Yesterday, The University of the West Indies (UWI) signed a partnership with the Institute of Fiscal Studies and Democracy (IFSD), based at Canada’s Ottowa University, to launch its new Fiscal Research Centre.

Both funders — Minister of Finance Dr Nigel Clarke and regional economic advisor David Rosenblatt of the Inter-American Development Bank (IDB), who represented his boss Anton Edwards, acted as witnesses for their respective institutions. Indeed, Minister Clarke noted that the special grant of $200 million for the Fiscal Research Centre from the Jamaican Government had been just approved last week Friday, while Rosenblatt advised the IDB was planning to provide US$250,000 for climate finance research and US$400,000 for general research and capacity-building.

In his short presentation, founding president of the IFSD Kevin Page, who had worked for 27 years at Canada’s Ministry of Finance before founding Canada’s first Parliamentary Budget Office in 2008 (before leaving to found the IFSD) explained the “democracy” piece of their name as helping “leaders who need support” with “really difficult” political challenges, such as climate change, as part of its public discourse.

In this context, it is worth noting that as early as 2003, under the then partnership for progress “social partnership” initiative, the Jamaican private sector had looked at the UK’s Institute for Fiscal Studies as a potential model.

Page noted that fiscal commissions are now a global trend, as, along with the existing European network of fiscal commissions, there is now an African network (which pledged their support for Jamaica’s initiative) and an Asian network that has just been established in Seoul, Korea.

In his keynote address, Finance Minister Clarke correctly called again for Jamaica to study its economic history through non-partisan lens so that the country can see it as an “integrated whole”. For example, he noted that Jamaica had run fiscal deficits roughly 95 per cent of the time since 1974 and that, incredibly, we had negative net international reserves from 1976 to 1993.

He argued that the new research centre provided opportunities for undergraduates to learn sound public financial management and was a key step towards ingraining its benefits, critical to an economically stable society. He argued, with a nod to former Bank of Jamaica Governor Brian Wynter who was in the audience, that because our central bank was now independent, we had for the first time managed to get ourselves out of an “externally driven” inflation spiral in a short space of time, with inflation quickly being brought back into its target range.

Importantly, he articulated the role of the Courtney Williams-led independent fiscal commission, which was to look at how one is doing “today” and forecast the medium-term outlook, in contrast with the research that would be undertaken by the likes of Dr Nadine McCloud (a key driver of the fiscal research centre initiative) to teach public financial management and do research that looks forward five or 10 years.

He also spoke about a potential agenda for the research centre based on the current global technological revolution, noting that Uber doesn’t own cars and Airbnb has no hotels. He argued that policymakers needed to look at the trade-offs with, for example, hotel room tax in this environment of technological transition.

Similarly, he observed that local advertisers do not have a level playing field verses the major global aggregators of digital content, as they have to pay general consumption tax while the much stronger global players, such as Google, pay nothing. He said how to deal with these issues should be “interrogated” in a thoughtful way to avoid “overnight” policy shifts that were not properly ventilated, the implication being shifts in the past had often not been thought through properly.

He could have added, as articulated by the Jamaica Chamber of Commerce and others, that the current business model of Amazon also represents a non-level playing field with local retailers. In this regard, it is interesting to note that the new UK Chancellor of the Exchequer Rachel Reeves is expected to address this same issue — Amazon verses their high street — in her next budget.

Of particular note, he observed that Jamaica’s public sector had sacrificed in the name of fiscal adjustment and had now been prioritised, but said one of the easiest ways to lose its fiscal stability would be for public sector wage increases to continue to be consistently above inflation. In his view, Jamaica needs to move away from negotiations being presented as one (the minister of finance) verses 100,000 to a more inclusive balancing of the needs of the 100,000 verses the roughly 3,000,000 Jamaicans.

The event closed with the principal of The UWI, Professor Densil Williams, signing the partnership agreement with Page.

In Williams’ opening speech, he mentioned famous “good institutions” economist Douglas North, observing that it had long been known that “institutions matter”. For a long time the “Achilles heel” of economic stability in Jamaica had been its macro-instability tax, which “at heart was a problem of fiscal discipline”. He argued that Jamaica needs “institutions that transcend the political cycle”, acting as a guard rail against fiscal indiscipline.

He recommended that we should continue the pursuit of the long-standing goal of Minister Clarke to achieve investment-grade status, hopefully within five years, then no one in Jamaica would need to complain about the cost of capital.

Keith Collister

Keith Collister has been a member of the Jamaica Chamber of Commerce Economic Affairs and Taxation Committee for 24 years and is its current chair. He has also been a member of the Private Sector Organisation of Jamaica Economic Policy Committee for the same period of time.