Consider This | Is it really the people’s time?
“Everything a politician promises at election time has to be paid for either by higher taxation or by borrowing.” – Margaret Thatcher
In the run-up to the 2017 general election, the Free National Movement (FNM) adorned the nation’s pedestrian and vehicular corridors with posters that displayed the words “It’s the people’s time”. This was a captivatingly charming and slick slogan on which the FNM decided to stake its 2017 general elections campaign.
It was a conspicuously catchy message that embodied an ethos that the FNM was decidedly different from the outgoing Progressive Liberal Party (PLP) government whose term lasted from 2012 to 2017. A year has passed, and Bahamians throughout the archipelago are beginning to wonder exactly which people the FNM was talking about.
Therefore, this week, we would like to Consider this… After its first year in office, do Bahamians truly believe that the new FNM government has demonstrated that it is really the people’s time?
Heightened hopes & enormous expectations
The FNM came to office amid heightened hopes and enormous expectations that a new day had dawned in The Bahamas, and that the time had come for Bahamians to see the backs of the PLP and all it was perceived to represent. In a landslide victory, the FNM captured 35 of 39 seats in Parliament. In the wake of the electorate’s deep disappointment, disenchantment and disillusionment, the PLP was awarded the smallest percentage of the votes cast for that party in modern political history.
There was enormous expectation that, with the departure of what the FNM described as a corrupt PLP government that had lost its way under the leadership of a delusional prime minister, the FNM would usher in a new dispensation for a better Bahamas. There was heightened hope that, finally, the FNM government was one that would listen to the people on important national issues in a way that its predecessor had not done.
Only a faint memory lingered in the minds of Bahamians of a distant past when our leaders consulted with and took the advice of the electorate on a wide range of issues that affected our daily lives. There was considerable anticipation that this new government would be more consultative in formulating policy and would provide greater accountability.
The new government wasted no time in parading handcuffed former PLP politicians before the public, and the world, on the way to the courts to face charges of corruption, malfeasance and misfeasance. Many Bahamians blindly accepted the highly popular FNM government’s accusations that some PLP Cabinet ministers, high-level officials and their cronies were caught with their hands in the cookie jar, personally benefitting by draining the national coffers, and had developed callous contempt and deplorable disdain for the Bahamian people.
Amidst the FNM government’s immense political currency, demonstrated by this swift action against alleged criminality, Bahamians were hopeful that, because it was the people’s time, a new political culture would develop to embrace the will of the people. They believed this would result in better government for the people.
However, this heightened hope and enormous expectation has encountered a catastrophic tailspin with the introduction of the FNM government’s new tax regime. This included a 60 percent increase in value added taxes (VAT) from 7.5 percent to 12 percent from the same FNM that had vociferously opposed the introduction of VAT just three years earlier.
The immense increase in VAT bewildered many Bahamians. Explaining that this was the only choice that the government had to correct the fiscal mismanagement of the preceding administration, Bahamians are still flabbergasted that the government had taken such drastic measures. The government also explained that the VAT increase was required to balance the budget in three years and to liquidate gigantic unpaid and unaccounted for liabilities of the former administration.
This bewilderment was exacerbated by the government’s lack of consultation with any of the country’s stakeholders. Merchants were not consulted, the tourism sector was not consulted, the Chamber of Commerce was not consulted, the real estate and construction industries were not consulted. In fact, no one was consulted on the impact that such a massive increase would have on the important sectors of our economy.
In response to the immense public pushback to the government’s VAT increase decision, the minister of finance asserted that the government has a sovereign right not to consult with the country’s major stakeholders. While we fully agree with the minister’s “sovereign right” assertion, just because the minister or the government has a right not to consult does not make it correct not to consult. In fact, in light of the template that was established by the former administration in advance of the implementation of VAT, the government should have seen the tremendous benefit of widespread consultation with its major stakeholders.
Two former governors of the Central Bank and two senior former FNM ministers have publicly stated that they do not agree with the dramatic increase in VAT. They also believe that such a drastic increase could have a disastrous effect on the economy.
Across the length and breadth of this country, persons are still bewildered about what assumptions were employed to arrive at this decision. People are even more are befuddled about the short time in which the minister of finance has decided that the budget must be balanced. To date, the government has failed to provide reasonable answers regarding the lightning speed requirement to achieve a balanced budget in three years.
Furthermore, the government has placed far too much emphasis on the revenue side of the budget without equally commensurate consideration to expenditures. While budgeting for a 31 percent increase in recurrent revenue, the government has also budgeted for a 21 percent increase in recurrent expenditure (from $1.8 billion to $2 billion), not including $381 million interest payments on the national debt.
In light of this, the government’s claim that the VAT increase was the only choice that it had is disingenuous at best and dishonest at worst. The government could have reduced the recurrent expenditures, thereby eliminating the need for the massive VAT increase. This latter consideration supports the general view that the more revenue the government earns, the more it spends. The reduction in expenditure is only one option that the government could have adopted if it was really serious about minimizing the VAT increase.
Damage control – too little, too late
Now that the die has been cast and the VAT increase has become law, the prime minister is busy, frantically scurrying about the country, attempting to explain his government’s VAT increase decision. This past week alone, he has done this on the islands of Andros, Exuma and Cat Island.
In doing so, the prime minister has sought to explain that, if his government had not increased VAT by 60 percent our way of life could have been severely altered. This is disingenuous, erroneous and dishonest. While it is true that we must become more fiscally disciplined and more closely monitor our public finances, there is nothing to suggest, based on the key economic indicators, that we would be headed over the cataclysmic cliff if the VAT were not increased by 60 percent.
Is it the people’s time?
If it were truly the people’s time, the government would have consulted more with the people who will be most adversely affected by the VAT increase. Imagine for a minute what would have happened if the government had consulted in good faith with the Chamber of Commerce, the real estate industry, the tourism and construction sectors and the domestic gaming operators before increasing the taxes.
Imagine what would have happened if the government had engaged in the kind of broad public consultations that were conducted by the former administration in advance of the introduction of the VAT in 2015.
If this is truly the people’s time, the government would not have shoved this tax increase down our throats and then tell us, after the fact, that this is bitter medicine that we must swallow if we are going to feel better about ourselves. Rather, there should have been wider consultation with a greater cross-section of the people whose time it is supposed to be.
Only time will tell if the bitter ‘medicine” that has been prescribed to the ailing ‘fiscal patient’ will nurse it back to a healthier condition within the stated timeframe. In the meantime, Bahamians should brace themselves for a very austere period during which it will be even more difficult to make ends meet. There is little doubt that this is not what the electorate had in mind when they were first invited to believe and accepted that it’s the people’s time.
- Philip C. Galanis is the managing partner of HLB Galanis and Co., Chartered Accountants, Forensic & Litigation Support Services. He served 15 years in Parliament. Please send your comments to [email protected]