Tag: Budget

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Potential financial crisis looms

Introduction
My blog of April 20, 2014 was captioned Doubts about Government respecting the budget non-approvals. That e-column followed the passage of the Appropriation Act 2014 introduced by the Minister of Finance and passed on April 16, 2014. In that column, I noted that the passage of the Appropriation Bill had given way to skepticism, suspicion and speculation and I expressed three possible responses by the Government: returning to the courts; bringing the first Supplementary Appropriation Bill for 2014 to restore the noncontroversial items which were victims of collateral damage, or thirdly that the Minister of Finance would “simply release the funds that [had] been removed by the Opposition and accepted by the Government in the amended Appropriation Act.”

It is now known that the government, through the Minister of Finance, chose to spend public moneys on items in programmes that had been specifically rejected by the National Assembly. Last Thursday, by way of Bill No 12 of 2014 the Minister presented to the National Assembly for rubberstamping $610,404,711 for current expenditure and $3,943,357,280 for expenditure under the capital programme, a total of $4,553,761,991.

In today’s e-column I seek to explore whether the Minister of Finance has acted properly, legally and constitutionally and the potential consequences of his action which one presumes he pursued on the advice of the Attorney General Mr. Anil Nandlall. According to the Bill presented by the Minister which comes up for debate and approval/non-approval next Thursday, the expenditure is authorized under Article 219 of the Constitution and sections 24 and 41 of the Fiscal Management and Accountability Act. I have serious doubts about that. But let us look at each of them.
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Doubts about Government respecting the budget non-approvals

Introduction
The mixture of surprise and relief when Dr. Ashni Singh, Minister of Finance announced in the National Assembly that he would be amending the 2014 Appropriation Bill to reflect the non-approval by the Committee of Supply of several items in the 2014 National Budget has given way to skepticism, suspicion and speculation. Of the six Programmes not approved, two are under the Office of the President, one under the capital budget and the other the current budget. The full list is:

Among the projects or entities affected by non-approval were the usual suspects, the Government Information Agency (GINA), (previously referred to in the Estimates as Guyana Information Agency), National Communications Network (NCN), the Specialty Hospital and the Information Technology Project funded by the Chinese and way, way behind schedule. Mildly surprising were the Chinese-funded Airport Project and the Amaila Falls Hydropower Project, both of which in earlier appropriations by the National Assembly had received some support of the parliamentary opposition, albeit under some rather interesting circumstances.
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The Budget cuts case

Introduction
The abrupt resignation earlier this month of Court of Appeal Justice Rabi Sukul which I addressed last week on this Blog continues to reverberate in the community, along with two other issues with implications for the judiciary. The first involved unusually swift justice dispensed in the case of baby-sitter who admitted to slapping her one year old charge, the daughter of a magistrate mother and a lawyer father. Without even asking for a Probation Officer’s report, the magistrate sentenced the legally unrepresented teenager to five years in prison. One section of the press had earlier reported the sentence as sixty months but that appears not to be correct.

The second issue raises the question whether a lawyer admitted to practise in the Courts of Guyana who is subsequently convicted in another jurisdiction should be allowed to return to practise in the Guyana Courts. Both in this and the Justice Sukul’s matter the (alleged) misconduct took place outside of Guyana.

There is a striking contrast between the considerable media attention and feedback to these issues and the silence of the major stakeholders over the challenges facing the judiciary. Even if this matter had involved a puisne judge it would have been serious enough to warrant attention. In this case a Court of Appeal Judge and the constitutional body the Judicial Service Commission (JSC) are involved but yet there is virtual silence from the head of the Bar, Minister of Legal Affairs and Legal Adviser to the Government.
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Not a watershed budget for the poorer person

As Guyanese analyse the Budget for 2013 it is useful to compare some of the numbers with how they are presented and received. There is no group which has welcomed the Budget more than the Private Sector Commission, one representative describing it as our (PSC) budget.

Let us take the apparently straightforward example of the reduction in the rate of personal income tax from 33⅓% to 30%. Readers will note that not only do individuals not have the benefit like dependents allowances while companies are allowed to deduct almost all their expenses, but the individual is still paying the same or higher rate of tax than non-commercial companies do, that is 30%.

