PCN's Budget Submission
From the PEOPLE’S COMMUNITY NETWORK (PCN)
We at the People’s Community Network are grateful for the opportunity to contribute our suggestions to the formulation of the 2012 National Budget. As an organisation which works with the grass-roots people of the country – the workers and the poor – we feel we have an important perspective to offer for the Budget, especially in view of the priorities of the People’s Charter and the Millennium Development Goals.
A People Centred Budget.
We want to see a people-centred budget where the needs of our people and the improvement of their quality of life come first.
While the poor and the disadvantaged have not been forgotten in recent Budgets, the allocations made for them were totally inadequate to their numbers and totally inadequate to any commitment to overcoming poverty as expressed in the People’s Charter and the Millennium Goals. Basically past Budgets addressed the needs of investors and the business sector – especially the tourist industry – to enhance economic growth. The influence of the IMF and the ADB was apparent and little evidence was given of “thinking outside the box” of their recommended policies and prescriptions and setting in place a new model for development..
Consequently we fear that that the focus of the 2012 Budget will be just more of the same. The invitations for contributions stated that: “A key area of focus for the 2012 Budget is the formulation of policies that will contribute towards raising investments and growth ... stakeholders are invited to provide suggestions on feasible policy options .. to achieve these objectives”. It is added (almost as an afterthought) that these objectives of raising investments and growth will “contribute towards raising the overall living standards of all people in Fiji”.
For years now the World Bank, the IMF and the Asian Development Bank have been influencing the policies we have been following in Fiji. They have been talking about “Poverty Alleviation through Private Sector Development”. In other words promote the private sector, privatise government services, give concessions and encouragement to investors and business interests, and introduce tax “reforms” and labour “reforms”. As well reduce public expenditure on health, education and welfare. Trust the “Market”. Go in for a free-market export-oriented economy and follow the principles of extreme neo-liberal capitalism (or “economic rationalism”). Funding was provided on condition that countries followed these so-called “structural adjustment” policies.
Numerous studies have shown that these policies, far from improving the lives of the ordinary people, have usually produced greater poverty and inequality and any economic growth does not trickle down to the ordinary people. As one overseas expert expressed it at a USP Symposium in November 2009, these policies have certainly produced economic growth for some but at the expense of an increase in poverty and inequality for many. The economic growth never seems to trickle down or be redistributed to the ordinary people of the nation.
As always, many of us would like to know how exactly “private sector development” translates into “poverty alleviation”. Or, in terms of the title of the 2010 budget, how will “enhancing economic growth” actually translate into “inclusive development”. It just never seems to happen in reality. It is just a nice theory to persuade the gullible..
We need to take serious note of the Meltzer Commission of the US Congress which in 2000 came to a frightening conclusion:
“Neither the World Bank nor the regional Banks are pursuing the set of activities that
could best help the world move rapidly to a world without poverty or even the lesser,
but more fully achievable goal of raising the living standards and quality of life,
particularly in the poorest nations of the world.”
So we are very wary of the policies propounded by these international Financial Institutions and are concerned that our government (and its advisors) has not yet realised the adverse effect they have on or people. For example the increase of VAT by 2.5% last year is acknowledged by all economists to have a more serious impact on the poor and low income earners of the country and , withot a proper social welfare system, will lead to an increase in poverty. Yet it was introduced. Previous corporatisation (leading to privatisation?) of some of our basic services such as water and electricity has increased the costs of these basic necessities and affected the quality of life of many (including low income housing costs).
Targeting the Poor
Previous Budgets have consistently said that government will have policies specifically targeted to the poor (and not everyone). That is fine. However government seems to have a very unrealistic idea of the numbers of those in poverty and those vulnerable to poverty in the country. Only those on the FAS seem to be considered to be really poor yet they constitute only about 3% of the population. In fact at least 31% - 35% of our people are living below the poverty line and another 33% are living just above the poverty line and hence are vulnerable to poverty. Because they are vulnerable to poverty they can easily fall below the poverty line if the breadwinner of the family dies or loses his/her job (as has happened to many recently).
The issue of food
One of the main components in reckoning the basic needs poverty line is the cost of the food required to keep people alive (“food poverty”). It is established on a very basic, or Spartan diet. Over the past two years the cost of food has risen astronomically and has given rise to growing general dissatisfaction. When some prices of food have been controlled, others have been allowed to increase. Again, while some basic food items are not subject to VAT increases, others are. Moreover the cost of local foods in the market have also increased because of the general rise in VAT across the board. Already there were big increases following the impact of devaluation. These increases have been unbearable for many families. VAT should be removed from all food (except for luxury items and restaurants).
The retention of the food voucher scheme for those on Family Assistance (FAS) payments and the addition of another 10,000 to the scheme is welcome as long as it is properly administered and does not involve reductions in the Family Assistance payments to existing clients (as happened previously) thus negating the effect of the food vouchers..
Addressing Poverty of Access:
In terms of improving areas for what sociologists call “Poverty of Access” some good policies have been put in place which could benefit everyone –including the poorer section of the community. These include:
Infrastructure development in terms of roads, bridges and jetties;
Grass roots initiatives in terms of health care for villages and communities;
Allocations to sustain and improve the sugar industry;
The improvement of schools in rural areas;
Attention given to improve agriculture in rural areas;
Maintaining the school bus fare scheme, tuition costs and text book scheme and introducing an electricity subsidy for schools.
