Salary increase generous, says Finance Minister

A SEVEN PERCENT salary increase which the government negotiated with trade unions is generous yet fiscally responsible, says Minister of Finance Camillo Gonsalves.

“This salary increase stays within the boundaries of our fiscal responsibility framework. It is not an irresponsible increase in salaries while still being a generous increase in salaries,” the Minister said at a press conference at Cabinet room yesterday, September 22.

Finance Minister Camillo Gonsalves

Gonsalves spoke on the heels of a press conference held by the Heads of the Public Service Union(PSU), the Police Welfare Association(PWA) and the St Vincent and the Grenadines’ Teacher’s Union(SVGTU) held on Tuesday, September 20 where they announced the finalization of a 7% salary increase for Government workers, to be distributed over the years 2023, 2024, and 2025, in increments of 2.5%; 2% and 2.5% respectively.

Additionally, for all workers, there is to be a reduction in the top margin rate of Personal Income Tax to 28% from 30%, and an increase in the Personal Income Tax standard deduction to $22,000 from $20,000.

The minister recalled that in January when the Budget was laid, “we were having some inflationary spikes, at the time we didn’t know precisely how our recovery would go,” but in the Budget it was promised that in 2022, “we will engage with workers to conceptualize what sort of wage augmentation is possible within the confines of our fiscal responsibility framework.”

“Then Ukraine hit and then inflation went up higher all around the world,” he noted.

Despite this, he said that by July the government was able to begin to consider what they could afford.

Then began meetings with the private sector and the Labour movement.

In the process the Government also engaged with “outside economists” the Minister said.

At a September 8 “exchange of views” between the government and the unions, they had narrowed down a list for negotiation.

Teams met on September 16 and agreed on the final terms.

On the Government side for the final negotiation there was: Edmond Jackson, director general of finance and planning; Ken Morris; budget director, and Denece Pompey-Gilkes, senior economist.

The trade unions sent representatives and heads from the: Commercial Technical and Allied Workers’ Union (CTAWU), the National Workers Movement (NWM), the PSU, the PWA, the SVGTU and the St Vincent and the Grenadines’ Nurses Association.

After outlining the final terms the Minister recalled that the last wage augmentation package was implemented in 2018 where a 4.5% salary increase was spread over the years 2018 to 2020.

He also noted that currently 53% of Government workers already receive yearly 2% salary increases regardless, so the 2023 to 2025 salary increases will be in addition to that.

Gonsalves also emphasized that “The tax relief package is very important when considering exactly how much more money somebody is going to take home in their pocket because it’s not just that your salary is going up, it’s that your taxes are going down. So you’re gonna save a little money when your taxes go down and you’re gonna make a little money when your salaries go up.”

Further there will be a reduction on Corporate Income Tax as well as Personal Income Tax.

The minister said, “the long standing position of the Government is that we want to bring our income tax rate down into the mid 20s.”

With the reduction of tax and salary increases twice in four years, the minister assured that “all of these track with what everyone is predicting to be a strong year for economic growth for St Vincent and the Grenadines in 2023.This year in 2022 are projected to grow – well the IMF says 5%, our internal projections are a little bit more optimistic.”

“This growth this year is digging us back out the hole and taking us to our pre-Covid economic levels. But next year we are expected to grow well, 5/6%,” he said.

The finance minister also said that during the consultations with the Labour movement “everybody showed up with a very constructive, a very respectful, a very results oriented discussion.”

“Proposals were discussed and the back and forth was very reasonable. We said the things that we couldn’t manage, they accepted them, we narrowed things in a particular way that was mutually agreeable and we had a very, very frank, open, honest but respectful conversation.”

Based on reports in the media, the minister commented, “I’m very pleased to see the Labour movement considers fair in all the circumstances that we’re facing. I consider it generous, they consider it fair, but nonetheless we have arrived somewhere of mutual agreement.”