If we exclude the personal allowance of $50,000 per month an individual’s nominal and actual tax rate is the same: 30%. Compare this with say GBTI whose nominal corporate tax rate is 40% but which enjoys a host of tax shelters. Its effective corporate tax rate for 2011 is 26.82%. Shareholders of GBTI pay no tax on dividends while its employees pay 30%. Even if we say that the company and the shareholder are the same – which it clearly is not – the shareholders’ tax rate is 26.82%. That is inequitable.

But let us get back to the benefits of the reduction in the rate of income tax and the increase in the rate of NIS, both of which impact on take home pay, or as the PSC says, spending power. In dollar terms, for each $10,000 earned by the worker the tax saving is $333. It means this: the worker who was earning $50,000 per month at December 31, 2012 gets nothing out of the budget; one who earned $60,000 per month takes home $333; one who earned $80,000 takes home $680 more, etc. The earliest point at which the increased take home pay exceeds $10,000 per month is for employees earning $380,000.

Note that I have not taken the projected inflation of 3.5% for 2013 into account. If that is done the income level at which there will be a net saving is for employees earning $296,000 per month. All persons earning below that income per month will actually be worse off.

The PSC is right: this is a watershed budget – but not for the poorer person.

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Budget 2013 – Get ready to rumble

Introduction
I take these words not from Dr. Roger Luncheon who used it around the time of the Agricola protests but from the American boxing announcer who trademarked it. There are eight working days to go to the constitutional deadline of “before or within ninety days after the commencement of the year” for the presentation of the national budget. With the practice being a prior announcement and none having yet been done, tomorrow Monday can be ruled out. That leaves seven days. The practice too has been to present the budget on a Monday or a Friday. That leaves Friday 22 and Monday 25 since Friday 29 is another public holiday. And here is where it gets a tad tricky: of the six budgets presented by Dr. Ashni Singh as Minister of Finance, three were presented on a Monday and three on a Friday. So take your pick.

My bet is that B-day will be Monday 25 to allow the government’s propaganda machinery to move into high gear, with Shadow Finance Minister Carl Greenidge being the prime target. Some of the propaganda was on display a couple nights ago on Jagdeo’s surrogate television station whose owner and friend Dr. Bobby Ramroop was granted practically universal coverage to broadcast television and or radio in Guyana in a move in what many hoped were the dying days of the Jagdeo presidency.

“Cynical”, “crude”, “vulgar”, “obscene” are too mild terms to describe Jagdeo’s action in a demonstration of abuse of office that required only a perverse mind to conceive. If there is one single incident of dozens that make it vital that the Constitution be amended to rid Guyana of the curse of the executive presidency, then Jagdeo’s action on sharing out the airwaves mainly to his friends and party supporters must surely be the straw. But back to the budget.

Missed opportunities
The 2012 budget was historic not only for its size. The stage for the battle over the 2012 budget was set on November 28, 2011 when the voters of the country placed control of the National Assembly in the hands of the opposition. This was too much for the PPP/C which had become accustomed to ruling, bullying, buying, penalizing, harassing and intimidating those not prepared to tow its line. Once again there was not even a charade of consultation envisaged in the directive principles as well as the fundamental rights enshrined in the Guyana constitution. With the wind in its sail, it was a chance for a united, reinvigorated opposition to assert its authority over public expenditure in Guyana.

On the last day permitted under the Constitution, the Minister of Finance presented his 2012 Budget with the theme “Remaining on Course, United in Purpose, Prosperity for All”, calling for expenditure of $193Bn, or 25% above 2011 spending. The budget included the sum of $4Bn for GuySuCo and $6Bn for Guyana Power & Light Inc., both state entities. While the opposition seemed to have had some idea of what it wanted, the leadership appeared confused on a clear and united strategy to challenge the Budget. After some initial differences between the AFC and the APNU whose leadership appeared to have sided with the Government on the contentious issue of the electricity tariffs in Linden, the parliamentary opposition settled down to addressing the expenditure side of the budget. Of course those initial differences caused a number of missed opportunities for stamping fiscal discipline on the entire project and process.

Cut
The Estimates of the Public Sector for the year 2012 were tabled as Bill No. 3 of 2012: Appropriation Bill 2012 with current and capital expenditure totaling $103.9Bn and $75.8Bn respectively. Of the dozens of budget agencies including known abusers of the public purse, only four were subject to any cuts, among which was GECOM for which the expenditure proposal was clearly excessive. And the real significant cut was to the budget of the Ministry of Finance in respect of expenditure out of LCDS funds which the Minister projected would be received. In many ways therefore the cuts were more symbolic than real. Principally they targeted NCN and the Office of the President where PPP/C politicians, long past their sell-by dates were put on the payroll to be paid by taxpayers, often at higher salaries and the same perks they previously enjoyed.

