Madame President
Once again it is an honour and a privilege for me to rise to make a contribution to the debate on the debate for the upcoming fiscal year 2008/2009.
In addition to the expenditure estimates that we are being
asked to scrutinize and approve, legislation also being proposed include:
The budget debate is the most important, and it is
definitely the most watched debate on the calendar of this Honourable Parliament.
Observers, Bahamians and others including international agencies, watch to learn the how the administration intends to deploy the financial resources of the State to address the issues and concerns that face the public, and to provide the level of services that the public expects and deserves.
It is a time when the administration has the full attention of the public. Therefore it is the most opportune time for the administration of the day to clearly lay out its plans, programmes and priorities and to invite stakeholders, particularly all members of the Bahamian public, to buy in to the vision, to play their role and to make their contribution to moving our country forward.
Today the issues that are foremost on the minds of Bahamians are:
In seeking to address these issues, members of the
public look to the government for direction. The administration indicates
the seriousness with which they regard these issues not simply by how much
it talks about these issues but by the level of resources, indicated in
this budget, it devotes to confronting these issues.
In other words the administration has to put its money where its mouth is.
So, for example, while no minister or any individual person has the solution for the crime problem, citizens rightly look to the political directorate, those who control the power and resources of the state for leadership, direction and focus.
I wish to address in my presentation, the focus of the budget on these issues amongst others and make some suggestions that the administration may wish to consider.
Firstly though, Madame President I wish to commend the government for some initiatives that I view as positive that have been introduced in this budget.
Among them:
The move to eliminate the stamp tax payable on moving
a mortgage from one lending institution to another and to facilitate loan
consolidations to a maximum of $500k.
I fully support this initiative and believe that by removing
that barrier and giving the customer more choice, it will foster greater
competition and foster better service to the customer. I do not believe
that prudential standards in the financial services industry will be compromised.
I trust that the necessary resources and manpower are made available to
the Ministry of Finance in order to properly implement and monitor this
programme.
Madame President, I further commend the administration
for the removal of stamp tax and customs duty where they existed on certain
food items and the reduction of customs duty on others.
If the savings are passed on to the consumer, the reduction
in the price of frozen vegetables such as broccoli, cauliflower and on
mixed vegetables should put these within the reach of more consumers and
thus help to promote a healthier diet.
I urge the administration to take steps to ensure that these savings are passed on to the consumer. It will be a massive waste of time and energy if we were to implement these cuts and only to see them not have the desired effect. The administration has this responsibility, it can not say, “we changed the law and so we did our part.”
Senator Wright states that merchants will pass on the savings or risk losing customers. That a customer will simply shop around to find the merchant that has passed on the savings by lowering prices. This is true in a perfect world. We do not live in a perfect world.
Not all customers have the choice to go from shop to shop.
People in the Family Islands do not have the same ability to shop around that we in New Providence have.
We take for granted that everyone can jump in a car and shop around. Not everyone has a car. For those that do own a car, with the high price of gas, it may be counter productive to drive from place to place looking to save a few cents.
So the government needs to police this and ensure that the savings are passed on.
The same for duty reductions on building materials and household items (liquid detergent).
On the subject of stamp tax and custom duty reductions on food items; I do however believe that efforts should have been made to reduce the cost of food consumed on a daily basis by ordinary Bahamians.
While the administration claims that duty was reduced or eliminated on 160 food items; a closer study of this list show that while breaks were given on items such as frozen and fresh vegetables, some breads and some cereals, the bulk of the list consisted of items such as frozen okras, mangosteens, mangos, Brussels sprouts, aubergines, dried apricots, dried figs, pistachios (shelled or unshelled), pasta (with egg or without), prunes, guavas, cassava, watermelons etc., turnips, salad beet root, hulled cereal groats, dried bananas, Brazil nuts etc.
Hardly the items that the average Bahamian puts in his/her trolley when he/she goes to the food store.
In addition, many food items are already free from customs duty and stamp tax so the rising price of these foodstuffs will not be affected by these measures.
I will quote Mr. Patrick Treco of Continental Foods, operators of Blue Hill Meat Mart and Fox Fill Meat Mart in an article that appeared in the Tuesday June 3rd edition of The Tribune entitled:
“Food duty elimination pales alongside 100 per cent price increases in 2008”
“Mr. Treco told Tribune Business that in many cases the 2 per cent Stamp Tax elimination translated to just a few cents per individual item.”
“Mr. Treco said Bahamians have to also bear in mind that there is no duty on many food items”
“For instance Mr. Treco said consumers will not see a decrease in the price of flour, rice and cooking oil, whose prices have skyrocketed over the past few months”
“Take flour. A bushel of flour used to be $17 and now it is $35.15 or a 100 per cent increase. Where we would have sold flour for $1.90 now it is $4.80 so even if you take the 2 percent stamp tax off that, it only amounts to about nine cents”
I urge the administration to seek ways to affect the prices of these items.
A starting point may be determining to what extent the increase in transportation costs have contributed to price increases and explore the option of subsidizing in part or in full the additional cost associated with importing basic foodstuffs.
