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Rowley’s reply to budget 2012: An exercise in self-praise, deceit
Mr Speaker, I want to begin, as a member of the Accommodation Committee, by joining you and my other colleagues gathered here, in expressing my sincerest gratitude to all those who have contributed to the smooth relocation from the Red House to our temporary accommodation at this venue, a subject to which I will return a little later. I particularly want to single out the parliamentary staff for special commendation as they once again demonstrated that they are among the most professional and reliable officers in the Public Service. This is a badge of honour which they must continue to wear with pride as they follow the excellent leadership of our Clerk of the House, Mrs Jacqui Sampson-Miguel.
Mr Speaker, as is customary after the budget statement is read, the Leader of the Opposition is required to respond to the Minister of Finance and the Government in the context of their proposals as advanced. On this occasion, Mr Speaker, I crave your indulgence to direct my response solely to you and the wider public of Trinidad and Tobago whose business has been so trivialised by the Group of 29 which is leading us over a cliff whilst pretending it is a trip to the promise land. It is my intention to leave the Government to continue to ascribe blame to others, to evade its own responsibility, to hide and misrepresent facts, to propagandise and engage in self-praise as the national crisis looms larger and larger. In the words of the Minister of Finance himself, this is the only Government which finds itself approaching a cliff and chooses to “look up” with “resolve and vision”.
Maybe it is their intention that the inevitable loud thud at the bottom of the pit will wake them up to the reality of our deteriorating circumstances but by then it might be too late for the people of Trinidad and Tobago. It is against this background that I choose to speak directly to the people of Trinidad and Tobago about the real threatening circumstances which the Minister of Finance has studiously evaded. One year ago, Mr Speaker, a new Government presented a budget to this Parliament and received the support of the Opposition in its passage (unheard of). Even though we were critical on a few of the issues and strongly warned against the negative potentials of some actions we voted for the budget and wished the five-month-old Government well as it embarked upon the business of improving the condition of the people of Trinidad and Tobago on a foundation built by its predecessor.
It has come to pass that all that the Minister of Finance can claim as an accomplishment in this budget statement is that he “stabilised” the economy, it behoves me to remind you, Mr Speaker, of the state of the economy as it was, when this Government took office. This is best summed up in a press release from the reputable Standard and Poor’s rating service which was issued in New York on September 14, 2009: “...Standard and Poor’s Rating Services said today that it affirmed its A/A-1 foreign currency and A+/A-1 local currency sovereign credit ratings on the Republic of Trinidad and Tobago. Standard and Poor’s also said that it removed these ratings from CreditWatch, where they were placed on February 3, 2009, with negative implications. The outlook is stable.”
The budget speech delivered by the Finance Minister was an elaborate exercise in obfuscation, self-praise, and deceit! At times the speech bordered on delusional or was of such extreme vagueness that one had to struggle to follow exactly what the Minister was really saying. The Minister of Finance has presented budget estimates of $54 billion! The largest in the country’s history! This is without identifying any clear revenue generating activities other than increasing fines for certain offenses. The minister is actually congratulating himself for planning to run huge budget deficits without articulating any plan as to how he will raise revenue in the future and when will he return to a balanced budget? The disastrous outcome of this should be clear to all right-thinking people in this country.
There is a saying on Wall Street that “if you jump out of a building 100 stories high, for the first 99 floors you can really believe that you are flying”. This is the perfect metaphor for what this UNC government and its Finance Minister is doing to our economy. They are leading us down a path to economic ruin while believing their hollow rhetoric about “from steady foundation to economic transformation, who are they trying to fool? What foundation did they lay? The minister said by the first quarter of 2011, “we envisioned a somewhat smooth sailing, with a certain gentle economic wind on our backs.” Well, in that quarter, “growth’ turned out to be -1.7 percent! And in the previous quarter it was -3.5 per cent.
So what was he talking about? Furthermore, after painting a gloomy picture of the developments in the US and Europe, the minister then tries to pretend that somehow these were responsible for the recession that he was presiding over; listen to him: “These uncertainties were transmitted to our economy through the impact on oil and gas prices”. Well, the average oil and gas price was well above the budget price of last year to the extent that greater than expected revenue was derived from the energy sector. This even allowed them to run a smaller deficit than was planned.
