The budget — growth with equity


The budget — growth with equity

Stephen Edwards

Monday, March 11, 2019

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The 2019/20 budget presentation by Nigel Clarke, minister of finance and the public service, is remarkable because it represents Jamaica's first growth budget in recent history. The primary tool of a minister of finance is fiscal policy. This budget speech was profoundly important because it presented a taste of a fiscal policy framework in which accelerating economic growth was one of the overriding objectives. Frankly, for a generation of Jamaicans, this is something new.

To its credit, Jamaica has in recent times grown accustomed to budget presentations that focus on fiscal balance. This has been true now for successive administrations. In these presentations, much of the policy work that informed the budget was dedicated to allowing Jamaica to simply pay the bills for debts already incurred. By definition, this was always a backward-looking conversation. It was about holding together what little we had left while staving off creditors, and ultimately succeeding at lowering borrowing costs. The zenith of this era, and indeed its culmination, was perhaps the revenue neutral shift from direct to indirect taxes in 2016/17 followed by the announcement in the 2018/19 budget presentation by Minister Audley Shaw that there would be no new taxes.

The question for Nigel Clarke, therefore, was always going to be: Where do we go from here? He has clearly heard the question and is rather transparently forcing us into a difficult discussion about what we want for our future. He is insisting that we talk about who we want to be as a nation.

Questions of this nature typically devolve into a debate about the importance of growth and opportunity on the one hand, and the need for equity and fairness on the other. Conventional wisdom is that at points in time countries have to choose one of these vehicles in which to set off on the road to being a better nation. There is the expectation that, at least for a period of time, the other option would be left behind.

Clarke sought to turn this argument on its head. His view is not only that we have the capacity to do both growth and equity — which is in itself a bold view that had to be meticulously substantiated with a list of actual programmes and a clear statement of how we can pay for them — his core message is that we have a duty to pursue both goals at the same time, because the achievement of one goal directly reinforces the prospects for achieving the other.

There are three broad areas in which Clarke's presentation is most forceful in setting the ambition for growth with equity. First is his focus on championing a series of investments in social programmes that he labels 'Protecting the Vulnerable'. He makes this case by citing a 72 per cent increase in the budgetary allocations for the Programme of Advancement Through Health and Education (PATH) and school-feeding programmes since 2015/16, and a 25 per cent year-on-year increase in funding for the overall portfolio of major social-protection programmes.

This $20-billion social-protection initiative includes sizeable increases in conditional cash grants to a range of vulnerable groups and directly supports school feeding; academic examinations; back-to-school grants; school transport grants; and community development, poverty reduction and rural education access projects. The programme also develops new shelters for the victims of domestic abuse, steps up support for the disabled, tops up the lowest government pensions, and funds a range of social interventions aimed at citizen security.

A second key part of the presentation was a commitment to funding a group of defining capital expenditure projects and general national development initiatives that have long been on the list of things that Jamaica has wanted to do but simply hasn't done. The largest of these is the 61 per cent increase in the capital expenditure on national security to fund Plan Secure Jamaica to the tune of $20 billion. It also includes significantly expanded budgets for rural water irrigation and farm roads, access to finance for small business, school upgrades, funding for tertiary education and student loans, and skills development.

Importantly, in this part of his presentation — dubbed Economic Opportunity for All — Minister Clarke also included some measures that started us down a road to seeing ourselves and our potential as a nation in a different, more modern light. Among these I include the work towards a new Parliament building, new recreational parks in St James, the breakthrough roadwork and highway construction on the south coast and to St Thomas and St Mary, and perhaps most profoundly the commitment to new funding for research and development. Behind all of these are new measures to promote greater local involvement in public sector procurement.

The third major component of the presentation was Clarke's historic programme to reduce taxes in specific areas that directly support growth after decades of budgets that legislated increased taxes. The long-sought-after reduction in transaction costs on buying, selling, and borrowing against property is huge. When combined with lower interest rates, new measures to allow for a wider range of investments by pension funds, the 100-fold increase in the transfer tax threshold for estates, and direct support for the financing of small business, it is reasonable to see this as a major stimulus to investment as well as construction and property development in Jamaica. Supporting this are a series of aggressive reforms to make it easier to do business, such as the abolition of the asset taxes for non-financial enterprises, the abolition of the minimum business tax, and the increase in the General Consumption Tax (GCT) threshold to $10 million.

Either because of his modesty or his desire for historical accuracy, Clarke made heavy weather of insisting that the idea of combining the much-heralded growth and prosperity agenda of the Jamaica Labour Party (JLP) with the demand for equity was not original to him or even to this Administration. He wanted us to know that the labour union movement that spawned the JLP and took root in both major parties meant that the equity piece was there, front and centre, at the beginning, and was secure again in its rightful place.

One newspaper headlined its reporting on the 2019/20 budget with the expression 'Santa Clarke'. There is a sense in which this jubilation also rings some notes of caution. First is the obvious: Growth with equity is not free; we have to pay for it. The Government's credibility on fiscal balance is solid, but as a people we have to remain vigilant and hold them to account. And, while we can do some things to prepare and save now for future eventualities, we must also be willing to quickly change the course on spending if we face a natural disaster or adverse shock to the economy.

The second note of caution is more subtle. We may all listen to Dr Clarke but hear only the chorus that we like. The “growthers” might only hear the tax cut chant and would be moved to join in and make it louder and longer. The vulnerable may only hear the piece on PATH and challenge us to focus solely on finding ways to do more and do it faster. This is the worst possible outcome for Jamaica — a Jamaica in which we remain focused only on entrenching our own narrow special interests.

The good thing is that we know that this is exactly the opposite of what Clarke intended. At points in his speech he alluded to his invited guests who sat in the gallery of the Parliament. Sitting side by side, shoulder to shoulder, were PATH recipients — some uniformed students, some elderly and infirm — as well as small business owners and captains of industry. As protocol would have it, they could not clap or cheer; they had to listen in silence. But they were allowed to look around and smile at one another with laughter in their eyes — and they did! This was the experience that Dr Clarke wanted for the House of Parliament. One can only imagine that this is what he intended for all Jamaica.

Stephen R P Edwards is the president of Generation 2000 (G2K), the young professional affiliate of the Jamaica Labour Party. He is a civil engineer and former university lecturer. Send comments to the Observer or

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