The Estimates of Expenditure were tabled
two weeks ago and it has received extensive analysis in the public media and in the
sittings of the Standing Finance Committee. The reactions to the size of the budget have
been mixed and at times contradictory. On the one hand, there are those, including some
local and external creditors, who have argued that the projected level of expenditure was
greater than expected and the Government should have sharpened the knife to a greater
extent reducing the increase for 03/04 either compared to the Supplementary or to the
original estimates presented a year ago.
At the same time, virtually every single Minister at Standing
Finance Committee was bombarded with questions suggesting that the allocations contained
in the Estimates were inadequate.
Let us look briefly at the budget. Debt servicing –
amortization and interest payments will consume approximately 65% of total expenditure.
This leaves 35% to deal with wages, salaries, running the ministries and the capital
budget. If we operate on the assumption, which all Governments of Jamaica have adhered to,
that the debt must be paid and I am certain all our creditors wish to ensure that this
tradition is preserved, then any cuts should be related to that 35% of the expenditure
which is not related to debt.
Let us probe a little more deeply. Of that 35% remaining, after
debt, the capital budget consumes $9 billion or 3.4%. No one, I repeat no one, in this
House would dare to suggest that this is adequate. In fact, it is because of the
inadequacy of the allocation in recent years why the deferred financing mechanism has been
utilized to supplement that which is taken on board in the budget in this fiscal year.
So we now turn to the recurrent budget and here we are faced with a
reality. Interest payments account for a half of total recurrent expenditure and the big
three ministries - Education, Health and National Security consume 30%. This means that
only 20% of the total recurrent expenditure has to take care of everything else.
I turn to those who demand a smaller budget and ask how do we
compress expenditure in these three ministries without undermining all efforts at
improving the social conditions of our people?
I am not for one moment claiming that there are not efficiency gains
to be made and this is an issue to which I will return. However, we run the risk of taking
a superficial view of the problem, unless we disaggregate what is indeed contained in the
budget.
On various occasions I have heard persons argue that the cutting of
the expenditure is not a difficult problem. They say "look at any well run
firm, this is what decision-makers do as a matter of course." This comparison
of the Prime Minister to the CEO of a company and hence charged with taking identical
responsibilities for a major firm is acceptable up to a point.
However, how should we treat the school system if revenues fall off
in a particular year? How should we treat the police force, how should we treat the health
system? Should we simply slash expenditure in areas which are already under-funded?
But there is yet another issue which must be faced by all of us,
but especially those who urge greater fiscal austerity particularly in terms of wages and
salaries. There are those who opine, sometimes from capitals abroad, that we should
enforce drastic cuts or freezes in the wages of public sector employees. The basic
suggestion is that the average government employee is an under-qualified paper pusher.
This stereotype is simply not true. They do not face what successive Governments have
faced - the brain-drain whereby our most skilled professionals can simply make a logical
choice and give up on low-paying jobs.
So even whilst accepting the imperatives of increased efficiency in
providing services for which Government is responsible, we must also indicate that
reduction of expenditure on wages and salaries cannot be carried out without recognizing
that professionals have options - not simply whether to work with Government or the
private sector in Jamaica, but whether to remain in Jamaica at all. This is not
theoretical musing. The recruitment of our health professionals over many decades and our
teaching professionals in more recent years is practical proof of this.
I now turn to a brief discussion of the allocation of an
overwhelming percentage of the budget to debt servicing. Clearly, as I have stated before,
this is not sustainable as it undermines the country’s credit worthiness. Hence the
tightness of this year’s budget.
However, even as we all agree to focus on debt, whether through
normal loans and credit lines or through deferred financing, we should not pretend that
this debt has brought no positives. It is through debt that we have modernized our
hospitals - whether it is the Kingston Public, the Mandeville, St Ann’s Bay, May Pen
or Cornwall Regional.
It is debt, now in excess of J$10 billion, which has provided the
KMA with a modern civilized transportation system. It was this debt which financed the
dualization of Hope Road; it was debt which has brought about improvements to the North
Coast Highway, to Mount Rosser, to Washington Boulevard and to Trafalgar Road. It was this
debt which has brought about modern water and sewage systems for Negril, for Montego Bay
and for Ocho Rios.
So even as we take steps to reduce the debt to GDP ratio and to
reduce the deficit, let us not pretend that these debts were incurred to buy fighter
planes or to carry out extravagant acts.
