Thursday, December 14, 2017

How to trim the fat

This Carnival, the Minister of Health does not want a “rolly polly”. His onslaught on the country’s “sick and lazy” has opened another health care debate. A 2012 Pan American Health Organisation (PAHO) report highlights the continuing effect of tobacco, alcohol and poor nutrition on our long term health and longevity. PAHO has seen a shift from acute infectious diseases as the major cause of death, to chronic non-communicable diseases (NCDs), driven by increasing levels of obesity in the population. Armed with the data, what is the ministry doing? After all, three consecutive prime ministers have battled chronic health conditions.

Murder numbers may be more familiar, but deaths from NCDs are more significant and more avoidable. The PAHO report identifies as risk factors hypertension, hypercholesterolemia, obesity, as well as behavioural factors such as tobacco use, alcohol abuse, unhealthy diets and physical inactivity.

The Minister of Health must be prepared to tackle health and lifestyle issues in a holistic way, and not simply on the basis of the occupancy rates at hospitals and other health facilities, and overcrowding. The State is a big player all around. It controls the majority of investments made in healthcare facilities. It drives healthcare policy, education, training, access, and cost. It has made most tertiary care free. It subsidises major surgery including heart-related conditions. And, it controls the legislative agenda.

Let’s talk about tobacco. In 2009 the tobacco industry was targeted. But since 2008 the share price of the local tobacco company has increased from $26.50 to $120. Tobacco remains good business for its shareholders, many of whom include local pension plans and individuals who may themselves be completely against tobacco. Along the flanks of this “war on tobacco”, for decades the country’s alcohol laws are unchanged, and there has been no significant change to consumption, labelling, or food and drugs laws driven by the NCDs data. What are the statistics and what are the policy proposals?

Outside of health care, the State can immediately impact lifestyles. It is an investor in the local tobacco operations through its control of the Home Mortgage Bank (HMB), Republic Bank Ltd, CLICO, and the National Insurance Board (NIB). These four entities hold 21 per cent of the issued shares of the West Indian Tobacco Company (Witco), country’s dominant producer of tobacco products. The four earned for taxpayers $67 million in dividends in 2012, and the investment in the company has grown from a value of $470 million in 2008 to a current value of over $2 billion, Witco’s share price having moved from $26.50 per share in 2008 to a current price of $120 per share.

Even as public policy and legislation put pressure on the tobacco products company, Witco’s gross turnover increased by ten per cent between 2011 and 2012; its gross profit increased by 14 per cent; and its profit after tax grew by 20 per cent. Apart from the increase in share value benefitting those entities in which the State holds equity, and the dividend flow which yielded about $270 million between 2008-2012, the State’s tax take from Witco averages over $100 million annually.

NIB, the State entity charged with dealing with the country’s long and short term pension and health benefits, is a key investor in tobacco, directly as owner of 1.2 per cent of Witco’s shares, indirectly as a 51.3 per cent owner of HMB and part owner of Republic Bank Ltd, and as an investor in other funds and equities that may hold tobacco stocks as investments. NIB earns an average annual dividend of $3 million from its direct investment, and has a $120 million stake in the company.

The State has also expanded its interest in the country’s rum business. Apart from its ownership of Rum Distillers of Trinidad and Tobago Ltd (formerly Caroni Ltd’s rum division), through its majority ownership of CLICO the State owns a 32 per cent stake in Angostura Holdings Limited (AHL), the owner of Angostura Ltd and Trinidad Distillers Ltd. At AHL’s current share price, that is a $778 million stake that earned a $17 million dividend in 2012.

The Minister of Health and his government must be prepared to go all the way on the issues of health, wellness and lifestyles. To deal with these issues in a holistic way it must not only kick people out of hospital beds and demand that they exercise. The minister and his government may use a range of tools available to it: rewarding healthy lifestyles; promoting health and wellness by investment in appropriate facilities and programmes; using tax incentives to promote health and wellness in the workplace; shifting resources away from events and activities contributing to unhealthy lifestyles; prohibiting future investments in products that are not conducive to good health and wellness; and creating further disincentives to alcohol and tobacco producers.

Part of the State’s shift will come through its disposal of the assets it currently holds by virtue of its assumption of the assets and liabilities of CL Financial and related companies. But a more long term shift will come if the Government re-examines its direct and indirect holdings. Any shift in the NIB’s investments may bring a reduction in investment income, but this could be compensated over the longer term by implementing the long sought approval to invest in overseas equities and funds, giving the funds’ exposure to global markets.

Australia, for example, introduced the Government Investment Funds Amendment (Ethical Investments) Bill in 2011 to amend existing legislation to provide for its sovereign funds to be invested in accordance with a proposed Future Fund Ethical Investment Guidelines. The Bill, which lapsed at the end of 2013, provided for the designation of “prohibited financial assets” that must include investment in corporations that manufacture tobacco products. Other sovereigns have considered the issue of ethical investing.

The minister’s knee jerk reaction may be to kick “sick and lazy” people out of hospitals. But with the “rolly polly” on the rise, we must reduce the need for hospital care.

• Clarence Rambharat is a lawyer and a university lecturer