Between a rock and a hard place

This must have been the most difficult Budget that Prime Minister and Minister of Finance Dr. Ralph Gonsalves has ever had to present to Parliament. His government is in the last year of this term of office, it is faced with an Opposition, brimming with confidence following its moral victory in last November’s referendum, and the economic environment is far from healthy or conducive to the normal “electioneering” in an election lead-in year. Dr. Gonsalves simply has little room to manoeuvre, politically or economically. Talk about being between the proverbial rock and a hard place!{{more}}

Yet this Prime Minister is an indomitable character who, as he is fond of saying, likes to try to turn every setback into an advance. His 2010 Budget represents his juggling act in difficult circumstances. Obviously, in the present circumstances, economic reality demands fiscal austerity, but political imperatives point in a different direction. The Budget mix reflects these trends. Thus whilst trying to climb down from his “stimulant” packages of the past couple years, there are new social initiatives, (needed but affordable?) such as the student support services and the crisis centre for abused women and girls. These and other similar commendable social programmes reflect the emphasis on balancing economic priorities with meeting social needs. But they are costly.

Two aspects of the Budget are of great concern to most Vincentians. They are the billion dollar national debt and the current account deficit. The national debt continues to grow alarmingly, graphically dramatised by the Opposition Leader in terms of dollars per minute during his Parliamentary speaking time. It now requires EC$149 million or 30% of our recurrent revenue to service the debt. The revenue deficit could, in normal times, be made up by taxation. However, with elections looming and the referendum defeat a lingering worry, new taxation was simply not an option. Significantly, though, the trend of the past few years in annually reducing income and company taxes has been broken. There could hardly be a reasonable complaint on this score.

The enduring problem of the imposition of VAT on some basic food items has been partially addressed with its reduction on some items, including chicken and wheat imports. Opposition Leader Arnhim Eustace has, however, proposed that such reduction be extended to even more items and has even advanced the position that this is what should have been done rather than the $200 per schoolchild stimulus at last Independence. It is also praiseworthy to note the incentives offered to agro-processors in the removal of VAT on packaging materials, which represents an incentive to small business.

Political considerations also influenced some Budgetary decisions. One such is the decision to remove the $1 service charge on persons travelling to the Grenadines through the Grenadines wharf. This has been the subject of much controversy, with the Opposition staging protest demonstrations and charging discrimination. Prime Minister Gonsalves, previously impervious to those charges and calls for the removal of the $1 user fee, has at last relented. Perhaps the “elderly lady” that he referred to as influencing his decision may have been the November referendum in disguise, but one must commend him for at last heeding the calls. It is unlikely to affect his political fortunes where the Grenadines are concerned, but can do him no harm, considering that the fee was not a major revenue-earner.

It does bring into focus an issue raised by the Leader of the Opposition in his Budget presentation, that of the responsiveness, or lack of it, of the Prime Minister to the views of others. This Prime Minister has been by far the most accessible of our Heads of Government. Yet there is a persistent charge in several quarters that he does not listen enough to the views of others. He would no doubt refute this strongly, but as long as the view persists and has traction, he cannot ignore it. Let’s hope the rescinding of the unpopular Grenadines fee is a step in the right direction.