Sunday, January 21, 2018

Getting real about level of subsidies

It's a subsidy free-for-all that identifies Trinidad and Tobago as a welfare state in all but in name. Free education from pre-school to tertiary level, with laptops supplied to all in secondary school, will be recognised as a T&T birthright, without curiosity or concern about how its funding can be assured into a future of unknown economic outturns.

Provision of educational opportunities will justify itself as an investment in the development of national resources normally defined as human. Realistically, however, this will not be expected to stop at the gates of schools.

The state, over years, has responded positively to the beckoning of demands on behalf of public transport. Transport Minister Devant Maharaj last week reported the annual $50 million subsidy to keep afloat the limited, water-taxi service between Port of Spain and San Fernando.

It appears, from the Minister's report, that the economic cost reaches $150 to move each passenger between the two cities. Meanwhile, each passenger, in buying a ticket, is called upon to meet just a vulgar fraction of what it costs to keep the water taxis afloat.

For sure, the deliberations of policy makers charged with sustaining benefits increasingly regarded as public entitlements will focus on the question of where the money is going to come from. One irresistible response is that beneficiaries could be called upon incrementally to meet some part of the cost now painlessly covered by taxpayer-funded subsidy.

Transport Minister Devant Maharaj has warned of water taxi fare hikes. Not only are water-taxi operations heavily subsidised, he noted, but maintenance and repair of the vessels are also extraordinarily high-cost.

Addressing the same question, the Minister referred to the bill for subsidising the Trinidad-Tobago air bridge. Latest figures show that more people are flying, and Tobago tourist arrivals from Trinidad describe a rising curve.

Even so, the Minister is yet to mention the grandfather of all transport subsidies, which is the multi-billion dollar fuel subsidy. At a time of rising oil prices, the fuel subsidy delivers a handsome benefit of cheap transport and cheap fuel for domestic, business and industrial use.

 To this, all of T&T have, unsurprisingly, become deeply attached. Nor is this any more simply a matter of indulging a longing for freeness, at State expense. Indeed, nobody dare contemplates triggering the dire economic, social and political consequences (likely in reverse order) of any overnight cancellation of the fuel subsidy.

Accordingly, the fuel subsidy will undoubtedly remain in effect, awaiting the implementation of some adequate solution. Meanwhile, much worrying-aloud about the costs of the water taxi and the air bridge amounts to nibbling at a huge and growing national problem of subsidies. Sooner or later, however, state policy makers and money managers must bite the bullet, and rein in subsidies—from grandfather all the way down.