Address to the Nation by the Prime Minister of Saint Lucia - May 20, 2009
ADDRESS TO THE NATION
HONOURABLE STEPHENSON KING
PRIME MINISTER OF SAINT LUCIA
WEDNESDAY, 20th MAY 2009
Citizens of Saint Lucia - Workers, the unemployed, the youth; particularly our students (school children), Teachers, Civil Servants, Partners in Development, Ladies and Gentlemen:
During my last budget presentation, I took the opportunity to address the issue of Government’s request to public sector workers that they consider a delay in the full implementation of the third tranche of 7.5% general increase in wages and salaries, which became due from April this year, in respect of the triennium 2007 to 2010. I also addressed the nation on this specific issue prior to the budget presentation.
When I presented the budget, I did so in a particular context. I explained in detail the problems in the world economy, the fact that we are facing the worst economic crisis in more than half a century and its impact on Saint Lucia.
The budget therefore must be viewed against this background. It is a set of proposals which are based on certain assumptions and forecasts. If those conditions change and these assumptions don’t hold, then the budget proposals will have to be reviewed.
I make these observations again to emphasise that we are in a situation of uncertainty where we have little or no control over key variables and factors.
Since the delivery of the budgetary proposals the situation in the international economy has not changed for the better. Indeed if anything, the prognosis seems to have worsened.
For example, the European Commission last January estimated that there would have been a decline of 1.9% of GDP in the European Union economies. The Commission’s most recent revision predicts that these economies will contract by 4% - much worse than originally thought.
It is reported that 600,000 jobs are being lost in the United States of America on a monthly basis, and we recently heard of 45,000 Public Servants in Puerto Rico to lose their jobs.
Secondly, out of nowhere came the recent outbreak of the North American Influenza or Swine Flu. This can also have adverse implications for our Tourism Industry. More immediately however, we are required as a Government to take steps to protect the health of our citizens, and to secure our borders in the face of this looming pandemic.
The public sector workers in the various agencies of government who have responsibility for these matters have met and prepared an action plan in order to protect Saint Lucia in the face of this threat and they have submitted a budget of nearly four point five million, dollars EC ($4.5m). This provision was not included in the budget recently passed by Parliament. It has to be found from somewhere and we have no father giver waiting to hand us this sum of money.
My fellow citizens, we are now approaching another hurricane season. Whilst the good Lord has spared us any major calamities during the last hurricane season, and whilst we all continue to pray that we are spared once again for this coming season, we would have to find the resources for reconstruction of infrastructure not to mention other social and economic dislocation, if we were to suffer a direct hit this year.
In addition to this, I have outlined to the nation before, the fiscal pressures which we are presently under this year, in the face of the recession, and it is worth repeating.
After careful examination and allocation of the financial resources likely to be available to us, we have managed to realise a surplus on our current account of only EC$2 million. This means that based on our Estimates of Revenue and Expenditure, after taking account of Wages and Salaries for Public Officers, Travel and Subsistence, Utilities, provision for Debt Servicing and other fixed expenses, Operating and Maintenance and related items for the operations of Government, we only have two (2) million dollars to invest in our country from local revenue.
Two million dollars to invest in Education, in Health, in Social Infrastructure, in Road Construction and Maintenance. This is grossly inadequate to meet the needs of the country and therefore these investments have to be financed from other sources including loans and grants from friendly Governments.
Our country cannot continue to depend to such an extent on external resources for its development.
The same countries which usually grant us assistance are themselves having problems. Their tax payers are suffering. How can they take their own tax payers money to help us and at the same time they see us not exercising fiscal prudence. What message would we be sending?
In every country in the world austerity measures are being taken. We heard from the budget presented by the Chancellor of the Exchequer in the United Kingdom, of plans to reduce public sector expenditure by over forty (40) billion pounds, including doing away with entire government departments. Closer to home in Jamaica, we have heard of austerity measures leading to public protests.
This crisis is real and there is no indication when it will end. In fact, it is going to get worse before it gets better. If there are economic problems being experienced in the United States of America, in Japan, in Germany, France, the United Kingdom, what is it that makes Saint Lucia different?
This Government, your Government has always insisted on its desire to avoid loss of jobs; to attempt as far as possible to protect the jobs of those currently at work as a first step, and to take whatever action we can to protect and support the most vulnerable of our citizens.
All that we ask of public sector workers, is that in a spirit of partnership, of national solidarity, of concern for all our citizens; particularly the poorest among us, they consider a delay in the implementation of the 7.5% increase in salary which became due in April of this year. I repeat, we are only asking for a delay in payment. We will honour our obligation.
This 7.5% increase forms part of the 14.5% award over three (3) years, and was granted at a time when our projections for economic growth were much better than they are today. It was also a reflection of the fact that this Government recognised the importance of Public Sector Workers in the implementation of its development programmes and hence for overall economic growth, and social development.
We believe that workers ought to be adequately compensated. Hence we awarded the highest level of wage increase for any Triennium over the last fifteen (15) years. Even without the 7.5%, the award is more than any granted by any Government within the last fifteen (15) years. So we respect workers, we appreciate their contribution and feel that they should be adequately compensated.
But these are extraordinary times and these times call for extraordinary action and they call for us to work together in a spirit of partnership.