The cuts were reflected in Act No. 3 of 2012: Appropriation Act 2012 which was passed by the National Assembly on 26 April 2012 with current and capital expenditure totaling $101.7Bn and $57.0Bn respectively after cuts in five account lines:

2013.03.17_Table1

Enter the courts
However, after the revised budget was approved without dissent by the entire National Assembly the Attorney General Anil Nandlall in his wisdom advised the Government to go to the court and challenge the power of the parliament – including the President – to cut the budget. The AG went to the courts for several orders for the restoration of the amounts cuts by the National Assembly, all of which were refused, except for the sum of $99,000,000 for the Ethnic Relations Commission (ERC). The reason for restoring the amount for the ERC was that the ERC is a constitutional body subject to a direct charge on the Consolidated Fund. Accordingly, its budget allocation was not subject to a vote of the National Assembly.

For the other heads, the Chief Justice (ag) rejected the application of the Attorney General and denied the Minister of Finance the “liberty” to make advances/withdrawals from the Consolidated Fund to restore the $21 billion 2012 budget cuts. Opportunistically the government chose to misrepresent and possibly violate the ruling by the Chief Justice which was described in his written decision as being in its “preliminary stage” and that “the views expressed at this juncture are not final.” Unfortunately the lawyers for the Speaker Mr. Raphael Trotman and Mr. David Granger, the Leader of the Opposition who along with Dr. Ashni Singh were the defendants in the matter never pursued the case to finality. Mr. Nandlall and Drs. Singh and Luncheon did not allow this simple fact to get in the way of their story that the cuts were unconstitutional. There was simply no ruling except in respect of the ERC. I have no doubt that we will see a reprise of the battle over the 2013 budget.

Dr. Singh v Greenidge
But there is a larger and more practical point. From the following exchange between the Minister of Finance and his counterpart on the opposition benches, it appears that consistent with their belief, contrived or otherwise, the government found ways to restore the cuts as necessary, some by way of the parliamentary route and others from sources unknown. After all the government has so many public funds around the place which are subject to no oversight, that finding money is not a problem. Apart from what are in effect slush funds there is always NICIL and the GGMC to help when called upon.

Here is that exchange between Mr. Greenidge and Dr. Singh:

TENTH PARLIAMENT OF GUYANA – FIRST SESSION (2012)
NATIONAL ASSEMBLY – NOTICE PAPER No. 115 – Q. 66 Opp. 65

RESTORATION OF THE SUMS DELETED FROM 2012 BUDGET

QUESTION by Mr. Carl Greenidge, M.P.

Would the Hon. Minister of Finance say whether monies cut from the Budget and not approval (sic) by this House have been restored to the Ministries? If so,

What categories and sums have been involved?

What is the legal basis for such payments?

What advice was provided on this matter by the Attorney General?

What section of the Chief Justice’s report/decision suggests that either the Chief Justice or the Ministry of Finance can restore cuts to the budget or that the Chief Justice can authorize the Ministry of Finance to make advances from the Consolidated Fund?

ANSWER – The Minister of Finance

Where the sums approved by the National Assembly under the Appropriation Act 2012 were found to be inadequate to meet the services of Government, supplementary financing was resorted to in accordance with the law.

The categories and sums involved have already been reported to the National Assembly in successive Financial Papers.

The Constitution and the Fiscal Management and Accountability Act 2003.

The Attorney General confirmed in advance the appropriateness of the course of action adopted, which course of action was also approved by the Cabinet.

The Chief Justice made several relevant references to the Constitution.

Conclusion
There have been no substantial consultations on the 2013 budget nor have the political parties drawn any lines in the sand. Guyana is hardly any better off now than one year ago. Surely the budget is the occasion to get agreement on some vital requirements for governance. There should be no delay in appointing the Public Procurement Commission; in appointing and Ombudsman; in appointing a Chancellor and a Chief Justice; in establishing the Integrity Commission; in introducing anti-corruption legislation; in bringing the Judicial Review Act and the Access to Information Act into into effect; in reforming NCN and the Chronicle; holding local government elections; dealing with tax reform; and in activating the Constitutional Reform Commission.

The Budget cannot be divorced from these important elements in how the country is managed. Let us fix them now.