It won’t be easy

Nothing concentrates the mind like a deadline. With the date for the convening of the 10th Parliament fast approaching – it must be held within four months of the end of the previous session which ended in the last week of September, 2011 – it is expected that our politicians will soon resolve the uncertainties over who will be the Speaker as well as the simmering questions about the Statements of Poll. That would set the stage for the National Assembly to begin work in earnest over the dozens, or perhaps scores, of issues that cry out for attention. Since all of these cannot be addressed simultaneously, the Parliamentary Management Committee would have to agree on the priority issues and their timelines for completion. This will be no easy task.

The Jagdeo administration has left a damaging legacy of bad laws, unhelpful culture and lots and lots of square pegs. The parliamentary opposition, faced with exciting possibilities has promised much and they will be expected to deliver. They will be tempted to set extremely ambitious targets. How can they not want to deal with CLICO, GuySuCo, all of Jagdeo’s big money items, the legacy of corruption, constitutional reform, public sector pay within a broader wages policy, local government elections, a failed capital city, etc, etc?

It will be a huge challenge for our system of part-time politicians coming out of decades of a negative, adversarial culture which we are reminded is harder to change than people. But President Donald Ramotar can certainly assist the process if he willingly accepts the reality of the new parliamentary configuration and work with the Parliament which the constitution defines as comprising the President and the National Assembly.

Of course as Robert Burns reminded us, “The best laid schemes o’ mice an’ men
gang aft agley” (often go awry) and however carefully the members of this exciting National Assembly may plan their work there will be challenges, surprises and setbacks. Business Page today will highlight a potentially early challenge, identify an issue which I think warrants urgent attention and will comment briefly on the announcement of a tax reform committee.

When the National Assembly met on the last occasion on September 22, Finance Minister Dr Ashni Singh obtained approval for expenditure of $3.3 billion in extra budgetary allocations via Supplementary Appropriation (No.3 for 2011) Act comprising Financial Papers 5 and 6. In paper 5, some $1,367 million was earmarked to replenish the Contingencies Fund for expenditure mainly for the procurement of drugs and medical supplies for the Georgetown, Lethem, Mabaruma and Bartica Hospitals, and some $25,871,000 of which was for the Ministry of Agriculture for expenditure associated with Phase 2 of the Grow More Campaign.

Paper 6 which was for $1,951 million was made up mainly of some $1.2 B in electricity charges and an additional $350M allocation for the Drainage and Irrigation Board and the National Agricultural Research and Extension Institute. What was significant was that just a few weeks before, Dr Singh had obtained approval from the National Assembly for $2,646 million of which $2,104 million was to replenish the Contingencies Fund, and $542 million in supplementary appropriations mainly to do with the roll on-off vessels.

From technocrat to politician
In the previous Parliament in which Dr Singh was an appointed technocratic minister, he seems to have had very easy rides when it came to getting the automatic approval of his colleagues who then enjoyed a dominant majority and who quite often never seemed to understand the financial implications of their votes. That situation has changed with the majority, albeit a razor-thin one, now on the other side. Dr Singh who has now become a political minister will find that he has far more questions to answer before obtaining such approval. This column has pointed out ad nauseam that the law provides very strict rules for the use of the Contingencies Fund.

Section 41 of the Fiscal Management and Accountability Act (FMAA) allows the Minister of Finance, by way of a drawing right, to make advances from the Contingencies Fund. The circumstances under which he may do so, however, are severely limited; the overriding test is threefold: urgent, unavoidable and unforeseen. Further, he can use this fund only where no or inadequate sums had previously been appropriated, or where reallocation under the FMAA is not possible, or finally, where delay would cause injury to the public interest. He cannot use the fund to meet a promise by the President to do something or the other, or because he failed to budget properly, or because some budget agency was careless.

The same section of the Act requires that the minister report at the next sitting of the National Assembly all advances made out of the Contingencies Fund, specifying (a) the amounts advanced; (b) to whom the amounts were paid; and (c) the purpose of the advances.

Strict compliance
If, as is feared, Dr Singh improperly spent moneys from the Contingencies Fund during the two months between the close of the last Parliament and the end of 2011, then I foresee some real difficulties for him. I expect that he has to face as the shadow Finance Minister Mr Carl Greenidge, who knows the system as well as the law. Public officers are also aware that an era of political fear from despotic ministers and political cover has ended and they will have to conform to the law. It is one of the unfortunate features of the FMAA that ministers cannot be prosecuted under section 85 of the Act. Only officers can, something that is unlikely to make them comfortable.

Two things the Minister needs to bear in mind: He must present to the first sitting of the 10th Parliament a report of any spending (advances) out of the Contingencies Fund since his last report. He should expect that report to be rigorously scrutinized to ensure each has met the three tests: urgent, unavoidable and unforeseen, and that any delay would have caused injury to the public interest. And second, the level of detail provided in his report of advances made out of the Fund in the past did not meet the requirements of the law.

Dr Singh is justifiably rated very highly within the PPP/C. Judging by their stout defence of Minister Irfaan Ally whose public accountability performance has been called into question by the National Assembly, the party will circle around Dr Singh. If there has been expenditure that does not meet the rigid standards of the law, there will be difficulties. I sincerely hope that this is all speculative and that if there was any expenditure from the Contingencies Fund, that it met the requirements of the FMAA.

The National Insurance Scheme, which for nineteen years has been led by Dr Roger Luncheon, has for several of those years been faced with challenges of increasing seriousness. The problem is that no one has appeared willing to confront the challenges, some of which would have required politically unpalatable actions. Not FITUG which for several months has gone silent, not the GTUC, whose leaders are protesting everything else while ignoring the dangers faced by the Scheme, not the political parties, not anyone. The recommendations of the 2001 Actuarial Report on the Scheme were hardly acted upon except for a 1% increase in the contribution rate in 2004. The 2006 Report has largely gone unaddressed as well, in complete disregard of the actuaries’ cri de coeur that the NIS at then “40 years old, [was] at a stage where immediate measures need to be taken to maintain public confidence in the sustainability of the Scheme.”

In their 2010 country consultation the IMF staff had pointed out too that the mismatch between pension benefits and contributions and weak reserve management threatened the sustainability of the National Insurance Scheme.
They noted that under current parameters, the finances of the NIS are unsustainable. And using data provided by the NIS, they projected that after 2011 the NIS would shift from small surpluses to growing deficits.

More recently, the challenges of low rates of compliance, low investment returns, inefficient policy and executive administration, and deteriorating finances have been compounded by the Scheme’s potential loss of $5 billion in CLICO and the consequential loss of investment income thereon.

The 8th actuarial review as at December 31, 2011 is now due. The actuaries should be called in immediately, the review expedited and its recommendations acted upon. We can no longer tolerate the delays in taking remedial action or continue with a highly ineffective Board.

The Tax Reform Committee
President Ramotar had announced the appointment of a Tax Reform Committee, the terms of reference of which have not been made public. It is not clear whether the President consulted with interested groups including the political parties, consumers, the trade union movement and the Institute of Chartered Accountants of Guyana both about the scope and the membership of the committee. If he did not that is remarkable and unfortunate. VAT and personal income tax affect mainly consumers and workers, and I hope that on reflection, the President would recognize that the exclusion of representatives from those groups is a regrettable omission.

For the work of the committee to be really useful, its composition should be widened and its terms of reference publicised for comments.

A successful 2012 to all readers of this column.

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