Admissions of failure by Government

Martin Henry, Contributor

Recent parliamentary debates and presentations have been enriched with several spectacular admissions of failure. None bigger than that made by former Minister of Finance, Dr Omar Davies, in the debate of the Revenue Administration (Amendment) Bill.

Davies told fellow parliamentarians that he and his successor ministers of finance had failed. OK, he was quite specific about the failure. It was failure to pull in significant tax revenue from high-profile tax dodgers. "If you look over time," he said, "all the proposals, all the attempted measures to gain additional revenues from higher-income groups; if you examine the reality, we have failed." But why stop at taxes?

The failure of sound economic management is broad and deep. Despite gains here and there, governments in Independence have broadly failed to create an orderly, peaceful, productive and prosperous society.

The incumbent minister of finance, Dr Peter Phillips, at a recent Gleaner Editors' Forum, spoke about the failures of the political system in which he has risen to the top as de facto 'chief minister'. "Mature politicians," he told the forum, "need to ensure that the economic programme is not derailed by the need to win elections."

Admitting that there always has been, and there still is, a risk that politics can derail the economic programme, Phillips continued, "The greatest proof of the maturation of our political system would be when we can reach the point where incumbent governments, of whatever stripe, recognise that it doesn't make sense to destroy the fiscal foundation of the country in order to win an election." The well-established political principle of "run wid it", as bluntly articulated by one of his failed predecessors.

'Personal embarrassment'

The run-wid-it former finance minister admitted to his fellow parliamentarians: "To me, it is a personal embarrassment that there are issues which we should have seen or felt but, for whatever reason or little bad patch or tribalist thing, we can't make a move, or even in circumstances within our own party, we can't make a move because we feel we goin' lose some votes, when we are taking positions which are not sustainable."

The biggest indices of the failure of government and of governance have to be the crime problem, the debt burden, and the debasement of the currency.

But contrary to popular mythology, leakages through corruption, wastage and inefficiency are not that significant in explaining the size of the debt burden which now stands at 150 per cent of GDP. The debt, borrowed against future income, initially went into providing services in education, health, public works, state-owned utilities, and other areas faster and more extensively than tax revenues could pay for.

When the sluggish capacity of the economy, the now-acknowledged failures in tax administration, and currency depreciation did not allow debt-service payments from revenue, more money was borrowed just to be able to meet the obligations of debt servicing, which is essentially what the IMF is doing for us now.

No sector benefited more from debt than the education sector. Plain and simple, the country has a public education system which it cannot afford and which has not produced the kind of productivity gains and GDP growth on which debt repayment was predicated. We are still throwing at it nearly 15 per cent of the total budget and some 26 per cent of the post-debt payment budget.

The current minister of education, the Rev Ronald Thwaites, has made his own admission of the failures in education policy and has advanced serious proposals to fix some of the critical problems. But as the National Executive Council (NEC) of the governing People's National Party takes charge of the Government - as it has done in the past - the minister of education, as I warned him in a recent column, may be the one isolated in Cabinet and not the minister of finance.

"Ronnie's greatest risk factor," I wrote then, "is not the JTA, as such, but political interference from within on behalf of the teachers and in defence of their special place in the old order."

No support for Thwaites

While the NEC meeting in Spaldings, Clarendon, Sunday gone, including the prime minister, sang the praises of teachers, there was not a word of support for the minister of education or any serious discussion of the education reforms he is pushing (as far as the media reports go).

The month still had several days left it in when confirmation came in. Mr Thwaites has been pushed on the back foot, forced to fend off his own party's NEC chaired by his own prime minister and publicly insisting that he did consult with the Cabinet before running off his mouth in the Sectoral Debate on one of the most significant national issues, education reform.

The Sectoral Debate tends to parade the fluff of sectoral accomplishments, ignoring failures and critical problems. It was, therefore, startling, to say the least, to hear the minister of local government and community development, Noel Arscott, frankly telling the country that the National Disaster Fund is bare and that the National Solid Waste Management Authority (NSWMA) is now in a worse condition than it was before.

At a time when year on year the hurricane season is delivering many storms (13-20 named storms with 11 getting up to hurricane strength are predicted for this year), and when his colleague minister of land, water, environment and climate change is glibly announcing an early earthquake, Minister Arscott told Parliament that Jamaica's National Disaster Fund coffers are so bare it would hardly assist one per cent of the country with supplies in the event of a Category Four hurricane.

"An assessment of the requirements for dealing with a Hurricane Ivan-type scenario showed that a minimum of $650 million would be required to put in place adequate supplies for 32,000 Jamaicans. The current status of the fund is just over $260 million," the minister said.

Impact of tropical storms

And, "given the impact of several tropical storms and hurricanes several times over the past 12 years, it is apparent that the fund is not adequate to meet the purpose [for which] it was intended, especially in the area of facilitating rapid response post-disaster, nor is it able to meet the requirements for the effective provision of relief stocks and related activities," Arscott said.

The minister rambled on to tell the Lower House and the country that challenges created by the current economic situation have worsened the indebtedness and dilapidated condition of equipment owned by the NSWMA.

"However much we may wish to paint a rosy picture, the bottom line is that the NSWMA is undergoing a difficult transition," Arscott told the House of Representatives. Debt payment by the agency and actions to improve service require a budget of $8 billion, the minister estimates, but only $2.2 billion was allocated in this year's Budget.

Meanwhile, over at Transport, Minister Davies has painted his own grim picture for the Parliament and the country: "The public transportation sector is teetering on the brink of a collapse."

The immediate cause offered is the lack of a fare increase over the last few years. Price control on public transport fares is one of the
few remaining areas in which the Government feels obliged to regulate
the cost of goods and services. Another is water supplied by the
state-owned National Water Commission.

Out of abundant
love for the poor, the Government keeps fares and water rates
artificially below commercial rates. In the case of public transport, a
substantial part of the system is private, not public, with private
business operators forced to subsidise commuters.

The
minister himself told us that "the changes in price, the exchange rate
and the price of fuel; it's impossible for the fares of three years ago
to make economic sense".

In the case of the state-run
JUTC, government subsidy does not offset the low fares and allow
operational costs to be met. Former Managing Director Rear Admiral (ret)
Hardley Lewin has fled, leaving hundreds of buses out of operation and
the company deeply indebted to suppliers and unable to adequately
service its routes.

Juan Carlos Echeverry, former
finance minister of Colombia and credited with turning that country's
economy around, visited us a couple of weeks ago under the auspices of
the World Bank and left some very wise words. Echeverry warned that the
principles of economics indicate that Jamaica must spend within its
means.

"Economically, we ask our governments to spend
more than we give in taxes: 'Give me more health care, give me more this
and that,' but we don't want to pay taxes, yet we are impatient to see
results. ... All too often, we ask our Government to provide more
services than our taxes can afford to
provide."

Echeverry stressed that no serious
government should systematically spend more than it has. "While this may
be excused for one or two years, you cannot do it for 10 years. You
have to spend within your means."

He suggested that if
the crime rate continues to climb, the Government must sacrifice all
things to fight crime. "There is no way you can fight crime and not
sacrifice other means," he argued.

Smeared spending, a
little spread over everything, and consistently spending more than
revenue can afford, have left us in a deep hole. Having admitted the
failures, those who lead us in Government must chart a clear path to
success and stick to it, despite the escalated expectations for more
benefits than the country can afford and the substantial risks of
political fallout.

Martin Henry is a communication
specialist. Email feedback to columns@gleanerjm.com and
medhen@gmail.com