In fact, the Central Bank reported that: ( June 2011). As the energy markets picked up in 2011, the Energy Commodity Price Index increased by 42.4 per cent on a year-on-year basis to June 2011, after peaking at 153.5 in April 2011.
• The average price of crude petroleum: (WTI) peaked at US$113.9 per barrel in April 2011 before falling slightly to US$96.3 per barrel in June 2011.
Let me remind them that their budgeted price was US$65. So again, what is he talking about? If this not deceit then, what is? More importantly, Mr Speaker: What was the real state of our economy when they came into office and what have they done since then? The fact is that all our macroeconomic indicators were very good when this Crew of 29 took office in the second quarter of 2010. Mr Speaker: Unemployment was at 4.8% at that time, one of the lowest levels ever recorded in any CARICOM country. Mr Speaker our foreign exchange reserves stood at over US$9 billion when the crew took over the reins of government.
There was also already over US$3 billion in the Heritage and Stabilization fund! So they met the country with a combined US$12 billion in savings and reserves. Yes, Mr Speaker, this was what the PNM left in place. Furthermore, Mr Speaker, our public debt to GDP ratio was at about 38.5 per cent. This was way below any panic point, in fact, this was one of the lowest you could find anywhere in the world. Additionally, our international credit rating was well in place “A” well in place, look at this, Mr Speaker.
Yet, incredibly they set about bad mouthing the country’s economic situation and in the process, destroyed the very business confidence that they are now struggling to revive. We warned them about what they were doing yet they kept on “crying wolf”, playing cheap politics—trying to convince the country that we were on the brink of some sort of economic calamity when they came into office. Mr Speaker, the real disaster started on May 24.
No real GDP growth
The economy was expected to grow at positive 2.5% in 2010 when the UNC came in to office, but after claiming in September that his 2010 budget would “turn the economy around”, the Finance Minister presided over a, -3.6 % economic decline in the last quarter of 2010, and then a further contraction of -1.7 in the first quarter of 2011—in other words “a recession!” So all indications are that for the rest of this year, economic growth will continue to be negative. The Minister of Finance himself has confirmed this. Therefore from the point of view of this most important economic indicator, the UNC government has been an absolute failure,—a disaster.
Unemployment fell to 4.8 % around election time in the second quarter of 2010. Since then all evidence points to a steady increase in the unemployment rate, Again, all indicators suggest that the unemployment rate could be significantly higher than this at the moment, because they have continued their backward policies.
No business confidence
The UNC has failed miserably to convince anyone in the private sector that they have a clue that they know what they are doing. Their flip-flopping and mean spirited actions have destroyed business confidence in our economy.
As one story in the Trinidad Guardian confirms: “Budget 2011 did not turn the economy around. An ambitious $50 billion plan, by an even more ambitious newly-minted coalition Government, struggled with a confidence crisis for most of the financial year.” Published: Wed, 2011-10-05 21:21, Asha Javeed. This is also reflected in the fact that the Central Bank reports that business lending continues to decline under this government, falling by -5.7% at the beginning of this year.
The country is on its third year of deficit financing. The UNC is now in its second year of deficit financing. They insist on bringing larger budgets than the PNM ever did while boasting about their ability to “borrow”. So if they actually borrow and spend all that they claim in their two budgets they would significantly increase our national debt. In fact, it can go from a manageable 50% of GDP to about 70% if they carry out all their plans. And that unfortunately appears to be their ambition. And they are proud of it. And this they refer to as “prudent economic management.”
While sitting comfortably on the IMF train they are proudly boasting that they are not taking the country down that road. Utterly delusional! Who is so crazy in this country to take any assurance given by the UNC. Two consecutive quarters of increasing unemployment, and more pain to the people suffering under the modern policing in the 21ST.C (SoE). Super low core inflation in 2011—base effect notwithstanding—partly indicating weak activity in the economy..
This UNC government has presided over: taking the country from weak positive economic growth into a recession! Rising unemployment; Increased national debt, and destroyed any semblance of business confidence. If this is not economic mismanagement then what is? For them this is good economic management “PP Style”. So when this Minister of Finance and his coalition gang members seek your praise for stabilising the economy, I want to tell them, Mr Speaker, that he did not stabilise anything, he met it stable in May 2010 and it had been declared stable since September 2009.