I am advised that in late 2007 to bring in a 40foot container cost $1850 in freight. To bring in that same container now costs over $3,000 in freight. Additional costs are affected by the increase in freight costs.
Still on the issue of food, I worry that we may be further undermining food security removing levels of protection for farmers provided by tariffs.
Food security comes with the understanding that we may have to pay more for local produce given our size and the fact that we have to import agricultural inputs. With education Bahamians will come to accept this reality more. Duty eliminations on watermelons, cassava, bananas, sweet potatoes and sweet peppers and okra, among others put our farmers at a disadvantage when they should be getting help.
The true test of the measures to bring down or stop the rises in the cost of food will be when all of us but especially those challenged to make ends meet, and the poor, can go into the food store, purchase items for a balanced diet and see a reduction in their food bill.
Simply shouting that, the lowering of duty on 160 food items means you are a friend of the poor is false. When the list of items is examined, it is plain that the poor do not benefit to the extent that the administration would have us believe and it fact by removing protections for farmers, our small farmers especially in the Family Islands are being hurt.
I hope these measures contribute to this but I urge the
government to be vigilant.
I am happy that the administration has re-introduced the stamp tax exemptions for first time home buyers and customs duty exemption (Excise Tax Exemption) for public service drivers and an Act for the Encouragement of Family Island Development.
I say again that none of these should have been allowed to expire in the first place. Thankfully, for whatever motivations the administration has seen the gross error in allowing these measures, measures put in place by the PLP administration to assist Bahamians, to expire.
I appealed from this place for others to ask the administration to reconsider their position, and I want to, on behalf of those who will benefit to thank those who publicly voiced their concern Mr. Wrinkle of the Bahamian Contractors Association, Rev. Walter Hanchell, William Wong.
It is amazing how quickly an about face can be done. Clearly there was no philosophical basis for the FNM to cancel these concessions. Simply because they were PLP initiatives.
In the Bahama Journal of 16 January 2008, the Minister of State for finance said: “It was a sunset law and that is really the matter for the moment”
What he meant was that the law expired and that was that full stop. No need to renew it.
Lo and behold five months later the law is being re-implemented with a higher ceiling. I am happy to see this but urge the government to stop playing with peoples’ lives by this on again off again ad hoc, seat of the pants governance.
The government should seriously consider refunding the taxes paid by those who had to pay stamp tax during the six months when the law was cancelled. It is not fair.
Public service vehicle exemptions only for new vehicles whereas in the previous legislation allowance was made for exemption of 50% of the duty payable on vehicles three years old or less and 100% duty exemption on new vehicles. Not everyone can afford a new car. I urge the government to find a way for used vehicles up to three years old to be included in this legislation.
Family Island development
Again this legislation was re-introduced and similar
legislation put in place by the PLP repealed.
The FNM loudly criticized the PLP for putting a sunset provision in the Stamp Tax Exemption law but lo and behold, in this legislation there is a sunset provision, it ends in 2013.
I believe that there is nothing wrong having sunset provisions in legislation, it allows review and adjustment and gives persons a sense of urgency. It is shocking that a few weeks ago the FNM would talk about have legislation expire after five years as if is was a stupid thing to do and come right back doing the same thing in the case of the family Island Development Act and the City of Nassau revitalization Act. Amazing.
This budget has been described as a recession budget
A budget designed to “prime the pump” and bring the economy out of a slump
But how did we get to this point? How did we get in a slump? The administration would have us believe that the TOTAL blame should be placed on the sub-prime crisis and other world events.
But let’s examine it.
In its monthly and quarterly reports from February 2007 to January 2008, the Central Bank of the Bahamas predicted continued growth of the economy based on robust construction activity and continued foreign direct investment inflows. It spoke of a softening in tourism.
In its report released last November following their visit in September 2007, here is what the IMF had to say:
“GDP grew by 3.50 per cent in 2006 supported by buoyant construction on new resort and second home projects”
“Growth is projected to rebound next year based on expectations that tourist activity will recover as new and upgraded facilities come on stream”
In February of this year in the mid-year budget statement, here is what the Prime minister had to say as he introduced a new word “decoupling” to the vocabulary of many Bahamians. Quoting the Prime Minister:
“The current outlook for strong capital inflows into productive projects already underway may not be seriously affected by global or U.S. developments in 2008 and 2009.This could give rise to what we consider would be a certain element of decoupling between the performance of the U.S. and Bahamian economies in 2008. By this I mean that while normally the health of our tourism sector and therefore our economy, is heavily connected to prevailing conditions in North America, in 2008 matters might be a little different. This is because even if there is a more severe recession in the U.S. in 2008, the capital inflows and the momentum of some of the major investment projects in the Bahamas will partially compensate.”
Up to February of this year we have pronouncements that the Bahamian economy that due to the healthy pipeline of foreign direct investments, never mind the binoculars, the Bahamian economy was set to grow, despite what was happening in the United States economy.
Of course all of this was before the unfortunate events surrounding Bahamar.