Let me now turn to certain special aspects of the expenditure
budget identifying particular areas which are geared toward improving the socio-economic
standing of those at or near to the bottom of the economic ladder or providing support for
increased output and production.
For obvious reasons there is very little scope in the budget for
financing major new incentive programmes for the productive sector. However, we have
closely examined those areas where the resources which are available can have the maximum
positive impact in terms of output, employment and reduction in the cost of living.
Support for the agricultural sector can reap those benefits –
not just in theory. Recent results in terms of movements in the CPI confirm this; e.g.
over the period January through March, despite significant depreciation of the currency,
which under normal circumstances would have impacted negatively on the CPI, the recovery
in domestic agriculture has contributed greatly to reduced food prices and hence the
moderate inflation for the first three months of 2003. We need to give further impetus to
this sector.
We have included some additional resources in the budget and also
have earmarked sums from the DBJ totalling approximately $300 million for various
initiatives to facilitate expansion in the agricultural sector. I wish to highlight a new
production rebate scheme.
We propose to refund up to 30% of the investment cost of farmers
who meet agreed production targets under an agreed set of criteria.
The refund will be paid over to farmers after performance is
certified by RADA and a special management committee made up of persons from DBJ, PIOJ and
the Ministries of Agriculture and Finance.
The main objective of this scheme is to quickly resuscitate output
from cocoa, ginger, tree crops as well as livestock for which there are ready markets.
There are several areas of expenditure which represent concrete
examples of the continuing commitment to addressing the need to improve physical and
social infrastructure thus raising the standard of living of the inhabitants of the
country. This afternoon I will focus on two – the PATH programme and the soon to be
implemented National Health Fund. As regards the PATH programme we accept that there are
some teething pains still to be overcome, but there can be no question that the focus is
right and should lead to a more coordinated response to the need for assistance by the
most deprived in the society.
The programme links benefits to desired behavioural changes and it
is one which we have developed with the assistance of the World Bank and the IDB. Whilst
we will be accessing loan funds from the multilateral institutions in the first instance,
after the initial four-year period the GOJ will assume full responsibility for financing
the programme.
When fully operational, the PATH programme will provide benefits to
approximately 240,000 persons each year. I have heard many justified complaints in terms
of the coverage of the programme and the adequacy of the amounts being provided to
families.
Such complaints and comments are to be expected, but let us not use
them to halt implementation of what is undeniably a major advance in the social welfare
programmes. Let us all, as persons concerned about the welfare of our constituents, share
our thoughts on how this programme, which can alleviate the poverty of nearly 10% of the
population can be improved.
The National Health Fund–
Let me begin by paying tribute, stick-to-itiveness and tenacity of my
colleague who pushed, prodded and persisted until this Fund has become a reality.
The Fund will assist individuals in meeting the high cost of
filling prescriptions for a range of chronic illnesses. It will also provide assistance
for primary health care.
It is estimated that up to 750,000 persons who suffer from one or
more of the chronic illnesses will benefit from the NHF. There will also be a health
promotion and production fund with allocations for immunization and health education
programmes which focus on promoting healthy lifestyles.
Financing for the Fund will come through the imposition of a 23%
excise tax on tobacco consumption. This additional revenue from the excise tax will go
straight to the Fund. Furthermore, there will be a specific charge on the Consolidated
Fund of $450 million and a re-configuration of payments into the National Insurance Scheme
providing $800 million during this first year.
Registration for NHF individual benefits will commence on April 28
and benefits can be accessed some time in June.
Two additional points must be made. The first is that the
successful implementation of this Fund will be a major achievement, not only by Jamaican
standards, but internationally. There are very few countries regardless of how wealthy,
which have solved the problem of providing some measure of health insurance to its general
populace.
For example, one-fifth of the US population has no health insurance
protection at all. Therefore, it is in the interest of all of us to collaborate to make
this Fund operate successfully.
The second point is that whilst there are many who are not in a
position to make their full financial contribution to keep this Fund going, we cannot
allow those who are able to, to benefit without making a contribution. Hence those who
register for the programme will be required to have a valid TRN and we will be putting in
place arrangements to ensure speedy processing of applications for the TRN.
We need to collect the data on beneficiaries. No one will be
prevented from participating, but we need to have full information on all beneficiaries
just as in the case of the NHT and the NIS.
Efficiency and Cost Containment
Earlier on, I made the point that whilst the
analogy of running the Government being no different from running a large firm cannot be
generally applied. I wish to assure this House and the public at large, that clear steps
are being taken to increase efficiency levels in the public service. Simply put, we need
to ensure that we are receiving "more bang for each buck".
