“THE greatest gift of any statesman rests not in knowing what concessions to make but recognizing when to make them.” – Prince Metternich
Last past week we got a clear indication of what can happen when public policy is high-jacked by partisan politics. I refer to the government’s decision to reduce gas prices by as much as EC$5.20 within the space of three weeks.
Naturally, the move has been welcomed by long-suffering consumers who have been reeling from the double-whammy of stifling gas prices and the high cost of basic food items at supermarkets.
The people need relief. No doubt about it. But so too does the government.
For much of this past year, the news has been dominated by the sour tone of negotiations between the government and the CSA over a 5% pay cut which was proposed by Government as a way of easing the budget deficit.
Our Prime Minister made several addresses and statements on the matter. In one Address to the Nation in June 2014, he insisted that Saint Lucia needed to “…send the correct, strong signals to the market and to potential investors that we are serious about restoring our economic fundamentals. We cannot ask investors to trust us with their hard-earned capital if we are not prepared to put our own financial house in order.”
All around us is clear evidence that Saint Lucia’s house is in bad shape and that the Prime Minister’s plea for shared sacrifice is well-founded. Our economy is anaemic. We have seen record business closures and a steep rise in unemployment. The country’s public debt is at its highest – at almost US$1 billion. Foreign investment is at its lowest. Government spending on capital projects has had to be drastically reduced, with the odd repair or construction of a bridge here and a road there, as the only infrastructural works of any note. The Owen King/EU Hospital cannot be commissioned because government does not have the money.
If it was not for the timely injections of money from Taiwan, Saint Lucia’s economy would have gone into cardiac arrest by now.
Governments run on taxes. It’s how schools, hospitals, health centres, roads and bridges are built; how medical supplies are paid for; and how public servants’ salaries are paid.
The excise tax on fuel and fuel products is one source of government revenue. Over the past eight years successive governments have foregone much, if not all this revenue and have used it to cushion the effect of high oil prices on consumers. The dip in global oil prices gave the government a priceless opportunity to rebuild its finances while passing on much-need relief to consumers.
So how then does the Prime Minister explain his government’s decision to shave off $5.20 off the price of fuel at the pumps, with a promise to shave off even more, if global oil prices continue to drop?
I estimate that for every 25 cents retained in excise tax, government would earn net revenues of about $4million every year. This is more than the government would have earned from that 5% salary cut.
Is it that government no longer needs the revenue? Is the economy on the rebound? Has the government found the money to complete the new hospitals? Is the massive size of the government’s salary and wage bill no longer a problem? Can government now buy the machines that would give relief to the over 100 people who are on the waiting list for dialysis? Does the government have enough money in reserve to cushion gas prices when global oil prices begin their inevitable rise?
The answers to these questions would all be a resounding: “NO!”
So why did the government do it?
Why did our Prime Minster and Minister of Finance shell out more money at the pumps than he would have gained from his proposed 5% cut in public servant salaries?
The answer is blowing in the winds of politics.
Had it not been for the protest mounted by the opposition, the integrity of the fuel price review mechanism would have remained intact. Prices would have come down, but in a fiscally-responsible manner…one that took full consideration of Government’s current and future liabilities.
The irony is that now both the government and the opposition are fighting to claim the political credit for the fuel price cuts, when in fact both should accept responsibility for creating and reducing our heavy national debt. It was the last administration (now the opposition) that gave public servants a salary increase that the country could not have afforded at the time.
It is likely that the price cuts could inject some life into the economy. If this does happen, it is highly unlikely government’s precarious finances will improve in the short to medium term.
All indications are that the budget deficit will increase when the next budget is tabled.
This writer accepts that the people deserved some relief from stifling gas prices. However, the Prime Minister and Minister of Finance wasted a precious opportunity to explain to the people its management of the fuel price mechanism in the context of the full burden that government carries; the country’s expanding fiscal deficit and the reason why the government must take a prudent and responsible approach in responding to the legitimate demands of the people.
By the Prime Minister’s own assertion, his government was “…elected to lead, to govern and to take decisions that are in the best interests of the entire country, not just a few, even if those decisions are uncomfortable and painful.”
Based on this analysis, it can be concluded that the Prime Minister and his government have lost sight of their own purpose.
By The Virginian