Home' Trinidad and Tobago Guardian : March 15th 2015 Contents MARCH 15 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
COMMENTARY | SBG3
In the Estimates of Expenditure
budget document for the period
October 1, 2014, to September
30, 2015 (the 2015 financial year),
the amount of money allocated
under the heading personnel
expenditure is $8.718 billion,
which is a 2.68 per cent increase over the
amount allocated for personnel in the 2014
Estimates of Expenditure.
As a result of the 14 per cent salary increase
to public servants, an inquiry was made on
Friday to the Ministry of Finance as to whether
Minister Larry Howai knew where the money
is coming from to pay the backpay.
The response from the Ministry of Finance
staffer was: "Well yes, or else the minister
would not have made the commitment."
Previously, the staffer had conveyed infor-
mation from Chief Personnel Officer (CPO)
Stephanie Lewis, which had been checked by
Minister Howai before release, that: "The addi-
tional recurrent cost of the entire agreement
for officers of the civil service (including the
Tobago House of Assembly) and statutory
authorities subject to the Statutory Authorities
Act (that is revised salaries and allowances)
is approximately $325 million per annum.
"The cost of the arrears over the period
January 1, 2011, to December 31, 2014, is
"Some 25,000 officers of the Civil Service
and Statutory Authorities under the Statutory
Authorities Act will benefit from the agree-
Now, the information conveyed by the CPO,
through the ministry staffer to me, differs in
at least two important ways from the infor-
mation that was apparently disclosed at a
news conference attended by the CPO, the
Minister in the Ministry of Finance, Rudy
Indarsingh, and the president of the Public
Services Association, Watson Duke.
Both the Guardian and the Newsday reported
yesterday that the total backpay owed to the
public servants was $1.9 billion (and not $1.19
billion) and that the period of the collective
agreement was 2011, 2012 and 2013 (and not
from January 1, 2011 to December 31, 2014).
Yesterday, the staffer said that the backpay
computation includes 2014 because public
servants were paid at the rate for the previous
collective agreement last year.
Those differences aside, the following ques-
• Salary precedent:
How can the Minister of Finance justify
increasing the salaries of 25,000 public servants
by 14 per cent and not increasing the wage
packages of police officers, prisons officers,
fire officers and members of army, coast guard
and air guard by a similar amount?
For the CPO to not offer other workers in
the public sector 14 per cent would be dis-
criminatory and "oppressive, unfairly prejudicial
or unfairly disregarding their interests or their
representatives interests," to quote the words
of the Telecommunications Authority of T&T
in its statement on the proposed acquisition
of Columbus International by Cable & Wireless
In fact, in my view, the 14 per cent wage
hike granted to public servants also sets a
benchmark for salary negotiations at First Cit-
izens and other state-owned companies whose
salaries fall under the ambit of the Govern-
ment s personnel department.
In other words, if the Government has
offered public servants a 14 per cent wage set-
tlement, it will have to make a similar offer
to all public officers, such as teachers, the
daily-paid workforce as well as monthly-paid
officials at the local government bodies.
It certainly has been a benchmark for
employees of the Public Transport Service
Corporation, whose union accepted an offer
of 14 per cent on Friday. And it should be the
benchmark for employees at the Port Authority,
who held over 700 passengers hostage on the
fast ferry from Trinidad to Tobago last week.
The associations representing police officers,
firemen and prisons officials may be justified
in refusing the CPO s offer of 60 per cent of
a 16 per cent market shift, which according
to a report in yesterday s Express, represents
a 9.6 per cent salary increase.
• Other payouts:
It won t only be the public officers who will
receive monies from the Government before
the next general elections.
The Minister of Finance has signalled that
he intends to settle the Clico policyholders
who have him in the Privy Council. That s
another $1.2 billion.
And if he settles the litigious policyholders,
he will have to top up those policyholders who
accepted the 2012 Government s offer for
$75,000 in cash, units in the Clico Investment
Fund and ten years of zero-coupon bonds.
That could be another $2 billion.
In all, the estimated total of the pre-election
payouts by the Government could be close to
• Potential impact:
If the Government is forced to settle all
public officers at the 14 per cent benchmark---
as is quite likely, given the fact that T&T is
within months of a general election---what is
the potential backpay outlay?
If a 14 per cent salary increase over four
years leads to $1.19 billion in backpay for some
25,000 public servants and statutory authority
workers, what would a similar increase for
teachers, police officers, fire officers, prisons
officers mean in terms of backpay?
And if the Government plans to make all
of these backpay payments within the next
three months---as it has signalled and which
is likely to be before the next general elec-
tions---what will be the impact on the Gov-
ernment s finances and on the conduct of
macro-economic and foreign exchange poli-
Will the Government need to borrow money
to finance these payouts or has the Minister
of Finance set aside (sequestered) funds to
make these payments?
It is never a good idea for a government to
borrow money to make recurrent expenditure
payments. If the Government is forced to bor-
row, what interest rates will the local capital
market demand, given the fact that the Central
Bank has increased the repo rate in order to
make borrowing more expensive, following a
theory that an increase in the cost of money
should lead to a cooling off of the demand for
If the Government borrows to throw money
at the population, it would be a sign of the
lengths that it is willing to go to win the elec-
• Inflationary impact:
University of the West Indies senior lecturer
in economics, Roger Hosein was quoted in the
Guardian last week as saying there is a pos-
sibility that the disbursement of backpay could
have an inflationary impact.
He said: "Wage increases that are unmatched
by a corresponding improvement in produc-
tivity will lead to some degree of inflation.
The challenge here is to get a corresponding
increase in productivity from the benefitting
members of the PSA."
Given the extreme difficulty of increasing
the productivity in an unreformed public sector,
it is quite likely that the backpay and other
payments will be used for personal expenditure
rather than on the acquisition of long-term
In previous years, public servants have gone
out and purchased fridges, stoves, televisions
and cars. What is the Minister of Finance
planning to do to ensure that the estimated
$10 billion in payments does not pass through
this country like the proverbial Michael
Manleyesque dose of salts?
If what is past is prologue, such expenditure
will not only contribute to T&T s inflation
problem, but will create a headache for the
managers of T&T s net official foreign reserves
Has the Government considered introducing
the tax-free personal bonds as a means of
ensuring that some of the payments are invest-
ed rather than spent?
Has the Government considered delaying
the Phoenix Park Initial Public Offering so
that it would coincide with the payouts and
give the potential investors a strong, US-dol-
lar-earning company to invest in?
Did the Government consider offering the
public servants shares in the National Enter-
prises Ltd in lieu of part of their backpay?
Can T&T afford 14% for public servants?
From left, Minister in the Ministry of Finance, Rudranath Indarsingh, CPO Stephanie Lewis and president of the PSA, Watson Duke during Friday's signing ceremony for a 14 per cent salary
increase for public servants at the Cascadia Hotel, St Ann's. PHOTO: SHIRLEY BAHADUR
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