More funding needs to be allocated to all these areas.
The Issue Housing for Ordinary People
One question that many have raised about recent Budgets is “Where is any new allocation for housing for the poor and ordinary people of the nation?” For years there has been a lack of sufficient affordable housing for the people of the country – especially following the commercialisation of the Housing Authority and Public Rental Board. Currently at least 15% of or population (and 20% of Suva’s population) live in squatter settlements. The reasons for this are many but the following are central: (a) the inability of government to provide a sufficient supply of affordable housing; (b) the non-renewal of so many land leases; (c) the low wages of 65% of the working population (currently 71% of workers earn below the Tax threshold of $15,000 and the 50% of workers earn below $10,000).
Although new housing projects are underway with loans from China, the big question that arises is: “Will these homes be affordable for the low income earners who make up the vast majority of those in need of decent housing (said to be a basic human right)?”
In two recent Budgets there was an allocation of $10m to assist those middle income, first home owners who wish to purchase a hose. This does not help the poor and ordinary people of the country unless a family has multiple incomes and/or remittances. Only the top 29% of our workers earn above $15,000 – the tax threshold. It seems that the way the allocation was made in the 2011 Budget, it was biased in favour of assisting Top Symphony, the Malaysian company which has undertaken to construct Waila City. This $10m needs to subsidise housing for low income earners.
The Impact of the Increase of VAT by 2.5%
The 2011 Budget tried to play down the increase of Value Added Tax by 2.5% to 15% saying it was necessary and there was no choice and no alternative. Yet every economist knows (or should know) that VAT is a regressive tax. In other words it affects the poor much more than it does those who are rich or have adequate incomes. In other words it increases poverty and inequality in the country. For a country like New Zealand or Australia which has high wages, unemployment benefits and a properly established social welfare system to care for its poorer members VAT increases might be an acceptable alternative. But for a country like Fiji which has so much poverty, inequality, unemployment, low wages and a very meagre social welfare system the introduction of VAT increases poverty and disadvantage and makes a joke of any program for poverty alleviation. It also seriously calls into question government’s commitment to the People’s Charter and the Millennium Development Goals. There are always alternatives – especially for our government which wants us to “think outside the box”.
The Policies of the International Financial Institutions (IFIs)
The 2010 United Nations Conference on Trade and Development stated that “the number of very poor countries has doubled in the last 30-40 years while the number of people living in extreme poverty has also grown two-fold.” The Report noted that “the model of development that has prevailed to date for these countries has failed and should be re-assessed”. It called for a new model of development.
It is about time we move away from the prescriptions of the World Bank, the IMF and the ADB and the suggestions of our own right-wing economists, think “outside the box” and find a model for development that benefits all our people – not just the few. The British Prime Minister, David Cameron, noted at the 2010 World Economic Forum at Davos that, when many people look at capitalism today, they see: “Markets without morality, globalisation without competition and wealth without fairness. It all adds up to capitalism without a conscience and we’ve got to put it right”. We need to move away from the neo-liberal paradigm.
The Question of Economic Growth
There is no doubt that we need economic growth and one way of doing this is to attract investors - both local and overseas. Yet, by now, we should know that not all investors are desirable. Some are “fly-by-nights”, some have their own hidden agendas, some are downright crooks (or, at least, subject to suspicion). We seem to bend over backwards to attract investors by offering incentives (including tax exemptions). Some openly say they are attracted by the prospect of low wages. If investors are not prepared to pay a decent wage to their workers as well as proper working conditions then they should not be considered as acceptable.
Often it appears that government has an obsession with economic growth but little consideration is given to how this growth will be re-distributed for the needs of the country and how more equitable distribution can be achieved. Company taxes have been reduced and capital gains tax is extremely low and yet the tax burden of ordinary people is increased through VAT. This is unjust.
The Issue of Tourism
Over the past few years tourism has received a huge budget allocation of $23m. We know that tourism is a very important component of the economy and our media seem to have an obsessive compulsion to continually tell us how tourist numbers are increasing. By all means give the tourist industry what it needs to expand BUT its huge funding needs to be made conditional on the industry showing not just increased numbers of tourists but how it can bring into the economy more than 42cents in the dollar. (The Sugar industry was able to bring into the economy 95 cents in the dollar.) Too much of the tourist dollar goes overseas and too little stays in the country in terms of local purchases and decent local wages.
The Investment Funds Attracted by Non Government Organisations
As noted above, overseas investors are attracted with incentives including tax exemptions if they bring into the country a few million dollars to start a business. Yet a number of Non-Government Organisations (including our own) bring into the country year after year millions of dollars from overseas donors for development projects for the people of Fiji. They also create employment. Yet they receive no incentives or tax exemptions. What is the difference? It is about time we also receive tax exemptions (e.g. VAT) for projects which are of direct benefit to the people of the country.
From recent Budgets one gets the impression that, while the poor are not entirely forgotten, Government is bending over backwards and spending millions of dollars for the sake of investors and overseas tourists. Yet its own people are left on the back burner. By comparison so little is provided for the housing, health care, education and welfare of its own people. That is why we need a people-centred budget.
We are aware of a number of good poverty alleviation programs set in place by this government and it is claimed that $1,5bn has been spent on poverty alleviation over the past ten years. However the policies successive government have introduced (often under the influence of the International Financial Institutions) have negated their influence and have, in fact, increased poverty and inequality.
It is about time we seek a new model of development.