Budget 2012/13 - Property tax, spending cuts

One more month left in the current 2011-2012 financial year—and counting. When Opposition Leader Keith Rowley pointed this out, it was August 22 and there’s actually now less than a month left in the current financial year. Rowley was at the time expressing concern about budgetary allocations for disaster relief following last month’s floods that struck western Trinidad. If the Opposition’s mind is on budget planning, hints are already circulating from the Government’s direction the 2012-2013 budget may be presented around September 21. “...Or between then and monthend—you know how things change,” said one People’s Partnership (PP) official last week Wednesday. Finance Minister Larry Howai has, however, made it clear that neither the date nor some of the direction is fully his call, but that of his boss, Prime Minister Kamla Persad-Bissessar. Upcoming budget debate will be the launchpad for resumption of parliamentary business later this month as the new financial year begins on October 1. And for the 28-month-old PP administration, the package will be a hardcase basis for balancing national priority over politicking — evidenced by Howai’s deference to his boss’ input—and likely to be a mid-term treatise for various economic ills. “I’m ready to go next week if we have to, but it has to be considered and approved first,” Howai said on Monday morning.

Howai, who was thrown into the deep end of budget planning only two months ago, met yesterday with his two colleagues in finance, Trade Minister Vasant Bharath and Minister of State Rudy Indarsingh. Asked if they could each describe what the 2012-2013 package aims for, Howai said, “Continued growth: it’s a key feature of what we’re attempting.” In London on Monday, Bharath’s projection: “Hope and Optimism. Indarsingh’s: “Continued growth, job creation, economic diversification.” Asked if the Budget would surpass the 2011- 2012 package of $54.6 billion, (SEE BOX) Howai replied, “I wouldn’t want to answer that at this stage.” Ministries began planning since February under former Finance Minister Winston Dookeran when circulars were issued to start Budget work. Finance officials said much of the process was expedited under Dookeran’s watch and it remains for Howai to tie up loose ends and “decide what he wants to say “ in the Budget. Taking over from former Finance Minister Winston Dookeran in June, Howai immediately began stakeholder consultations. That concluded, he has been meeting technocrats to begin collating his package. Detail tweaking and final scrutiny are now on the agenda.

The 2012-2013 prescription will be a newlook budget presented at a new venue: the Waterfront Parliament. While Howai’s style is different to Dookeran’s, his package will, however, implement the third phase of the PP’s development plan, which began with Dookeran’s first two presentations, which were geared towards economic stabilisation, job creation and economy stimulation. PP officials said last Friday current planning aim is for the 2012-2013 package “not to cross” the $55 billion mark and to retain the deficit around the seven-plus per cent mark. Planning Minister Bhoe Tewarie said Monday that the Government management of the 2011-2012 deficit involved “modest borrowings. It’s gone according to plan and there’s been no reason to go overboard.” Coming aboard at mid-term, former banker Howai, who has confirmed a continuing deficit budget—possibly for the next few years—and hinted at consideration of returning the property tax, may also have to include arrangements to continue dealing with Clico payoffs and company regrowth. His colleagues have already prepared the community for a new $410 million expenditure item in the budget with the Constituency Development Fund allowing MPs $10 million each for work in their areas.

Howai’s To Do list will overall have to juggle completion and initiation of projects—under financial constraints—with stimulating the economy and revenue-boosting mechanisms, his collegues’ demands and political considerations, plus other fiscal requirements, all with international challenges in mind. Admitting to the financial crunch, a PP official said on Monday, Howai has been challenged to come up with revenue-earning or cost-cutting strategies—or go for both within the PP’s political constraints. It will be a test not only of Howai’s financial skills and purse-string philosphies, but also the economic expertise of his fellow “newbie”, Central Bank Governor Jwala Rambarran, whose divisional data would have assisted the budgetary planning process (and whose concern about food prices are likely to be addressed in the package.) New items ahead In sync with the need to increase revenue or cut costs, the Business Guardian learned several new “items” are expected in the budget. No one wanted to use the word “tax” when pressed, but there are admissions within the coalition some form of property tax must be considered.

