Economics is about scarcity and choice. One never has all the resources required to do everything that one wants to do. The only alternative is to prioritise and do the best with the available resources and phase development. That’s how economic planning and the five-year development cycle was born. Investors (the private sector) generate the income that the State taxes: personal incomes, corporate profits, transaction taxes or proceeds from the sale of exploration or mining/mineral access rights and any royalties that may accrue thereon.
How much money does Tobago need and what are Tobago’s development requirements? How should these needs be financed? How should this development be phased? Over what time period? What are the priorities and how should they be balanced? What does Vision 2030 propose? These issues are not addressed by the THA Act and have bedevilled the relationship between the THA and the Central Government from inception.
The THA Act S41 provides for the formulation and approval of a revenue and expenditure budget in respect of all the functions of the THA to be agreed and passed by the THA before it is submitted to Cabinet by the end of the third quarter annually. In practice, Cabinet means the Prime Minister in consultation with the Finance Minister and budget technocrats.
S43 identifies five considerations to be used by Cabinet in evaluating the budget : (a) physical separation of Tobago by sea from T&T’s distinct identity; (b) isolation from the principal national growth centres; (c) absence of the multiplier effect of expenditures and investments (private and public) made in Trinidad; (d) restricted opportunities for employment and career fulfilment; (e) the impracticability of participation by residents of Tobago in the major educational, cultural and sporting facilities located in Trinidad. These considerations are open-ended with no quantitative limits requiring “maturity” in their interpretation, particularly in deciding what is sufficient or enough. What of Matelot, Cedros or Mayaro for that matter?
S49 (1) provides for taxation revenues “collected in Tobago on behalf of the Government and payable thereto in respect of activities undertaken or discharged in Tobago” to be credited to the THA. But tax revenues generated in Tobago are insufficient to meet THA’s requirements thus requiring allocations from Central Government. S44 recognises that disputes will arise over the amounts allocated and S56 provides for the establishment of a Dispute Resolution Commission (DRC) to address this eventuality.
Money can't solve a development problem
The THA has always complained that the budgetary allocations were inadequate relative to the THA’s requirements. Accordingly, the DRC recommended a fixed figure between 4.03-6.9% of the national budget without explaining the basis of calculation. The formula has the force of convention, not law, and answers the question of how much, but cannot alter the perception of those who believe that the amount should be greater to meet Tobago’s self-determination (meaning what?) requirements.
This argument suggests the current arrangements should be abandoned and replaced by other arrangements more in keeping with Tobago’s (unspecified) needs. On this construction, Tobago’s development is constrained by its relationship with Trinidad. Self-determination is not defined, though it suggests something akin to independence given its history as a separate colony up to 1835 (James’ Fact1). Hence the formulation of Tobago waters and by extension the right to taxation of any mineral revenues derived therefrom.
Winford James articulates the following summary in the Express on December 6: “Fact #2: Annually, Tobago produces 1.3 per cent of national output and exports only the small tourism component; receives about 4.03 per cent of the national budget; receives revenues that are 4.4 times its taxable capacity; receives revenues that are 11.3 times the taxes collected in the island. Fact #3: The effective (THA) budget deficit…about $2 billion or 90 per cent of THA spending in 2017 and was projected to increase to $4.3 billion, or 95 per cent of projected spending, in 2018. Fact #4: Despite all the reported efforts at diversification and economic expansion by the THA (BDU, the EIDCOT, and the Venture Capital Equity Fund Company) over the past 18 years, the Tobagonian economy has achieved no capacity to grow and export that could be delinked…from (Central) Government. Fact #5: (THA and Central) Government accounts for 44 per cent of Tobago's output and employs 64 per cent of its labour force.”
In short, money cannot solve a development problem.
I have inserted “central” before “government” as he (James) equates government with Trinidad. It has escaped James that 60,000 people do not provide the scale required to create a sustainable economy any more than the 15,000 in the case of Nevis, despite its political status. That is the lesson of Scotiabank’s (and Barclays) exit from the Eastern Caribbean; scale matters. Republic is willing to purchase because it is seeking scale; it may yet prove to be the wrong decision. It is Brexit’s lesson to England’s 60 million population.
The economic fight of the 21st century is one of scale. The emergence of the Internet and China’s entry on to the world stage has changed the economic equation as inexorably as the decline of the sugar economy in 1767 changed the Caribbean’s (and Tobago’s) economic outlook. The central question remains; how do small island states become and remain viable in the 21st Century? Mr James’s facts clearly demonstrate that money is not the problem.