Slash subsidies, prioritise spending

By Raffique Shah
August 14, 2011

Raffique ShahA WEEK sometimes feels like eternity in today’s fast-paced world. When I wrote last week’s column—”Jam Them!”—for which I received lots of jamming, Standard and Poor’s downgrading of America’s credit rating, and the almost instant global fallout, had not yet happened.

How was I to know that parts of London and other cities in England would erupt into mayhem?

And Central Bank Governor, Ewart Williams, had not yet warned of uncertain economic woes haunting the local economy.

Whew! What a week!

I am tempted to address the situation in England, a country with which I have long enjoyed a love-hate relationship.

While I agree with my friend Darcus Howe that the social explosion has its roots in economic hardship that has taken a toll on Britons across race and class lines, I cannot condone the wild looting we witnessed. Nor can I write off the murders of three young Asians as “collateral damage”.

But I shall not go there today; I think we need to wet our “shamba”, with much of the world being on fire, quite literally, in instances.

I believe, too, that S&P’s downgrade that rattled global financial and commodities markets was irresponsible.

True, America has been deep in the doo-doo for some time now, with its insatiable appetite for consumer goods. Americans have lived on borrowed money for many years now.

Successive governments have spent close to US$1 trillion a year on defence—scandalous for any country.

But since the 2008 economic slide, American consumers have reined in their appetites, improved their savings, and generally been more circumspect in how they live.

The same cannot be said of their government. Again, except for proffering that the S&P-generated global economic crisis is another “blip” that the emerging economic powerhouses will help us overcome within a year or two, I think I should stick with our domestic challenges.

I cannot resist adding, though, that oil and gas prices will rebound within, say, six months, and the ever-expanding consumer bases in non-traditional markets will pick up much of the slack where Americans and Europeans have left a void.

In other words, there is no need for us in Trinidad and Tobago to panic. That’s the worst reaction we can offer at this troubled time. We need to take serious stock of our own situation, examine where we have made costly mistakes, and take corrective measures before we, too, end up in the hock.

Based on responses to my call for cutbacks on certain subsidies, I don’t think our people are ready to get real. Most believe it’s a birthright to live for free, to have the few labour while the many enjoy the fruits, again, for close-to-free.

I did not call for the complete removal of the fuels subsidy.

Iwas careful to suggest a cap of 50 per cent, which means that motorists will still enjoy close to $2 billion a year in “gas support”.

Well, as Trinis would say, who tell me to venture there? Subsidised gas (and diesel) is a right, several respondents argued.

Further, the spin-off effects would spell high inflation: goods and services that depend on transport would increase instantly.

A few years ago, I remember doing some simple mathematics to show where a trucker would pay no more than an additional $3,000 a year based on a 50 per cent subsidy removal.

Given the volume of goods one truck transports a year, and the margin of profit fleet owners have long enjoyed, little additional cost should be passed on to consumers.

While it is true that passenger transport will cost more, how much more is reasonable? PTSC charges $4 for the Chaguanas-POS trip: would $5 kill commuters?

In fact, special fuel cost concessions can be made for all vehicles that transport ten or more passengers, so they can keep their fares at the lower end. This would in turn be an incentive for more commuters to use public transport.

That would then reduce the heavy flow of single-person vehicles on the nation’s roads.

You get where I’m going?

With regard to water and electricity rates, ours are among the lowest in the world. We should start the savings process by insisting that WASA not waste the amount of water it does—when I last checked, the utility was losing 40 per cent of its treated water to leakages.

Punish its managers for allowing such costly waste to go unchecked.

But bring water rates to more realistic levels, certainly for consumers who enjoy 24/7 water supplies. I do not think people who get little or no pipe-borne water should pay water rates anyway.

The other side of the labour-Government equation, and here I return to the impasse over new industrial agreements, is this: Government cannot cry wolf and say it has no money to offer workers decent wage increases, even as it spends huge sums on non-essential projects. Is the $7 billion (and counting) highway to Point Fortin that urgent at a time when you are asking citizens to “tighten belts”?

And why this nonsensical talk about an airport in Couva?

Construction of that highway should have begun when we had money, way back in the 1970s and 1980s. The same can be said of the POS to Chaguaramas causeway. Or a highway between San Fernando and Mayaro.

These are all sensible projects. But they are not priority items when tens of thousands of people cry out for shelter over their heads, when poverty stalks the land, when our existing network of roads and associated infrastructure is in bad order.

(To be concluded)

2 thoughts on “Slash subsidies, prioritise spending”

  1. “But since the 2008 economic slide, American consumers have reined in their appetites, improved their savings, and generally been more circumspect in how they live.” While I am sure this could be extrapolated from information provided,the truth is that so many people have defaulted on their bills and loans that the spending came to an end because there was no money to spend.

    The subsidies must end but I am not sure this is the time for it. Ending subsidies now will push up prices and with the pressures of labour cost expected to rise (though minimally if the govt has it way) the inflationary result will be dire for the citizens of T&T.

  2. “And why this nonsensical talk about an airport in Couva?”

    The land is already there and connections to Tobago and other Caribbean countries will be easier. Further the airport can have planes delivering West Indian goods at much faster rate into the North American market. Good for business.

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