What he has done by destroying confidence in the economy is to unravel what he met. He promised last year to turn the economy around. We pointed out then that if he was successful it would mean that the economy will reverse its direction from growth to recession. Sadly Mr Speaker, this is probably the only area where last year’s budget succeeded. After the initial supplies of the economic shock emanating from the Wall Street collapse of early 2009, the assignment of the new Government was to maintain that stability and bring about further growth in the weakened economy. On this score the Government has failed and failed miserably.
It is now common knowledge that even with all the challenges of the 2009 international, regional and local situations, the performance of the Trinidad and Tobago economy in 2010, the year of governmental hand over and transition, saw a negative growth of 0.6% and a better than anticipated fiscal deficit. It was on this foundation that the current Minister of Finance and his Government solicited and obtained Opposition support and from which it projected economic growth of 2% for 2011. What has been the result?
Not only did we not achieve the 2% expansion, nor did we remain at the initial level where we were at in October 2010 but the economy is projected to contract by 1.4% in the fiscal period 2010/2011. All this was whilst, throughout the year, the Government resolutely denied that the economy was stalled and we were experiencing recessionary conditions. It is reasonable to assume that when the full effects of the current economic disruption occasioned by the state of emergency is fully factored into the end of the fourth quarter the real decline could be well above 2%.
Instead of facing reality and taking the necessary action as they were required to do, using the tools of expenditure provided by the Parliament, the Government spent the year engaging in vacuous propaganda about “blue skies” and rosy forecasts of nonexistent recovery and growth. While the economy was collapsing and all knowledgeable right thinking citizens were beseeching the Government over the effects of this recession on their personal lives and their businesses, the Government chose to ignore the reality, to engage in deceit and misrepresentations as they executively travelled, partied heartily, and conducted guerrilla warfare against all contract officers.
They revelled in inter-ministerial jhanjat in the state enterprise sector where, even as I speak, chairmen and myriad functionaries are still coming and going like the traffic in Paddington Station. The net effect of all this has been tardy and ineffectual decision making, stifling of economic activity with significant job losses in the private sector. It is against this background that this deceitful government has not published the quarterly unemployment figures since the second quarter of 2010. As unemployment continues to rise alarmingly, there are no longer any official published statistics of the unemployment situation because the Government wants it to be so.
With no published statistics available, it was interesting to hear the Minister of Planning and Development quoting the latest unemployment figures, known only to him. This is a figure which is lower than that quoted by the IMF, all of which are much lower than the real numbers. What we do know is that during the last year, thousands of persons have lost their jobs and very few new job opportunities have been created as the economy continues to contract. With this experience, we demand that the Central Statistical Office (CSO) be revamped immediately and we call for and support the establishment of an independent statistical institute, gathering data of national interest and making it available in a useable and timely fashion, away from and free from Government interference and manipulation.
This institute should be headed by a director appointed by the President, with proper security of tenure.
Reliable statistical data are key ingredients in government and private sector decision making on policy formulation. The collapse and / suppression of the CSO, as we are seeing with the unemployment figures, is intolerable and should be cause for great concern with respect to the outcome of the ongoing national Census exercise. In a budget statement in which the Minister of Finance offers “disclosures and decisions” the exact opposite has been the fabric of his presentation.
For approximately three hours the Minister laboured haltingly over a text in a manner as though he was seeing his contents for the first time or so unconvinced was he of much of the contents that he could not drum up the enthusiasm to present his potions with any conviction. What is abundantly clear is that the Minister of Finance in October 2011, one and a half years into his tenure, has deliberately refused to report to you the people of Trinidad and Tobago on the performance of the last budget provisions, on the current economic conditions and outlook as they stand under his watch. He accepts no responsibility for his stewardship.
After he and his marauding colleagues did everything possible to destroy confidence in the economy he now makes the preposterous statement that the admitted failure of the last fiscal package, the contraction of the economy, this UNC-led recession, is the fault of the private sector and the Opposition. Clearly that is what his handlers advised him to say. When this budget fails to deliver, we expect that it would be blamed on Osama bin Laden and the man in the moon. No two ministers speak with the same voice on any issue as they jostle for attention in front of any available camera. Not even the Prime Minister is immune from this scourge. Only last week we heard of an airport in Couva and five hospitals as certainties in the 2012 Development Programme and that every ministry would have an identifiable gender component. Sadly, nobody bothered to advise the Minister of Finance.
