Contribution to the Budget Debate

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CONTRIBUTION TO THE BUDGET DEBATE

BY

THE LEADER OF THE OPPOSITION

THE MOST HONOURABLE PORTIA SIMPSON MILLER

THURSDAY 30TH APRIL 2009

SALUTATIONS

INTRODUCTION

Mr. Speaker,

Let me, at the very start of my presentation acknowledge your stewardship of the proceedings of this Honourable House over the nineteen months that you assumed the post of Speaker of this noble national institution.

Members of this Honourable House, I want to first thank Almighty God for providing me with yet another opportunity to participate in the National Budget Debate process.

I want to thank my husband, whose friendship, partnership and love strengthens my steps and my resolve to do more in the service of the people of Jamaica.

I also want to thank the members of my family for their unending love and support for which I will remain forever grateful.

I also extend my sincere appreciation to my housekeeper, who is a key member of my personal support team and a kind and loyal friend.

Mr. Speaker,

I must also thank the people of Jamaica, my three Councillors, my constituents and members of the People’s National Party for their continued love and support.

Let me also thank the members of staff of the Houses of the Parliament. In particular Mrs. Heather Cooke, Clerk of the House who is recuperating at home and recharging her batteries to rejoin us in the House. I also acknowledge Ms. Valerie Curtis who has ably carried out her role as Acting Clerk of the House.

I also acknowledge the staff at the Office of the Leader of the Opposition and thank them for their assistance throughout the year.

Mr. Speaker,

This budget debate takes place at a most crucial time in the life of our people.

It comes against the background of what is described as the most severe economic recession being faced nationally and internationally since the Great Depression of the early 1930s.

Today, fear taints the hope of many Jamaicans and deep anxiety destroys our joy.

As Leader of the Opposition, I have a responsibility to critically examine this budget as well as its impact on the various sectors of our society.

This presentation therefore, will be about the people of Jamaica.

It will tell the story of the working class and the middle class.

It will tell the story of the working poor and the unemployed poor.

Indeed it will be about our farmers, our professionals – young and old, as well as the micro, small, medium and large enterprises.

This presentation will be about the men, women, children, the youth, the young adults, and the elderly and about persons with disabilities.

Mr. Speaker,

This presentation is dedicated to the protection of the Jamaican Family and the restoration of their hope.

Never in the history of our country did our people have to contend with such burdensome mortgages, punishing food cost, crushing cost of medication, devastating energy and utility bills, high prices, increasing rents and leases, mounting tuition costs, mounting debt, suffocating interests on loans, wage freezes, salary cuts, redundancies, and delayed minimum wage payments.

Standing here today speaks volumes to the fact that I am still very optimistic about the future of this great country.

Our parents were convinced that we, their children, would do much better than they had been able to do.

We would be better educated than they were and that we would get better quality jobs than they had.

Just as this is the case Mr. Speaker, it was also intended that our generation would improve the foundation laid by our parents and so advance the development of future generations.

This progression has for centuries been the fuel of hope that was passed on from one generation to the next and in most cases, this most primary objective had been met.

Mr. Speaker,

At this point in history where we find ourselves, that progression - that continued development; our very hope is at great risk.

As we acknowledge the global financial crisis, we must also properly assess and quantify the local component of the problems with which we are faced.

No one could seriously participate in a discussion at this level without those acknowledgements.

It is against that background, that I make my presentation.

The National Budget is to be considered as the nation’s Blue Print for development in the fiscal year for which it applies. More than a combination of expenditure and revenue projections, the Budget should be founded in a social framework that

centralizes and emphasizes the hopes and aspirations of the people.

In the current context – the 2009/2010 budget as presented, is incoherent and does not address the developmental needs of the country in the wake of the financial crises.

It does not identify a way forward, and so it leaves the Jamaican people unprotected as does not inspire hope.

IMPACT OF THE BUDGET ON THE JAMAICAN PEOPLE

Mr. Speaker,

This year, the Government plans to spend JA$555 billion.

There are divergent views on this budget.

It is however unanimous that this budget includes the most confusing tax package ever presented by a government in Free and Independent Jamaica.

As I speak, we are still not clear on the full list of items to be taxed.

Some people are saying that this budget is a “Three Card Trick”!

I say, since it is the people who will be required to finance this budget, let them be the judge.

ANALYSIS OF THE BUDGET

Mr. Speaker,

An analysis of the macro-economic indicators over the life of this Administration reveals a very stark picture.

For this Fiscal Year the Government has: -

• Introduced a tax package of J$24.1 Billion following on a tax package of $5.4 Billion in the 08/09 fiscal year, making a grand total of 29.5 Billion since September 2007.