The 7.5% will mean an additional amount of more than 20.5 million dollars on the budget. But even in that regard we have compromised and agreed to pay 3% immediately which we have since increased to 3.5% with the balance to be paid in one year’s time.
The National Workers’ Union and the Vieux Fort General and Dock Workers’ Union have accepted these proposals in the interest of their members. We thank them for this demonstration of national solidarity.
Let us examine the options available to Government if we are forced to find the EC$20.5 million dollars needed to honour the 7.5% immediately or any part thereof, and what would be the consequences.
In this regard last week, I took the unprecedented step of asking the Senior Technocrats of the Ministry of Finance to meet with Officials of the Trade Union Federation to bring them fully up-to-date on Government’s fiscal position. In fact, this was tantamount to opening the books of the Government to Officials of the Trade Union Federation in order that they may have a full appreciation of the state of Government finances, from the perspective of the Officials, who deal with it on a day-to-day basis, and not from the point of view of politicians.
At that meeting, the full effects of the payment of the increases on the finances of government were discussed. Scenarios were presented for payment of 3%, 3.5%, 3.75%, 4% and 4.5%. The following would be the additional cost to government granting these increases:
These are additional costs that were not factored in the budget for the financial year 2009/2010. The only possible means for financing any of these scenarios is by cuts in other areas of the budget.
The following are areas in the budget where cuts in the existing provisions were discussed with the Officials of the Trade Union Federation:
What might be the implications of reducing the allocations in some of these areas?
(i) Vacant Positions/Promotions: an allocation of $10 million dollars is included in the budget to fund Vacant Positions. This represents a reduction of 50% from the sum of $20 million requested by Ministries. A further reduction would constrain even more, Government’s ability to fill critical positions in Education, Health and other important areas. It would also adversely affect promotions for Public Officers already in post and temporary workers may have to be placed on rotation, while temporary teachers may not receive salaries during summer vacation. In fact there may have to be a freeze on promotions out-right.
(ii) Contingency: A contingency of $5 million is included in the budget, less than 1% of recurrent expenditure. It is already way below the recommended level of 5%. Any further reduction would compromise Government’s ability to meet unforeseen circumstances, like the effect of hurricanes.
(iii) Travel and Subsistence: A reduction in this item would adversely affect the ability of Public Officers who are entitled to travelling allowance and subsistence to carry out their functions.
(iv) Supplies and Materials: The provision in the budget to cover supplies and materials is already very tight. A reduction would compromise Government’s ability to supply materials to Public Institutions such as medicine for hospitals and other supplies for schools.
(v) Communications/Utilities: As I have indicated elsewhere, every effort will be made to cut our waste wherever it exists and embark on energy conservation measures. A reduction in that allocation will only make the situation of Government’s communications system worse that it is already.
(vi) Operating and Maintenance: The cost of running operations, machines, vehicles to provide security to our people, ambulances to respond to emergency calls etc. We are going to have to cut down on the allocations for these services to the wider population.
(vii) Subsidies: For the first time, this Government has made a specific allocation of $10 million to keep the price of basic commodities of rice, sugar and flour, at reasonable levels for the poor people of this country. We are being asked to reduce on this subsidy and allow the price of these commodities to increase. But this Government has taken a policy decision at this stage. We will not reduce on the level of these subsidies. We will also not reduce on the subsidy of cooking gas.
(viii) Tax Refunds: We also increased the allocation in the budget to cause tax payers to receive their refunds on a timely basis. We are being called upon to reduce this allocation and deny tax payers of their refunds.
In addition to the above, we will have to examine other areas of reduction which may include:
(i) laying off of employees with temporary officers being most vulnerable;
(ii) discontinuing payments to temporary teachers during holidays;
(iii) reducing/eliminating provision for training; and
(iv) suspension of study leave with pay among others.
These will be the consequences and we need to decide whether we are prepared to or can afford to bear those consequences.
It is not my intention to pursue these options, because we believe that they are against the national interest. We believe that such actions would have a detrimental effect on our Country, and it’s the most vulnerable of our citizens who are likely to feel the brunt of it. However, if Unions insist on their demands, then we will have no choice. We will have to bite the bullet.
Taking all factors into consideration I have given approval for the Treasury to pay 3.5% in the Pay Roll for May, backdated to April 2009. This is the absolute limit of what; at great risk to other sectors, we can pay at this stage.
We have reached the absolute limit at 3.5%! This is the best I can do as Minister for Finance. This is the best the Nation can do. This is what we can afford. We just simply cannot draw blood out of stone. Let me reiterate that we are committed to paying the balance retroactively in April 2010. Our country simply cannot afford to pay it now.
I am therefore appealing to all our public sector employees to consider this period to be a challenging one, and as I did when I invited your Union Leaders earlier this year to engage them in discussions on the changing world economic fortunes, I once again call on them to work together with the Government in the interest of our Country and its people. Let us remember that we are not in this alone. The World is in it with us, and we must hold our own.
Let us not “throw away the baby with the bathwater”. Let us all confront the current global economic reality, and put aside self interests, petty political and other interests and agree; all of us, to work together in the overall interest of our nation.
Ladies and Gentlemen, fellow Saint Lucians I thank you and may God richly bless you in these troubled times.
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