GOVERNMENT is to offer a mea culpa to Parliament, before seeking support for a Bill to validate its actions pertaining to the misuse of funds accumulated under the Bauxite (Production Levy) Act since 1999.
A Bill to this effect, titled The Bauxite (Production Levy) (Validation and Indemnity) Act, was tabled last week by Minister of Finance and Planning, Dr Peter Phillips, who led the first and second reading in the House of Representatives last week, preparatory to the debate which could begin tomorow.
However, while the Bill has not generated much interest either inside or outside of Parliament, it is seen by those in the know as a fundamental departure from the way successive governments have handled the Capital Development Fund (CDF) which is financed by the payments from the 38-year-old bauxite levy in the past.
It is also seen as another effect of the International Monetary Fund's (IMF) insistence on a programme of improved fiscal responsibility, compatible with the medium-term economic objectives.
The Bill before the House seeks to: validate and confirm the failure of successive governments to pay all sums received as payment of the levy, and all other income from the assets of the CDF, into the fund; the investment and realisation of such sums and income otherwise than in accordance with the requirements of the Act; and the subsequent withdrawal and utilisation of a portion of such sums and other income from the assets of the Fund for the purposes of satisfying the financial obligations of the Government; "in good faith, from time to time, and inadvertently as to their being unauthorised, unlawfully made or otherwise illegal or improper, during the period from 1st January 1999 until the date of coming into operation of this Act, contrary to section 12 of the Bauxite (Production Levy) Act and to indemnify the Government of Jamaica and persons from liability in relation thereto".
In the past, the House of Representatives has approved the withdrawal of billions of dollars from the CDF for budgetary support, which is in breach of the defined purpose of the funds which is to finance capital development, including programmes in communities in which bauxite and alumina production take place, and not for recurrent expenses or other non-capital expenditure.
The last withdrawal from the CDF was the $1.4 billion withdrawn in November 2012 by Dr Phillips, which covered commitments arising from the privatisation of the Jamaica Railway Corporation (JRC), including redundancies, outstanding credit, as well as outstanding statutory deductions and retroactive salaries.
In March 2011, the previous Administration withdrew $2.1 billion from the CDF, at which time former Prime Minister Bruce Golding noted that the closure of the island's alumina refineries was sending a signal that "we are not going to be able to place the reliance we have been accustomed to place on the Fund for budgetary support; certainly not in the immediate future".
Former Minister of Finance and Planning Audley Shaw admitted that using the withdrawals for budgetary support was indeed in breach of the CDF provisions.
Economist Dennis Morrison, a former chairman of the Jamaica Bauxite Institute (JBI), has been among those who have consistently criticised government's voracious appetite for CDF money for budgetary support.
In a previous article in the Observer, Morrison noted that, since the introduction of the levy in 1974, increasing proportions of the inflows had been redirected into the recurrent budget in the face of the economic instability.
He noted that while significant investments were made in some productive assets, such as the Caribbean Cement Company, the Jamaica Public Service Company and some agricultural and low-income housing projects, very little, if any, resources were directed towards the expansion of the existing or new manufacturing capacity.
"After the late 1970s, almost the entire yearly inflows from the levy went to support the Government's budget, except for the period in the early 1980s when the Agro 21/Spring Plain experiment in winter vegetables was undertaken," Morrison wrote.