Home' Trinidad and Tobago Guardian : September 5th 2014 Contents In the 2013 fiscal year, the Government spent $29.56
billion out of total expenditure of $56.83 billion on
transfers and subsidies. That means that in the last
fiscal year, 52 cents out of every dollar spent by the
Government was allocated to transfers and subsidies.
In the first half of the 2014 fiscal year---that is from October
1 to March 31---the Government spent $13.66 billion on transfers
and subsidies, which was nearly 56 cents out of every dollar
Think of transfers and subsidies as the way in which the
Government is spending the taxes it receives to make the life
of the population easier.
Transfers and subsidies cover everything from the hundreds
of millions of dollars spent on T&T s many social programmes
to the fuel in the nation s cars right through to the grants that
are handed out to the elderly and people with disabilities.
The money that is spent by the Government to reduce the
cost of education: Not only does the Government pay the
teachers and maintain the schools out of a subvention from
the Treasury, but it also subsidises the school feeding pro-
gramme, facilitates the transport of children to and from school
and even provides a book grant to school children.
While T&T citizens receive a range of welfare support that
is the envy of many countries around the world, many inter-
national financial institutions are beginning to question whether
it is too much and too uncontrolled.
In its 2013 staff report following the Article IV Consultation
with the T&T authorities, the International Monetary Fund
team said: "Subsidies are on an unsustainable path, with fuel
subsidies particularly difficult to justify.....Subsidies and
transfers are...eating up a rapidly growing share of total
spending, from 45 per cent in FY 2007/08 to 53 per cent in
FY 2012/ 13.
"While some subsidies and transfers can be justified as
improving equity or fostering positive externalities, others are
poorly targeted at rich and poor alike and some may impose
negative externalities....Of particular concern are costly fuel
subsidies, which disproportionately benefit the wealthy and
contribute to severe road congestion that is materially harming
"In addition, the authorities and private sector participants
noted they believe employment programmes may be providing
disincentives to seek more productive employment. Other
subsidy and transfer programmes should also be evaluated
against the criteria of whether they help to provide "public
goods" and/or improve income distribution."
In the 2014 staff report, the IMF tempered its language
somewhat, stating: "Staff expressed concerns that government
temporary employment programmes distort the labour market.
While data are insufficient to establish a strong causal link,
there is a prima facie case the employment in these programmes
is competitive with private sector jobs since they require par-
ticipants to work much less than the officially required hours.
"Staff echoed widely-held views that social transfer and
make-work programmes may be inculcating a sense of depend-
ency on the part of the beneficiaries of those programmes.
While social safety nets are critical to protecting the most
vulnerable segments of society, inclusive growth should be
promoted through provision of skills demanded by the economy
and improved job matching. Some combination of carrots and
sticks may be needed to help move participants into productive
private sector employment, including via a greater role for
In a recent report, the Inter-American Development Bank
commented on the duplication, the escalation in the number
of programmes and the lack of monitoring and measurement.
And like the IMF, the IDB is beginning to question whether
the plethora of social programmes are having a negative impact
on the availability of labour.
It said: "Without a monitoring and evaluation of their effec-
tiveness, costs have escalated, and with less incentives for
people to enter the workplace there are signs of shortage of
certain types of labour." (See IDB report on page 2)
In addressing the Senate on July 1, when he got Parliament s
approval to add $3.8 billion in expenditure for the 2014 budget,
Finance Minister Larry Howai went out of his way to make
the point that not all transfers and subsidies drive consump-
Howai said: "You would see that in the appropriation,
approximately $1.6 billion in the Ministry of Finance and the
Economy represents transfers and subsidies. However, I should
point out that transfers and subsidies include transfers to the
IDF, transfers to the Heritage and Stabilisation Fund, and
various other similar transfers which represent savings and
investments for the future.
"Sometimes when we look at transfers and subsidies, we
assume that it is all for consumption. In fact, $1.2 billion of
the transfer is really for capital expenditure projects which is
included under transfers and subsidies, and another $300
million approximately included in there represents payments
which have been made to regional governments, in relation
to the settlement of the BAICO collapse, which has significantly
affected these economies."
But the point is no administration in the 52 years since
Independence has had the fortitude to reduce the amount of
money that is being spent on the population by way of transfers
That means the budget for transfers and subsidies keeps
going up and up.
It has got to the point where a significant percentage of the
population believe that they are entitled to cheap gas, free
school, free pharmaceuticals, subsidied housing, subsidised
air and sea transport and lots of social programmes.
That will make it much more difficult for the administration
that has to face the people when the price of the country s
petrochemical exports decline, leading to a reduction in tax
budget special 2015
Friday, September 5, 2014 www.guardian.co.tt Guardian
Are transfers, subsidies sustainable?
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