The issue was how this can be worked out within the confines of the political implications for coalition partner Congress of the People (COP) which spearheaded PP”s “Axe the Tax” drive—a large part of its successful 2010 election campaign. PP sources are also projecting prioritisation in people-centric areas: allocations for health and education with a “fairly large chunk” (sic) for national security. The package will likely include funding for construction projects in the health sector after a dry period of construction following the large scale projects of the Manning administration, which the current administration is now utilising. Health Minister Fuad Khan said last Wednesday the ministry’s 2012-2013 plans include starting construction on the longpromised Oncology Centre, the Prime Minister’s pet project—the Couva Children’s Hospital—hospitals in Sangre Grande and Pt Fortin, health centres, including Carenage and upgrades to the San Fernando, Mt Hope and Port-of-Spain hospitals. The ministry may have funds left over from its last $4 billion allocation to cover projects as Khan said not all of the 2012 funding was used since the ministry was in planning rather than construction phase. Further construction—and stimulation of the economy resulting from this—is expected from start of projects to shift certain ministries such as Science and Tertiary Education, from the north to central, begin the UWI Penal campus and other southern satellite education institutes.

In that sense, one prong of the Government’s plan to drive the economy may lie in the construction and affiliated sectors. National Security Minister Jack Warner’s much anticipated anti-crime plan is set to be a centrepiece of the budget and the major area of expenditure in that ministry as well as the focus of Warner’s budget debate contribution. This, judging from Warner’sdetermination to keep it under wraps despite his regularly headlining statements on everything else but his crime plan. If so, it will certainly be among key aspects of the upcoming budget debate, apart from the $10 million constituency funding issue. Last Tuesday, a ministry official said the Ministry of National Security was still finalising its budget allocation figures. In the 2012 budget, the ministry received the third highest allocation: $5.1 billion. The Ministry of Infrastructure, which received $6.9 billion last year, will be receiving further funding for the Pt Fortin Highway, other highway projects and various infrastructure. While Howai’s budget will be propelled by energy prices, it is left to be detailed what specific energy activities will be utilised beyond proposals to further Venezuelan and Latin American joint ventures. Though Government has boasted of collecting earnings from oil companies and looking to projects with North African partners, Energy Minister Kevin Ramnarine— who replaced Carolyn Seepersad-Bachan last July—has curiously been shifted from Government’s Senate’s front bench to its back bench in the resumption of sittings. (He now sits among Lyndira Oudit and other PP Senate backbenchers).

PP Senator Bhoe Tewarie said last Wednesday it was not a demotion and the backbench will better allow Ramnarine “to face the Opposition more directly” than his former front row seat. How successful and how key the ministry under Ramnarine has been will be interpreted in Howai’s presentation. This will have to confirm whether the ministry achieved the $18.1 billion in energy revenue which was projected by Dookeran’s 2011- 2012 package and if the non-energy sector earned the $28.9 billion in revenue that area was expected to take in. Or account for what worked and what didn’t. After a year of blistering trade union attacks, the Government is also factoring in funding for union complaints, a source in the Office of the Prime Minister said. Howai’s plans for tourism, the energy downstream, ICT and financial sectors will also be a point of focus since he cited these areas (in July) as four which can make the economy more competitive. Some are gearing for sharp measures— including a lack of pension hikes—in the midterm budget since the PP will be politically hard-pressed to implement tougher measures closer to the end of term. Indeed, Howai’s financial limits have not been helped any by the fact that the Tobago House of Assembly and local government polls are both due in 2013 (as is the UNC’s internal election of a political leader.) Facing a high level of expectation, Howai in his maiden delivery will be judged less lightly than his predecessor—a better promoter of philosophical underpinning than practical application—considering his banker’s background and since his boss said her Cabinet reshuffle was geared towards a better fit of ministerial talent. While he has echoed Dookeran’s “no magic solution” line, whether Howai remains in Dookeran mode or can pivot T&T around the financial crunch remains to unfold.

2011-2012 budget: