The New Today

Commentary

The political economy of national budgeting and party politics

The Estimates of Revenue and Expenditure, the budget, was presented to Parliament by the Minister of Finance just over two weeks ago.

The budget will be analysed over a period of time by economists and pundits alike, however in this submission the focus will be on the political economy of the budget which looks at the relationship between the national population and its government manifested in formulation and enactment of public policy.

It is the intersection of politics and economics that is realised in resource allocation patterns in the budget. An essential feature of the recently presented budget is the deceptive relationship government has with the population. One of the ways in which this deception is played out is in the financing component of the budget.

Since 2016 there were current account surpluses recorded that reached a high of 91 million dollars in 2021. This shows a trending steady improvement in budgetary performance during that same period. However government had public sector workers march up and down in the hot sun for their 4 percent salary increase that was negotiated and agreed to, under the guise that they could not afford to pay.

Considering in 2014 workers were asked to bear the brunt of the burden of the structural adjustment program through changes in income tax threshold and significant increase in property tax. It is wicked of government to ask such a huge sacrifice from workers then later on try and prevent them from receiving a salary increase.

Another area of deception is in the relief measures outlined in the budget to help citizens cope with increases in prices of foodstuff, rising utility bills and gas prices. For instance, though government placed a cap of 15 dollars on the price of a gallon of gasoline, this is still way higher than neighbouring countries with similar size economies.

In St. Lucia, the price of a gallon of gasoline is $13.95 while a twenty pound LPG cylinder is $33.44, in Dominica the price of gas is $13.37 per gallon while in St. Vincent and St. Kitts, it is $14.17 and $14.03 respectively.

Similarly, government introduced high taxes during the period of structural adjustment to raise sufficient revenue to be able to pay down on the national debt and return the economy to some level of fiscal stability.

Now that the program has come to an end and some of the main indicators such as debt to GDP ratio and current account have achieved the targets and are now stable, one would think that government would seek to ease the economic burden on the population by reducing taxes thereby increasing the level of discretionary income for people to spend and derived from disposable income which is a person’s take home pay after taxes and used to make essential and nonessential purchases.

Although used interchangeably, discretionary income is that part of disposable income used to buy nonessential goods and services. Discretionary income is critical to a healthy economy since people can only spend on consumer goods and services if they have money to do so. A reduction in taxes would have left more discretionary income in people’s hands to spend which will increase aggregate demand and boost the economy.

Rather than ease the burden of taxes on people’s back, in particular the middle class, government choose to reduce value added tax on a few selected food items.

Once again this is deceptive since high port charges and taxes on imported goods are further contributing to the already high prices brought on by global supply chain bottle necks and increasing demand.

Government is deceiving the people by trying to make them think that they are caring and sensitive to their suffering when in fact the piecemeal measures announced in the budget are only designed to shore up declining support among the poor working class at the expense of the already battered middle class who are drowning in taxes.

Another grave deception is the expansion in capital spending in the budget. Although it is widely accepted in economic theory that one of the ways to increase demand and employment during times of economic decline is to expand capital infrastructure spending, however the manner of borrowing to finance these projects and the way they are being implemented is concerning.

Capital spending is driven by grants from the National Transformation Fund (NTF), government’s borrowing on the local market, grants and loans from multilateral organisations such as World Bank and Caribbean Development Bank.

The latter source of funding from multilateral organisations are grants that are largely free money and concessionary loans with low interest rates, long grace periods and repayment schedules. Moreover, funds are disbursed under strict procurement rules.

It appears that some capital projects that were supposed to be funded by multilateral organisations are now being funded totally from NTF and local borrowing.

This should be of concern since the local procurement landscape is not even and easily manipulated. This might explain the sudden emergence of a few Trinidadian firms that appear to be getting most of the larger capital projects at the expense of local contractors.

The question must be asked – is the St. John’s River Project still being financed from World Bank funds or the Transformational fund and local borrowing? Why firms from Trinidad appear to be getting most of the contracts then turning around and sub contract the works out to local contractors?

