The upcoming 2020/2021 budget is being described as a challenge given the Prime Minister’s announcement that Covid-19 has caused a $15 billion hole. In the process people are expecting a hard budget, one that will be empty of goodies but hopefully one aimed at keeping our heads above water.
The challenge for this budget is how to reduce the gap between revenues and expenses while ensuring that people remain employed, have food on the table, and are assured through active government policies that they have affordable and secure shelter as well as adequate public health care. The situation is made worse since it is becoming increasingly difficult to peg the budget on the price of oil and gas given the volatile nature of prices in the energy sector. The question therefore is on what will the budget be pegged? Or will another approach be used? What is the realistic level of revenues which can be expected in the next budget period? What expenditures are necessary and should be priority? Questions like these should underline the preparation of the budget. The presentation of a budget of hope is not what the country needs at this time. It needs a dose of reality. The population must be given real data. This is not a budget to create false hopes. Truth is required about our prospects if the population is to make the sacrifices.
While there are many who are suggesting that the Minister of Finance may increase personal taxes, this would not be a wise idea. With many salaried employees already suffering from a combination of wage and salary cuts as well as shortened hours/days of work there is not much fat for the minster to cut. As well, to further increase corporate and business taxes will have a negative impact on jobs and squeeze businesses. It must also be remembered that a vast number of persons have lost their jobs in the small and medium-size business sectors.
The increase in the rate of VAT to 15 per cent is also a possibility. However such a decision can have an impact on both the cost of living and the cost of doing business. In the current situation the minister will be well advised to avoid increasing any taxes on basic food and medical supplies.
Another area of concern has to do with the possible loss of homes by persons defaulting on mortgages. The minister should find some way to cause protection for homeowners since a social tragedy of great proportions is possible if the quantum of mortgage defaults were to increase substantially.
The Government cannot just continue to draw down on the Heritage and Stabilisation Fund, to borrow and sell assets to cover recurrent expenses. It will not be in a position to perpetually give salary grants as the pandemic continues. As such the Government has to become creative in working its policies and incentives to keep businesses afloat thereby affecting their ability to keep people employed.
With the need to keep earning foreign exchange the Government will be well advised to support export-type businesses by ensuring that they have foreign exchange to keep the industries active. With oil prices stagnant the chances for income via taxes and royalties from this sector does not look promising.
Given the state of tourism in Tobago as well as with the small- and medium-sized guesthouses on both islands the need for stimulating the domestic tourism market is critical. The pumping, some say, dumping, of money to hotels in Tobago for upgrading leaves a lot to be desired. The accounting for these grants does not appear transparent. I say boldly though that Tobago has to change its attitude towards Trinidadians wanting to stay in Tobago. The unwelcome climate created by the “Calcutta ship” statement remains a blot in the relationship between Tobago and many Trinis who continue to feel unwelcome in Tobago.
It is against this background of reduced revenues that one has begun to see a rabid discussion on the Water and Sewerage Authority and I am sure will soon see on T&TEC as well as State enterprises in general. I will not be surprised to see massive reductions in staff at both WASA and T&TEC as well as a halt to hiring in the public service. In the case of the public service it is my personal view that it is unproductive in many ways, it needs a phenomenal attitudinal shift on the part of all employed in the public service but especially among the senior managers.
If I were writing this budget I would start by asking myself the following questions:
1. How am I going to close the gap between necessary Government expenses and the real revenues expected?
2. How am I going to ensure businesses remain afloat and that unemployment figures do not rise?
3. How am I going to prevent rising poverty and starvation over the next 12 months?
4. What am I going to do to prevent increases in the cost of living, especially for food, rent and utilities?
5. Which State enterprises require radical surgery like was done in the case of Petrotrin and what do I intend to do with similar State enterprises?
6. How do I increase activity in the construction sector and in agricultural production?
7. How do I ensure that the health sector is adequately prepared to continue to fight Coivd-19?
8. Am I going to bite the bullet and introduce property taxes as well as increases in utility rates?
9. What sectors of the economy should be incentivised given the objective of keeping jobs and people assured of basic needs.
The options are tough and the policy decisions have narrowed immensely.