Your pound of flesh...but there will be blood

Assuming Horace Dalley's disclosure that every percentage increase in wage offered to public sector workers would cost $1.2 billion, it seems that the Government will have to engage in either a massive tax package to raise the funds to prevent the spread of 'constabularitis' or take the axe to the budget, removing $14.4 billion of fat in order to pay public-sector workers a minimum 15 per cent increase.

The police want a 100 per cent raise.

An examination of the Estimates of Expenditure, the big yellow book which outlines the Government's planned spending, will show that, of the $641.5 billion to be spent, $178.6 will go towards servicing the nearly $2 trillion debt.

Now, to find an extra $14.4 billion within the budget for public-sector workers, who are already getting $165 billion, should be no big deal. Or so it may appear. There are some who argue that the Government has been wasting money fixing roads for Obama, buying SUVs, taking fat salaries and holding commissions of enquiry.

This year, an extra $11 billion has been set aside for public-sector workers. Finance Minister Dr Peter Phillips has told a parliamentary committee that some $6 billion of that amount is for back pay and a final tranche of a one-off payment.

The remaining $5 billion is for wage increases, which, realistically, means a four per cent increase this year.

But we have seen where the public-sector unions, while not publicly talking value for money, have said they want much more than the three per cent offered. To pay more, the Government has the options of more taxes, cutting the budget or just cutting the sector.

Since the Government is not brave enough to contemplate the first and the last, then consideration should be given to taking the knife to the budget.

As academic an exercise as it may appear to be, The Gavel will attempt to point Finance Minister Dr Peter Phillips into a direction in which he could take the hot knife. The mission is to try and raise $14 billion, an exercise which will not be either popular or painless.

 

save money

 

Perhaps, the easiest place to start is for the Government to also look towards ensuring greater efficiency in the contract award and implementation process to save money.

Note, for instance, that the Office of the Contractor General (OCG), in 2013, requisitioned 200 public bodies that were procuring goods and services and works in excess of $500,000.

The OCG found that 101 reported contracts, with an approximate combined value of $19 billion, had overruns and variations. The variations accounted for $2.1 billion and overruns accounted for $500 million.

Perhaps, the merging of ministries and the disbanding of some programmes could be the antidote, with significant side effects, to public-sector ailments.

For example, some $1 billion can be found from chopping the entire budget for culture. Even public-sector workers, some of whom may lose their jobs in this exercise, will agree that funding culture in an anaemic economy is not the best way to spend scarce funds, especially if the seemingly contagious virus affecting public-sector workers threatens to spread.

And if culture is removed, then it makes sense to transfer the youth portfolio to culture. This could result in some savings, too. But it cannot be just the transfer of responsibilities.

Another unpopular cut that could be undertaken to quench the thirst of public-sector workers is the removal of funding from the areas of sports, culture, and religion, which gets $1 billion through the Office of the Prime Minister (OPM).

The Jamaica Anti-Doping Commission, which gets $ 90 million, could be spared in this exercise.

There could also be significant cuts in allocation for state ceremonies ($61.7 million); the upkeep of the prime minister's residence ($14.8 million), as well as shutting down the PM Western Region Office, which costs $12.5 million.

The Communication and Public Affairs Budget, which consumes $30 million, should definitely be revised downwards. Consideration should be given to consolidating all communication services within the public sector in a single entity. This could result in savings.

Also in the OPM, the $200 million being spent on social services could be taken out, leaving the social security ministry, which already has a $2.5 billion budget, to carry out the functions.

Cutting out the Constituency Development Fund would yield $1 billion, and similar savings could be realised from reorganising the industry and commerce ministry by merging it with the foreign ministry, to create a foreign affairs and development ministry.

 

budget cuts

 

Capital projects in the works, environment and agriculture ministries could also be cut to ensure public-sector workers get their heart's desire.

The tourist budget could be made lighter by cutting off entertainment and pulling back from the spend of more than $2 billion on marketing overseas.

And while we are at it, why not stop the $400 million West Kingston Commission of Enquiry; save $11 million from cutting minister's pay by10 per cent, and ask the US government to reimburse the $200 million spent fixing roads to impress President Barack Obama?

While the aforementioned suggestions may be ludicrous, they indicate that the options in treating with public-sector salaries are neither palatable nor easy.

The Government currently spends $165 billion on wages for roughly 123,000 public-sector workers. This is about 9.8 per cent of GDP, making it impossible for the target set out in the fiscal rules of nine per cent by March 2016.

Finance Minister Dr Peter Phillips and company can continue fooling themselves about keeping the lid on wages. The minister must not forget that the fiscal rules require that the debt as a portion of GDP be lowered to at least 60 per cent by 2025. The current levels are 138 of GDP.

Refocusing the public sector and creating the opportunities for investment by the private sector in areas such as health are critical to achieving the embedded fiscal targets.

Attaining the 60 per cent target is not going to be possible unless there is economic growth as well as a containment of expenditure. The public-sector wage bill is one ripe for the cutting, but the politics won't allow it.

Someone has to take this bull by the horns and take the machete to the public sector. It must be chopped and the sector reorganised.

One hopes that unions representing public-sector workers are attuned to the country's economic realities and are doing what is necessary to get their members to brace for massive retrenchment.

Former Prime Minister Bruce Golding summed up the attitude of the public sector well in his 'pound of flesh' comment in 2009.

Then, Golding, in pleading for understanding from the unions, said his government could not afford to pay the seven per cent wage increase due to workers because it had no money to pay in the wake of the global economic crisis.

According to Golding, some of the bargaining groups had been unreasonable in their demands.

"We understand the plight the country is in. We understand that the world is going through this problem. Just give me my seven per cent and we will understand it even better," the then prime minister had mocked.

"I don't care how savaged the economy is. I don't care that this is something that has brought down more powerful economies than Jamaica's. I want my pound of flesh, which is what some of them are saying, and my response is, 'Take your pound of flesh, but not one drop of blood'," declared Golding at a post-Cabinet media briefing.

According to Golding, while he accepted the unions' claim that there was a contract in place for a seven per cent wage increase, the reality had left the Government with no choice.

I commend the words of Golding to Prime Minister Portia Simpson Miller, who has failed to take control of the issues of public-sector reform for fear she will lose political capital.

"I pick no fight with anyone, but what this country doesn't need right now is a leader who does not know how to say no. What this country doesn't need is a leader who is afraid to stand up to whatever the forces are and to indicate the direction which the country cannot be allowed to go."

That was Golding. Simpson Miller would do the country a world of good if she embraces those words and not squander them like the man who uttered them. She has lost lots of political capital without breaking a sweat, so surely she should spend some on this most important matter. She will be less popular for it, but history will judge her kindly.