Whilst we are not where we wish to be, the fact is that we have
made significant progress as there has been improved service coming from the public sector
with the establishment of Executive Agencies which have been forced to maximize their
revenues and improve their service to the public.
Much attention has been focussed on the significant increases which
were granted to civil servants last year and the logical and correct question is what will
be given in return to justify moving the remuneration of this group of workers close to
that which obtains in the market.
The truth is that significant concessions have been made in terms
of leave entitlement and in terms of performance related increments and promotions. All
new entrants into the Civil Service are being employed with drastically reduced leave
entitlements and a clear acceptance that additional increments and promotions are related
to their performance evaluation.
For those who have been employed for longer periods, performance
based promotions will first be introduced on a pilot basis in six ministries/departments
– Ministry of Finance and Planning, Office of the Prime Minister, Cabinet Office,
Office of the Services Commissions, Ministry of Transport & Works and Ministry of
Local Government. It will be extended service-wide by April 2004.
There have been further concessions made by the workers in terms of
the reduction of departmental leave, the number of days leave which can be accumulated and
the elimination of payment for leave not taken. In the latter case, it is estimated that
this will save the Government approximately $1 billion in the first year.
There are many who may argue that these changes, although welcomed,
are not enough. However, I wish to place on record my appreciation for the level of
cooperation which has been offered by the Executive of the Jamaica Civil Service
Association in making this move towards a more efficient and accountable public service.
Let me now turn briefly to discuss the ongoing negotiations with
the JTA who represent the majority of our 23,000 teachers. The review, which was jointly
commissioned by the Government and the JTA, establishing the links between teachers and
their Civil Service counterparts has been completed. The issue is no longer about the
monetary adjustments which are needed. The increases proposed by the report and accepted
by Cabinet are significant. However, given the overall objective of greater accountability
and consistency between the conditions of service which obtain in the "market",
we feel that it is imperative that there are clear signs that there are changes which are
taking place in those areas also.
Simply put, alignment with the market is not just about salaries
and the whole exercise would have missed the major objective were we to sign an agreement
which eliminates reference to performance-based pay and reduced leave entitlement, simply
in order to achieve industrial peace.
Notwithstanding the above, we have not doubt that the GOJ and the
JTA will soon have a mutually acceptable resolution.
I have indicated that the degrees of freedom, which face the
Government in terms of the expenditure budget are limited. Nonetheless, in any bureaucracy
this large, there is always scope for savings through cost cuts and each dollar saved
provides an opportunity for either reducing the debt or spending on a programme which has
been squeezed.
Toward this objective I have decided to establish a two-man Task
Force who will report directly to me with specific recommendations on how best practices
employed in the private sector can be utilized to trim expenditure levels in Government.
This Task Force will have access to full information on procurement procedures etc. It
will comprise Mr Chris Bicknell the CEO of Tank Weld and Mr Patrick Hylton, former
Managing Director of FINSAC.
The total non-debt expenditure is approximately $90 billion. I have
given this Task Force a minimum target of a one percent saving for the fiscal year. If
this is achieved, this will be a significant step on the way to greater efficiency.
There are additional steps being taken to improve efficiency. Work
is far advanced in respect of a further round of rationalization via closures, mergers,
sharing of corporate services.
Whilst I will not provide full details here, I will give a specific
example from my own ministry. Members will recall that the present institution, the
Development Bank of Jamaica, represents a merger of the Agricultural Credit Bank (ACB) and
the National Development Bank of Jamaica (NDB). These two institutions which formerly
employed 120 persons, were merged to form the Development Bank of Jamaica (DBJ). The DBJ,
with an expanded loan portfolio now employs only 70 persons.
We intend to go even further. Members would be aware that in
October responsibility for the NIBJ was given to me by the Prime Minister. I have asked
Professor Alvin Wint of the UWI, who was responsible for the study leading to the merger
of the ACB and the NDB, to advise me how to proceed with a merger of the DBJ and the NIBJ.
I expect to have his report by the end of April and will be
following up on his recommendations immediately thereafter.
Privatization of several state entities still remained on the
agenda. I wish to assure this House and the public that there is no lack of will by
Government and whilst I have heard the advice of the private sector to privatize and
divest, very few offers have been forthcoming and in several instances, when they are
forthcoming the proposals do not have the wherewithal.