• Inflation has moved from 5.8% in September 2007 to 16% by the end of fiscal year 2007/08 and to 12.4% by the end of fiscal year 2008/09.

• In two years, interest rates have increased to over 20%, resulting in the Government having to pay $159 Billion as interest charges this year. This is $35 Billion more than the $124 Billion paid out last year.

• And the National Debt Stock has grown beyond the Trillion Dollar mark.

As Dr. Davies indicated in his presentation to this House on Tuesday –

• Consumer, Business and Investor Confidence has plummeted to an all time low;
• Unemployment, job losses and job cuts have become the order of the day;
• The Economy has contracted and is now in recession;
• There is instability in the Foreign Exchange Market – the Dollar has lost almost 20% of its value in the last fiscal year;
• The Fiscal deficit has gone beyond 6% of GDP.

These results contradict the myth that was propagated by this Administration that they would be better managers of the National Economy.

Further, these results are largely the causes of poor management, an unwillingness to accept reality or a protracted inability to understand the complex issues of the global economy and their implications for Jamaica.

In contrast, Mr. Speaker,

• In the last two years of our Administration, the total tax package was 1.7 Billion Dollars
• Inflation had fallen to 5.8%

• Interest rates fell not once, not twice but four times to 11.8% - The lowest in over thirty years!
• Poverty level fell below 9.9%
• Unemployment was down by 8.6%
• The total debt was below the Trillion Dollar mark.

Mr. Speaker,

That was management!

THE GOVERNMNET’S RESPONSE TO THE CRISIS

Mr. Speaker,

The Opposition Spokesman on Finance has already gone into some detail regarding the inadequate response by this Administration to various aspects of the global economic crisis.

It cannot be contradicted that the government was slow off the mark in acknowledging that there would have been a severe impact on the Jamaican Economy.

All Jamaicans can recall the conflicting statements by the Prime Minister, the Minister of Finance and the Minister of Tourism about the extent to which the international crisis would affect Jamaica and our people.

Every time I recall the Minister of Finance, daring to suggest that the recession in the United States of America would be beneficial to the Jamaican Economy, I shudder.

That was truly a remarkable statement considering the amount of information to the contrary.

Considering that the USA is our largest trading partner, it was inconceivable that with the huge job losses, thousands of foreclosures and the instability in the stock markets, that Jamaica would not have been negatively impacted.

Shortly after that statement by the Minister, instability developed in the foreign exchange market, resulting in the need to increase interest rates.

Remittances started to decline and Jamaica experienced a fall out in the bauxite/alumina sector. Yet members of the Government continued to paint a picture of roses and daffodils, ignoring the clear warnings of ‘danger ahead’ as other governments had done.

IMPACT OF THE BUDGET ON THE JAMAICAN PEOPLE

THE STATE OF THE MIDDLE CLASS

Mr. Speaker,

The standard of living of the middle class has deteriorated beyond all expectations during the last nineteen months.

This budget comes at a time when: -

• Many young professionals
• Teachers
• Nurses and doctors
• Journalists
• Public sector workers
• Members of the security forces
• Entrepreneurs
• Farmers
• Fisher Folk
• University graduates
• Household helpers, and
• Single parents

are ALL faced with unprecedented challenges.

Mr. Speaker,

These challenges include increased mortgage rates, and increased costs for educating themselves and their children, increased cost of food, transportation and utilities.

All this at a time when a wage freezes and salary cuts have been imposed while taxes have been increased.

So I ask, what is there in this budget for Jamaica’s Middle and Working Classes?

Owning a home is the dream of every Jamaican. However the high interest rate regime and the worsening economy are converting that dream of owning a home to a nightmare.

The reality is that many Jamaicans are now losing their homes – many live in fear of losing their homes and still others are doubtful of ever owning their own home.

The young professional whose mortgage payment has been increased as a result of this Administration’s short-sighted policies are having great difficulties coping.

The situation is worsened by the increase in the price of petrol as a result of the gas tax and the consequential increases in the costs of almost all goods and services.

Mr. Speaker, that professional, if he or she works in the public sector is further faced with a freeze of salary and benefits or, if in the private sector, faces salary cuts.

Last year I warned of the dangers of increasing the interest on NHT mortgages.

The consequence of that decision and the failure to respond appropriately to theeconomic situation has made it very difficult for contributors to afford housing through the NHT.

The most recent survey by the NHT shows that 80% of contributors cannot afford the $3.5 million mortgage, even when the salaries of two family members are combined.

An editorial which appeared in the Gleaner on the 18th April 2009 stated that, and I quote:

“In the final analysis the findings of the NHT survey is less about the agency itself than it is about the failure of broad economic policy in Jamaica”. End Quote.

