prime minister and finance minister, and in fact the whole budget debate. However, these allegations speak to the strengthening of our institutions, press freedom, and awareness of our citizenry. And so, this must also be seen as a part of the institutional capacity building that we have been seeing over the last 15 to 20 years.

In fact, I am always happy to see the debate between political opponents and supporters, especially on social media. This is because every time something happens and there is strong criticism by the Government, Opposition, or citizens it helps to strengthen our democracy, as it is out of these criticisms that we see concessions to introduce or strengthen institutions.

The result is that over the many years of debate and criticism, we have seen incremental strengthening of our institutions, which act as a check on the power of Parliament and Government. It also results in what we see today where Government, parliamentarians, and public sector workers have a greater check on their power and authority. I am sure that most people are not aware of what they are doing when they criticise, but essentially what they have done is ensure that rules are put in place to put a check on authority, which has got to a point where it is now irreversible.

In conclusion, I would definitely rate the budget presentation so far, the best that I have ever seen. Not because of the tax breaks, but because of the philosophy of creating an environment where people can see the fruits of their labour, rather than past budgets where it was always about taking from Peter to give Paul. This is all we should ask of Government and Parliament.

No doubt, the budget also shows the benefits that can flow from fiscal discipline and good governance. So I say, keep the debate and criticisms going so that we can further strengthen our institutions and increase the check on Government and Parliament.

All contributors to the budget must be commended and we look forward to the sectoral debate, where more details should follow.

Dennis Chung is the author of Charting Jamaica's Economic and Social Development and Achieving Life's Equilibrium. His blog is dcjottings.blogspot.com.

email: drachung@gmail.com

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