The Central Bank reports that business lending continues to decline under this government, falling by -5.7% at the beginning of this year. This protracted loss of confidence has everything to do with the behaviour of the Government as much as it has to do with any circumstances beyond our control. As of today, there is no commitment to any time frame for a return to economic growth. The Government is clear that it is taking on no such responsibility. If this shirking of leadership responsibility continues for much longer the World Bank and/or the IMF public servants will do it for us when we turn up to do the borrowing which seems to be the panacea of the coalition. The 2011/2012 budget forecasts a best case scenario of 1.7% growth. How then will next year be better than the last.
The IMF World Economic Outlook warns that the world economy has entered a “dangerous” phase and that the prospect of lower world economic growth and a recession has increased significantly. The minister indicated that he appreciated the risks and then proceeded to ignore them. Expenses outstripped revenue yet another year in 2011. Where are the “growth poles” which drew so much desk-thumping last year? How has the private sector responded to these initiatives hailed in last year’s budget? Where is the big bang or cumulative series of small steps that would carry us from no growth to the stability of which he spoke in his first budget.
Indeed, the approach set out in the budget is akin to the encounter in “Alice in Wonderland” between the Alice and the Cheshire cat when she asks for directions, the cat replies that if you don’t know where you are going then “any road will take you there”. Mr Speaker, where is the Finance minister leading us. He paints a gloomy world economic outlook he speaks of uncertainty and the need to navigate uncertain waters. This is the same minister who just four weeks ago was talking about “blue skies and green shoots”. Perhaps his head was in the clouds then. He is certainly there now.
Last year’s budget PR talk was stabilisation; this year the buzz is transformation. The reality is that nothing significant has been achieved. There are no growth poles and no growth. In his last budget speech, the Minister of Finance based his budget on an oil price of $65. This year he uses a price of US$75 whilst telling us that the oil production has continued to fall. What he did not tell the country is that oil production is at its lowest level since the 1950’s. And in the main that oil production consists of heavy crudes which do not attract the best price (the WTI price).
We export a lower quality oil so our realised prices will always be lower by 15 to 20 %. Our LNG may be sold increasingly to other destinations which are achieving a better price, e.g. Europe and the Far East, but the market is softening yet the minister keeps the price constant at net back price of US$2.75. In the 2011 Review notes there are reports of problems with supply and several plants complained of low output. It is therefore highly unlikely that we will achieve the prices on which the budget is predicated. 2010 was a good year and we did well with revenues of $42.3 billion. The 2011 tax revenue is estimated at $43.4 billion and is projected to grow to $47 billion in 2012 with no new revenue streams and a weak energy market. Is this not wishful thinking? Is this realistic? Or did he just increase the prices of energy to get a bigger revenue number so expenditure could be increased?
But there might be an even more sinister interpretation. The HSF Act requires that monies be transferred to the HSF when realised prices are higher than budgeted prices. The minister has ensured that there will be no such transfers by budgeting a higher price than can be realized ensuring that he has every cent available for expenditure. These are the same people who advocated that we should never use anything above $50 for budgetary purposes so that there will always be a savings component from energy sector revenues. Today is today, yesterday was yesterday, this is new politics.
Mr Speaker, so we have a weak and uncertain revenue outlook, falling energy prices and an increasing possibility that we may have double dip recession. However, for the second year running budgeted expenditures are increased from $51 billion last year to $54.6 billion in 2012. How long are we going to continue with this? Are we the Caribbean Greeks? This Government came into office saying that the Treasury was empty, that the economy was in a mess that government debt was out of control?
And what have they done? Increased the borrowing limit, increased uncertainty about the future and destroyed investor and consumer confidence, kill the capital expenditure budget and slow the economy down! And if that were not bad enough, they come with this hare-brained idea to develop a bank for Jack, something called a National Infrastructure Bank! This is the same government who says that they want to restrict what government does and leave room for the private sector! But he wants to develop another bank the primary client of which, directly or indirectly, will be the Government of T&T. Just imagine the Member for Chaguanas with his very own Bank. Take that in your pooch, Blazer/FIFA.
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