Mr. Speaker,

To illustrate the impact of this Administration’s bad management and bad policies, I will present the cases of three Jamaican families: -

1. Paul the Entrepreneur
2. Sonya the Security Guard, and
3. Tenneel the Secretary

Paul’s situation became known to me when I received a copy of a letter outlining his challenges.

He wrote:

“I have always held the virtues of hard work, respect and justice at the centre of my being. I started a small business a year ago, but it has been gravely affected by the current economic climate. As a result, I have not been able to keep my monthly mortgage obligations.

The NHT has now referred the matter for legal proceedings. I am not seeking to be absolved of my responsibility. Instead, I seek an intervention of the human spirit on the matter.

I understand that financial institutions must carry out their functions, but I fear that they have so prioritized their operations in such a manner that it drowns out the voice of the honest hardworking citizen, crying for compassion and understanding.”

In spite of this plea for help, Paul’s house was forcibly sold two days before Christmas last year.

I subsequently learnt that Paul has a wife and two young daughters.

I also learnt that in his attempt to sustain his family in the face of his business having failed – he used his motor vehicle as a “robot taxi”.

His vehicle was seized by the Police. He was therefore left destitute and without hope.

Mr. Prime Minister, the letter I received, was written to you!

Paul is one of many who have lost their houses because of the cruel policies being pursued by this government.

As I recall his situation, I am reminded of the Bob Marley song, “Talkin’ Blues”

“Cold ground was my bed last night, and rock stone was my pillow too”….

Colleagues….

If it is not us, the elected members in this Parliament that should find solutions to the challenges our people are facing, then really, whose responsibility is it?

I now turn to the case of Tenneel - a single mother and a Secretary in the Public Sector.

She earns J$500,000.00 per annum.

Tenneel has been impacted several times by the new Tax Package.

Based on the Minister’s ‘give-back’ announcement she will ‘get back’ approximately $52,000.00 per year.

As a motorist she will now have to pay more for gas.

Let us assume that she will only pay the additional $8.75 per liter for gas, and assuming that today’s gas prices were to hold steady, her gas bill would increase by $2,200.00 per week or $26,400.00 per year.

This would leave $25,600.00 of the Finance Minister’s ‘give back’.

Tenneel now also has to pay GCT on a wide range of food items and other commodities (which were previously exempted),

and unfortunately, she still does not know what is on the full and final list of items to be taxed.

This despite several checks on the Finance Ministry’s website.

If we assume that the increases from GCT amounts to $3,000.00 per month (and I am being very conservative); then Tenneel will spend an additional $36,000.00 per year to purchase basic goods and services.

Tenneel will therefore spend $26,200.00 more for petrol and $36,000 more for GCT charges……

This is a grand total of $62,200.00 OR $10,000.00 more than the “give back” that she received from Minister Shaw’s calculations.

Mr. Speaker,

Minister Shaw now needs to explain to Tenneel where is the “give back”, since she is spending $10,000.00 more than she received in the Minister’s “so called” give back.

Let me now introduce this Honourable House to Sonya, the Security Guard.

Her salary is made up of two components –Housing Allowance – which was not previously taxed and her Basic Pay.

Under the government’s “give back”, as of July 1, Sonya now pays Income Tax, NIS, NHT, Education Tax – all statutory deductions, not only on her Basic pay as she was accustomed, but on the combined amount.

Let us do the Math.

Sonya earns J$8,500.00 per week

J$5,100.00 is her Basic Pay

J$3,400.00 is her Rent Allowance

Previously her total PAYE and other statutory deductions were approximately J$709.00 per week.

However, with the new Taxation Package, personal allowances will be taxable as from July 1, this year.

Sonya will therefore pay a total of J$1,139.00 per week in taxes after taking account of the increase threshold.

This means that Sonya will suffer an additional J$430.00 per week or a Grand Total of J$22,360.00 per year in additional payroll taxes alone.

This Mr. Speaker does not include the impact of the gas tax or additional GCT on the prices of transportation, food and other commodities.

Mr. Speaker,

There is nothing in the budget for Sonya, Tenneel or Paul.

These are just three cases. I haven’t even spoken about the Tourism Worker, whose gratuity is now taxed.

Or about the Nurse who still awaits a resolution to her new salary situation, or to the Security Forces, who like Sonya, will now pay taxes on their Uniform and Rent allowances.

Nor have I spoken about the Bauxite workers who will be losing their productivity incentives or Contracted Professionals throughout the Public Sector and Private Sector who will now have to pay income tax on their gratuities.

Jamaica – this is not a “give back budget” – this is a “hold down and tax Budget”.

Mr. Speaker, as a youth in my Constituency said to me yesterday -

“Dem dash it pon wi without waaaaaning!”

Mr. Speaker,

There is another group of people in the society who the “give back “budget will not impact at all.