If we look at the tables in the budget communication, we see that this is not unusual. From 1997-2007, in seven of those eleven years, the Bahamian economy outperformed, performed better than the US economy. It is right here in the budget communication. It is possible for the Bahamian economy to grow faster than the US economy. It has happened before. For the administration to tell Bahamians that we have no control over our destiny is not true.
The formula then for continued robust growth in the Bahamian economy was very obvious. The FNM was being told to:
Ensure than the foreign direct investment projects that were in progress continue and that those in the pipeline come on stream in a timely manner with the full support of the new administration.
In light of the softening of the tourism product; take steps to strengthen the tourism economy.
Ensure that construction, including residential construction, remained robust.
Instead what we had was:
Cancellation of 90mil in legally executed, above board
public works contracts to benefit the Bahamian people with the multiplier
effect, the true impact of this was close to $300million
the deliberate act to allow the expiration of the stamp
tax exemption for first time home buyers thus severely impacting construction
in a negative way
Intemperate words from the highest office that led to the withdrawal of a major investment partner and the shaking of confidence of other potential investors.
Tourism starved for funds until February of this year when during the mid-term budget review, a few dollars was thrown into the pot for promotion; a promotion programme that Senators on both sides have criticized, from this place, as ineffective.
In this budget communication we have the Prime Minister saying about the Bahamian economy:
“Though it may be able to decouple to some extent from adverse forces in the global economy it cannot totally isolate itself from these forces”
A backpedal it I ever saw one.
But we knew this!
So it is no accident that we are where we are economically. It is a result of deliberate mis-action and inaction of the current administration.
So here we are “priming the pump”
In fact we could have been further ahead as a people,
reaping the benefits of the multi annual forecasts from previous budget
communication tables.
Other issues
Crime
The Prime minister in his national address in January identified crime as the single most important issue facing the Bahamas.
Yet in this budget, at a time when the FNM has the full attention of the public, the FNM has failed to present a comprehensive programme to the Bahamian public to tackle the crime problem.
This is the time to present such a programme and invite the public to buy in and do their part with the government taking the lead. The FNM has missed that opportunity.
Very worrisome is the fact that the Royal Bahamas Police Force is allocated LESS in this budget than last year’s budget.
Last year the RBPF was allocated $117.4mil recurrent and $11.2mil capital for a total of $128.692million.
This year the RBPF is allocated $121.9 recurrent and $4.9 capital for a total of $126.893.
Therefore in 2007/2008 the police got $128.692million. In 2008/2009 the police will get $126.893million.
In the midst of a crippling crime crisis the FNM is cutting the resources available to the police to fight crime and protect law abiding citizens.
Similarly the Royal Bahamas Defence Force is allocated less in this budget than in last year’s budget. In the budget of 2007/2008 the RBDF was allocated $45.39million recurrent and $12.941 capital for a total of $58.33 million while in 2008/2009 the RBDF is set to get $45.81million recurrent and $3.072million capital for a total of $48.88million. Almost a full $10million less than last year.
On page 27 of the budget communication it says:
“Additional sums have been allocated to Ministries and Departments under the Capital Budget including principally:
The Royal Bahamas Police Force nearly $5million and the Royal Bahamas Defence Force some $3million.”
In fact the sums allocated are LESS than last year NOT
“additional sums”.
National Debt
Receiving very little mention in all the discussion Madame President is the alarming fact that, for the first time in history, the national debt of the Commonwealth of The Bahamas has passed the $3billion threshold at the end of 2007. This happened on the watch of the FNM
In fact the single largest increase in budget allocations in this budget goes not to law enforcement, education, health or tourism. The single largest increase to the tune of an additional $22.9million goes to pay interest on the national debt.
This is very troubling because it has implications generations yet unborn. Each Bahamian now owes$9,500 and climbing.
The government must make the management of the public
debt a priority and devote the necessary manpower and resources to do so.
It must be someone’s job to manage the debt and seek ways to reduce it
and/or reduce the cost/impact of it. It must not be out of sight/out
of mind.
Cost of Living
I spoke earlier of how, with much fanfare the FNM announced the elimination of the 2% stamp tax on a purported 160 food items. I repeat there is no guarantee that these savings will be passed on by merchants to the public.
The increasing price of diesel and the windfall in taxes that the government is getting as a result of these increases, threatens to lead to an increase in bus fares and in the price of fish and in the cost of freight to the Family Islands. The government must bring relief in this area by rethinking its tax regime in respect to fuel both gasoline and diesel. Drastic times call for strong measures.
Food Security/Agriculture
In a time of global concern about food security and the rising cost of food, the FNM is silent on this issue. Again at a time when the FNM has the nation’s attention, they have missed an opportunity to lay out a programme to improve agriculture and reduce the food import bill and therefore decrease the cost of living for Bahamians.
I like what the minister of Agriculture said about backyard farming. However there is no money in the budget for the programmes of which he speaks.
Those are my thoughts. I hope the budget is implemented for the benefit of the majority.
Thank you.