Who are the local persons with links to these Trini companies? Are any of them associated with the NNP party? Are these Trinis members of the opposition UNC in Trinidad and sidelined by the PNM of Prime Minister Rowley and then move their equipment into Grenada through arrangements with NNP surrogates?

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Are monies from these Trini companies finding their way back into the coffers of the NNP to fund their election campaign? The Trinis that were building the first national stadium that collapsed in Hurricane Ivan in 2004 boasted about the large donations given to NNP for the 2003 election.

Why are these Trini firms getting involved in building schools and secondary roads when local firms are able to so do and have been doing a good job of it over the years?

Why are these firms being allowed to cream off the big profits of these contracts, bring in only skeletal managerial and supervisory staff, leaving the selected local firms to struggle with less than break even subcontracts, thereby, compromising quality of work and placing local contractors under financial stress to contend with these ‘cut throat’ priced sub contracts?

Another big question that must be asked is – who are benefiting from this arrangement? Is it the working class lowly paid construction workers or a few elites among the political class? Is this expanded capital works program deceptively designed to further enrich the political elites while handing down crumbs to poor working class construction workers?

As the deception is laid bare after closer scrutiny of the budget it is heart-wrenching to observe how a small clique of ‘Project Grenada Types’ are attempting to get into the head of the young new leader of the NDC, trying to exploit their friendship with him for their own selfish designs.

The political leader must not fall for their foolish argument that they alone cause him to win election to leadership of the party. Many persons – some he might not be aware of pitched in to help. The leader must remember he campaigned on a change agenda and promised to include all those who want to be under the big unity tent.

He can’t now allow himself to be hoodwinked by the lecturer lady, the stationary man and others who are attempting to pursue an exclusionist agenda. This clique don’t have the political wherewithal to help the new leader succeed.

The recent glitch with the ill-advised press conference to discuss the budget, lack of focus and strategic effort to build back and strengthened constituency groups, and the recently launched structure less registration drive can attest to this.

The leader has to be blind not to see his opponent, the real politick, has started to roll out his election strategy, from construction of toilets for the elderly, soft loans for housing repairs, relief initiatives and expanded capital works programs in the budget and narrative attempting to paint him as emboldened by big business and foreign interest.

The leader must not allow himself to be misguided by the clique, rather he must be steadfast in focusing on building the organisational structures and processes that will help the party to win the next election. In order to effectively do so he ought to reach out to a wide cross section of persons who are capable of helping to rebuild the party.

The young leader must understand time is not on his side and he must move expeditiously to build a competent economic team around him. There are persons if reached out to am sure are willing to assist. The recently retired banker, two SGU lecturers, the private sector consultant in the south and Lennox Andrews can be a formidable, well experienced team that is able to put together a solid economic plan and advise you on such matters.

There are a number of experienced political strategists at home who are eagerly awaiting for you to reach out. You don’t have to confine yourself to the lecturer lady, stationary man and others from the north for the advice given by them to date are not sound and their approach to selection of candidate is wanting.

Gone are the days when selection of a candidate is like plucking a name from a hat. The process is now more scientific. The party must have a clearly articulated candidate selection policy endorsed by all constituency groups. A selection committee comprising competent persons with clear criteria for selection must be drawn up and the process driven by a well-functioning constituency group.

In fact, well-functioning constituency groups would not only contribute to an effective candidate selection process but is fundamental to the voter registration process and efficient functioning of the party.

The political economy of the 2022 budget clearly reveals a government bent on deceiving sections of the electorate to remain in power. It exposes a political strategy that is centered on shoring up support among the working class and swing voters while at the same time reversing any hemorrhaging of support from the base.

This is expected to be achieved through increased allocation of resources to sectors, projects, and initiatives that favour the working class. The strategy pits the working class against the middle class and urban elites.

Having seen the basic elements of the strategy beginning to play out, it is high time for the young new political leader and his party to respond and counter this unfolding strategy. However, this can only be possible if the young leader brings together a solid team of advisors and political strategists in an inclusive environment to develop counter strategies to neutralise the one by the incumbent.

This can only happen if the party moves swiftly to institute efforts to rebuild and strength the various organs of the party and the leader not allow himself to be pigeon- holed by the St. Andrew’s clique.

Special Correspondent