Budget 2020 dangles before the population a number of fiscal measures that, without prejudice to other intentions, are clearly intended to curry favour with the electorate in a fiscal year at a time when two sets of elections—local government and general —are due, with the former already scheduled for December 2, 2019.
It imposes no new taxes. It offers a 15 per cent increase on the wages of CEPEP and URP workers and on the minimum wage, and a ten per cent increase of the OJT stipend. It promises to put in place a bonds-based framework to fix the long-standing problem of VAT arrears and refunds. It dangles four bones before the Cooperative Credit Union Movement, enabling in the process transfer of funds from the banks and other non-cooperative savings institutions to credit unions for payment of utility bills and enhancement of savings on shares and other deposits by account holders.
By these measures, the Government is reaching out mainly to scores of thousands of lower- and middle-income workers, whom they hope to bribe into backgrounding the difficulties and pressures that come with retrenchment from institutions like Petrotrin, TSTT and UTT, with rising costs of living, and with invisible public construction works, as well as into voting for their party.
The Government is predictably arguing, of course, that they have imposed fiscal discipline on the economy and steered it into the territory of positive growth, and that is why they can offer the reliefs that they have. Indeed, Finance Minister Colm Imbert is so impressed with his work that he gave us the paraphrase “Get up and Stand up for What is Right’’ of Bob Marley’s song “Get up Stand up’’, calling Bob “another maestro’’ and thereby implying that he, Colm Imbert, is a maestro himself.
The intolerable arrogance of the man!
It may or may not be that the Government has brought us to the point of positive growth, depending on the data set that is used but, with the fiscal largesse right in front of our faces, there should be no need to question whether Imbert has given us an election budget.
And just as he cannot deny the fact of an electioneering budget, he cannot deny mistreatment of Tobago in the budget. He mistreats Tobago in at least the following ways.
Firstly, by applying the 15 per cent CEPEP, URP and minimum wage increases to Tobago as well, he will likely damage the Tobagonian economy more than it is now, instead of inducing investment—except he (along with the THA) introduces corresponding measures to raise productivity in the private sector. The private sector in Tobago comprises mostly micro and small businesses in sectors like transport, the wholesale and retail trades, hotels, guest houses and restaurants, and agriculture, all of which mostly employ unskilled and low-productivity workers.
So legislating to raise the cost of unskilled and low-productivity labour by 15 per cent will likely cause these small businesses to lay off some of their workers and reduce investment. It will force them to raise prices to make up for the increase in cost, causing a loss of custom and, therefore, income. Laid-off workers will either end up in CEPEP and URP jobs or seek greener pastures in Trinidad.
Another consequence is that the share of government will rise from 68 per cent to 70 per cent, which will be bad news for the private sector, including tourism.
If Mr Imbert is hoping for positive spread effects from the manufacturing sector, which, he tells us, has been experiencing productivity growth by 6.3 per cent and seven per cent in the last two years, then he must face the fact that output in Tobago has been in steady decline.
Secondly, the minister has not provided any serious measures to address the diversification and development of tourism in Tobago. The large-scale investment in high-level room stock development proposed in Budget 2019 is gone, and there is no suitably scaled replacement investment either in other exportable industrial services, e.g., education, healthcare, and the creative industries. Absent too is any reference to the performance of the Tourism Loan Guarantee Scheme or any other policies to attract foreign direct investment to tourism in Tobago. The planned public investment in airport development and other infrastructure in Tobago will not be accompanied by significant private investment to export the industrialised services.
Thirdly, and most importantly, Imbert’s budget 2020 fails to address public investment in building the national capacity to innovate needed to underwrite development of large-scale service exports. For example, while it provides an increased incentive for corporate sponsorship of activity in the creative industries, it envisages no investment in the development of targeted infrastructure to boost their capacity to innovate.
The failure to provide adequately for development of a national innovation system to support services exports is underpinned by underinvestment in institutional progress in the country. Institutional progress in budget 2020 takes the form of improvements in tax administration and, while this is important, the critical meaning of institutional progress for development is constitutional progress to give the public greater voice in, and control of, executive action. But on this, Budget 2020 is sadly inadequate. Critical aspects of this inadequacy are Government’s failure to make public the reports of the Joint Select Committee on Tobago’s autonomy and its inordinate delay in bringing the Tobago Autonomy Bill to Parliament. Budget 2020 promises a bill shortly, to be debated in the first quarter of 2020, but so far, Tobagonians have no idea what this bill contains.
Fourthly, in line with a trend that started in 2002, Minister Imbert fails to make adequate provision for development spending on the island. A good measure of the consequences of this failure is that in 2018 Tobago had a GDP per capita of US$4,200, which is 4.5 times lower than the national estimate of US$18,872. In relation to this massive development gap, Budget 2020 provides a mere $231.6 million for development spending in Tobago, close to the minimum provided by the Dispute Resolution Commission, even though in June the Chief Secretary asked for $2 billion.
The gap is a reasonable measure of the extent of underfunding of development in Tobago. To put the $231.6 million allocation in perspective, it would take 32 years for spending at this rate to allow Tobago to complete one development project scaled to the $7-billion San Fernando to Point Fortin highway in Trinidad.
At this rate, there is little chance that Tobago can successfully develop the tourism sector on behalf of the nation.