Mar­i­ano Browne

It is un­rea­son­able to as­sume the cur­rent ad­min­is­tra­tion would have been able to find so­lu­tions to all the dif­fi­cult eco­nom­ic chal­lenges and present them in its first bud­get state­ment.

How­ev­er, Min­is­ter Dave Tan­coo did say that he had been prepar­ing for this as­sign­ment dur­ing the ten years he spent on the Op­po­si­tion bench­es. He brought a more en­gag­ing style to the read­ing of the bud­get, in­cor­po­rat­ing mem­bers of his po­lit­i­cal par­ty in repris­ing the cam­paign theme “every­body wins” in true ca­lyp­so style.

His man­ner light­ened the mood, fa­cil­i­tat­ing a con­tin­u­ous po­lit­i­cal at­tack whilst gen­er­at­ing some op­ti­mism. It was good the­atre.

The ex­pec­ta­tion was that the bud­get would ad­dress the key eco­nom­ic chal­lenges of low or no growth, ris­ing pub­lic ex­pen­di­ture, con­tin­u­ous fis­cal deficits, and ris­ing na­tion­al debt. The key ob­jec­tive should be to re­turn the coun­try to con­sis­tent growth with low in­fla­tion. The econ­o­my en­dured a long de­pres­sion from 2015 be­cause of de­clin­ing en­er­gy prices and de­clin­ing nat­ur­al gas pro­duc­tion.

In 2022 and 2023, the coun­try ex­pe­ri­enced a short-lived re­prieve as en­er­gy prices briefly rose be­cause of the war in Ukraine and the post-COVID-19 pan­dem­ic bounce. Im­prov­ing the coun­try’s eco­nom­ic per­for­mance re­quires a trans­for­ma­tive ap­proach in key ar­eas and an im­prove­ment in work­force pro­duc­tiv­i­ty.

How­ev­er, the dev­il is in the de­tails. On more sober re­flec­tion, one jour­nal­ist opined that Min­is­ter Tan­coo had “plas­tered a po­lit­i­cal so­lu­tion over a com­plex eco­nom­ic prob­lem”. An­oth­er com­men­ta­tor ar­gued that the 2025-26 Bud­get is “so­cial­ly gen­er­ous” but “eco­nom­i­cal­ly pre­car­i­ous”. The more pop­u­lar mea­sures an­nounced were de­signed to pro­vide re­lief to the mid­dle- and low­er-in­come groups (by re­mov­ing VAT on thou­sands of items), while oth­er mea­sures (tax­ing the as­sets of in­sur­ance com­pa­nies and banks and the land­lord sur­charge) taxed those in­di­vid­u­als and cor­po­ra­tions in re­ceipt of high­er in­comes.  

The key dif­fer­ence be­tween the pre­vi­ous bud­gets was the an­nounce­ment of 65 years as the re­tire­ment age and the in­crease in na­tion­al in­sur­ance con­tri­bu­tions. These mea­sures have on­ly bought time for the NIS, the coun­try’s so­cial se­cu­ri­ty mech­a­nism. The ac­tu­ar­i­al fore­cast, which in­di­cat­ed the NIS fund would be bank­rupt by 2033, has on­ly been de­layed by 16 years, mov­ing the day of reck­on­ing from 2033 to 2049. This ad­min­is­tra­tion must be com­pli­ment­ed for mak­ing this change.

The 65-year age lim­it has al­ways been in the leg­is­la­tion, and the pri­vate sec­tor pen­sion plans have been ad­just­ing their re­tire­ment age lim­it ac­cord­ing­ly. The main dif­fi­cul­ty has been the pub­lic sec­tor, where the re­tire­ment age of 60 years is hard­cod­ed in gov­ern­ment reg­u­la­tions.

