EDITORIAL - The Budget and public-sector reform

On the face of it, the Government hopes to accommodate $8 billion of the $10 billion in back-pay to public-sector workers this fiscal year by the various nips, trims and shifts to the Budget unveiled last week by the finance minister, Mr Audley Shaw.

So, after weeks of dire warnings by the finance minister and his boss, Prime Minister Bruce Golding, that people should expect deep and painful cuts in government spending, Mr Shaw actually adjusted his Budget by a marginal $2 billion. It now stands, assuming that the revised estimates are approved by Parliament, at J$544.7 billion.

The administration, it seems, has employed an old and trusted trick of politicians: if you must deliver bad news, project the worst and deliver something better.

The use of this strategy, if this is indeed the case, is, from the perspective of raw politics, perhaps understandable. Prime Minister Golding must face the electorate in a year's time, his Jamaica Labour Party trails the Opposition in opinion polls, and after years of taking heavy financial hits, Jamaicans are not likely to be receptive to more bad economic news.

If the foregoing accurately summarises the calculation of the Government, the Golding administration, having talked loudly, and sometimes convincingly, about fiscal reform, will have done what Jamaican governments tend to do in a crunch: they freeze. Or, put another way, it will have been the latest example of the ascendancy of politics over economics.

Attacking fiscal deficit

Our argument is that there are ways - some of which have been long on the national agenda - to aggressively attack the fiscal deficit, apart from underspending, or outright cuts in capital spending, and/or the unofficial build-up of government payment arrears. The implementation, or lack thereof, of the public-sector transformation and modernisation programme initiated by Mr Golding is a case in point.

A unit, led by civil servant Patricia Sinclair McCalla, with oversight from banker Peter Moses, spent several months to produce a raft of recommendations for the reform of the public sector. We suspect that Mr Moses' effort reminded the administration of his good work for Jamaica and contributed to the decision to award him the national honour of Order of Jamaica.

Some of the reform proposals will, over time, mean a loss in some public-sector jobs. There is much that can be done, including the merging of agencies, that will cost neither job displacement nor money.

Yet, we sense a lack of appetite on the part of the administration to implement its own project, seemingly concerned with the political discomfiture that might arise in a pre-election period.

Another potential area for substantial savings in government spending would be in the reform of the public-sector pension scheme. The Government's wage bill will, this fiscal year, reach around $100 billion. But that excludes around $15 billion in pension payments - a scheme to which the employees do not contribute but are guaranteed specific benefits. Much work has been done on the development of a pension scheme to which the employees would contribute, with savings of billions of dollars to the Government.

Hopefully, these and other reforms will be implemented before Peter Moses forgets why Jamaica deemed him fit for a national honour.