Motorists who use premium gas will be the main persons to feel the pinch from Minister of Finance Larry Howai’s first budget, presented yesterday in the Parliament.
The environmentally-friendly premium gas has gone up by $1.75 per litre- from $4 to $5.75. That means if motorists paid $160 to fill their 40 litre tanks before the presentation of the 2013 budget, they would now pay $230.
In increasing the premium gas by 43.75 per cent, the Minister was cautious not to touch diesel and super gasoline. It means that the majority of the travelling public who use taxis should be spared increases in transportation costs. Furthermore, he said 100 new CNG buses would be added to the public transport fleet “ensuring the cost of the service remains cost-effective”.
What was unusual about the premium gas increase was that it was not effective immediately upon the announcement yesterday, but takes effect from today. This caused a rush for gas yesterday afternoon as people seized the last opportunity to fill their tanks at the old price.
Howai, whose $58.405 billion budget is the largest presented to date, said revenue initiatives would include “reform” of the land and building tax regime “during the course of the next fiscal year” and “a comprehensive review of the entire tax system”, but gave no details. He also said there would be “rigorous review” of subsidies and transfer to State Enterprises “which currently absorb 20 per cent of the national budget”.
He also announced a “rigorous review” of the social welfare programmes “with a view to assisting comprehensively and cost effectively the differently-abled, senior citizens, single moms and children and others in need of assistance. But, he stressed: “We shall now move to make cash transfers conditional, in particular they would be tied to changed behaviours and proper parenting with children being required to be in school, be exposed to basic healthcare and the absence of abuse.”
The budget, whose theme was “Stimulating Growth, Generating Prosperity” was a “judicious mix” of measures aimed at a providing a strong stimulus boost, while curbing extravagant spending.
It was not by any means an austerity budget. For the poor, the middle-class and even the high-end earner there was something in the banker’s budget.
The most punitive tax hike came in the form of a “sin” tax -directed at the gaming industry. There was a “very small” increase in NIS contribution rate from 11.4 per cent to 11.7 per cent in 2013 and 12 per cent in 2014 for “ 0.1 per cent” of employees and 0.2 per cent of employers, he said.
The Minister announced that NIS benefits payments (except pension) would be increased by overall 50 per cent. Sickness, maternity allowance, invalidity, survivor’s and employment injury will be increased by 25 per cent in 2013 and 20 per cent in 2014.
Meanwhile, minimum survivor’s benefits- in respect of spouses, children, dependent parents and orphan children of a deceased contributor or a NIS pensioner—would be increased to $600 for spouse, child, dependent parent and $1,200 for orphans.
He said the non-taxable special ($1,000 monthly) allowance, now being paid to members of the protective services would be extended to include the Special Reserve Police (SRP) Officers. “That takes effect...” he said. “Today!” National Security Minister Jack Warner thundered approvingly.
To promote home ownership especially in the lower and middle class bracket, the Minister announced an incentive to the developer for homes costing $1.5 million or less.
For the upper-class, the Minister gave exemptions from custom duties and VAT for the purchase of CCTV cameras and digital video recording equipment for home-owners, community and business security.
The Minister announced that there would be some divestment (20 per cent) of Government’s shares in First Citizens, TTMF and Home Mortgage Bank. He also said Government would bring closure to the CLICO/HCU situation in this fiscal year.
Howai said in order to eliminate waste and abuse, the GATE programme would “refocus” on areas of priority study “necessary to support our strategy for economic and industrial development and that tuition fees would be funded “at varying rates based on their socio-economic priority”.
The Minister announced an employment allowance uplift of salary of 150 per cent for tax deduction purposes for companies employing employees of the URP and CEPEP. But he also imposed an increase in the business levy threshold from $200,000 to $360,000 from January 2013.
Motorists would be able to renew their drivers’ permits for a ten-year period at a cost of $1,000. From November 1, 2012 the first issue of the permit would remain valid for five years, but after this, the renewal would be five ($500) or ten years ($1,000), at the option of the holder, Howai stated.
The budget is predicated on an oil price of US$80 per barrel and gas price of US $2.75 per mcf. Total revenue is estimated at $50.736 billion—$20 billion from oil revenue and $30.6 billion from non-oil revenue. The budget, for the fifth year in a row, is running a budget deficit —$7.669 billion. Howai served notice however that he intended to reduce this deficit by a minimum of one per cent of GDP per annum over the next succeeding years.
Howai, who had just three months to prepare the budget statement, delivered his two-hour-long presentation in a dispassionate tone. Nevertheless he quietly underlined Government’s achievements over the last year. He said after three years of negative growth the economy had achieved 1.2 per cent growth in 2012.
The current account balance of payment had a projected surplus of US$2.443 billion in 2012; foreign exchange reserves at a level of US$10.28 billion covering 14.3 months of imports. He said the Heritage and Stabilisation Fund, “the best performing Sovereign Wealth Fund” in 2011, currently stood at US$4.547 billion.
Furthermore the inflation rate declined to 7.1 per cent, the public sector debt to GDP ratio was stable and foreign direct investment continued to be buoyant and the country’s investment grading from international rating agencies confirmed these favourable assessments “There can be no doubt that these indicators are a testimony to a well-managed economy,” he said, to loud desk-thumping.
Winston Dookeran, the man credited with steering the country towards this position since the People’s Partnership Government assumed office however was not present for these kudos. Dookeran, who is overseas, returns to the country today.
Also missing from the sitting yesterday, was the most recently dismissed Minister, Herbert Volney, whose name card indicates that he would be sitting next to Collin Partap, former minister in the Ministry of National Security.
Opposition Leader Dr Keith Rowley will respond to the budget when the House of Representatives next meets on Friday at 10 a.m.
Figures at a glance
Total Revenue - $50.736 billion
• Oil Revenue - $20.038 billion
• Non-Oil Revenue - $30.698 billion
• Total Expenditure net of Capital Repayments and Sinking Fund Contribution—$58.405 billion
Oil price budget based on—US$80 per barrel
Natural gas price - US$2.75 per mmbtu
Annual projected growth rate - 2.5 per cent
- Education and Training : $9,149.1 million;
- Health : $5,108.7 million;
- National Security : $5,503.7 million;
- Public Utilities : $3,783.1 million;
- Housing : $3,503.7 million;
- Works and Infrastructure: $2,412.9 million;
- Transport : $1,682.8 million;
- And Agriculture : $1,338.3 million