Per­haps the pres­ence of many trade union­ists in the cur­rent ad­min­is­tra­tion made this de­ci­sion an eas­i­er sell. Per­haps the com­pro­mise to achieve the ac­qui­es­cence of pub­lic sec­tor unions was the de­ci­sion to rene­go­ti­ate pub­lic sec­tor union agree­ments at the high­er rate of ten per cent. In­creas­ing the con­tri­bu­tion rate and phas­ing in 65 years as the re­tire­ment date is the right move. How­ev­er, mak­ing the fund vi­able in the long run re­quires ad­di­tion­al mea­sures, in­clud­ing fis­cal and po­lit­i­cal dis­ci­pline to avoid mak­ing pen­sion pay­ments sub­ject to elec­toral whims.

The bud­get speech did not ad­dress the fis­cal im­pact of the new ten per cent wage of­fer. The min­is­ter did note that the im­pact of union agree­ments in the 2025 fis­cal deficit amount­ed to $3.1 bil­lion. Not all unions were in­clud­ed in this cal­cu­la­tion. Fur­ther, the pe­ri­od cov­ered by this pro­vi­sion on­ly ac­counts for agree­ments cov­er­ing the 2014 to 2019 pe­ri­od.

What is the cal­cu­la­tion for the pe­ri­od 2019-2025, which re­mains out­stand­ing, un­bud­get­ed, and un­paid? He al­so not­ed that im­ple­ment­ing the agree­ment with the “Teach­ing Ser­vice, the Trinidad and To­ba­go De­fence Force and the Port-of-Spain and San Fer­nan­do city cor­po­ra­tions” would cost $214 mil­lion an­nu­al­ly and ar­rears of $730 mil­lion “as of De­cem­ber 2025”.  

There are ap­prox­i­mate­ly 11 bar­gain­ing unions rep­re­sent­ing pub­lic sec­tor work­ers. The Pub­lic Ser­vices As­so­ci­a­tion (PSA), the largest pub­lic sec­tor union, ar­gued for a larg­er of­fer of ten per cent for the ne­go­ti­at­ing pe­ri­od 2014-19. The gen­er­al prin­ci­ple es­tab­lished in gov­ern­ment union ne­go­ti­a­tions is that what is of­fered to one must be of­fered to all. There­fore, those unions that agreed to less than the ten per cent now be­ing of­fered to the PSA will ex­pect to ben­e­fit from the same of­fer. Al­ready, the teach­ers’ union (TTUA) has said that they will re­open ne­go­ti­a­tions to ob­tain the same per­cent­age in­crease as the PSA. The ex­pen­di­ture es­ti­mates show no al­lo­ca­tion for the ten per cent an­nounce­ment made by Min­is­ter Tan­coo.

With­out ad­dress­ing any oth­er ex­pen­di­ture es­ti­mates for 2026, this means that emol­u­ment ex­pen­di­ture is gross­ly un­der­fund­ed, and the deficit of $3.8 bil­lion is gross­ly un­der­stat­ed. This should be­come clear dur­ing the bud­get de­bate, as the Op­po­si­tion is un­like­ly to let this “over­sight” pass un­no­ticed. But this is not the on­ly glar­ing over­sight. The min­is­ter’s state­ments that veg­eta­bles would no longer be sub­ject to VAT, or that agri­cul­tur­al equip­ment would be ex­empt from VAT, are both in­cor­rect. Un­processed veg­eta­bles were nev­er vat­able, and agri­cul­tur­al equip­ment has long been ex­empt.

Look­ing for­ward, none of the plans to turn around the econ­o­my are new, and many of the pro­pos­als are al­ready in progress. The pub­lic sec­tor em­ploy­ees to­day are the same peo­ple who were em­ployed pri­or to the elec­tion. Are these agree­ments tied to pro­duc­tiv­i­ty or ef­fi­cien­cy im­prove­ments? What are the met­rics that will tie the process and sys­tem changes to the gov­ern­ment em­ploy­ees? How is the im­ple­men­ta­tion process go­ing to be im­proved?

Mar­i­ano Browne is the Chief Ex­ec­u­tive Of­fi­cer of the UWI Arthur Lok Jack Glob­al School of Busi­ness.