The Freundel Stuart administration has in its possession a series of proposals on the touchy issue of the reform of state enterprises, the man who coordinated the drafting of the framework has revealed.
However, in announcing that Government has had the report for two months, Chairman of the State-owned Enterprises Oversight Committee Dr Justin Robinson refused to release details of what is in the report, when he delivered the Democratic Labour Party’s luncheon lecture at the party’s George Street headquarters today.
Still, Robinson said enough to suggest that serious decisions had to be made on the future of some of the 57 statutory bodies, which he said absorbed close to half of Government’s revenue in transfers and subsidies alone, contributing to a “clearly unacceptable and unsustainable” deficit, which stood at $537.6 million when Minister of Finance Chris Sinckler presented an austerity budget in May last year, aimed at wiping out the deficit.
The University of the West Indies lecturer said while the issue of reform of state agencies was “an extremely sensitive area in Barbados”, the options before Government were to allow things to remain as they are, or any combination of abolishing some services, mergers or privatization, all of which, he said, would result in “winners and losers”.
“It is going to require significant political will to do this and the reason is that these things are sensitive. None of these things are going to be easy. There is very little that can be done to reform this without affecting a large cross section of Barbados . . . [and] there are going to be winners and losers. So that is going to require significant political will,” he said.
In the ten-year period dating back to the 2006/2007 financial year and ending last fiscal year, Government revenue grew from $2.1 billion to just over $2.77 billion, while total expenditure increased from $2.3 billion to $3.05 billion, seven per cent more than it was earning.
Robinson said 41 per cent of Government revenue went to transfers and subsidies, 28 per cent to wages and salaries, 14 per cent to goods and services and 24 per cent to debt servicing.
He said in addition to debt servicing, transfers and subsidies accounted for the fastest growing section of the expenditure side of the ledger, and that the International Monetary Fund and other observers “have signalled that a $300 million plus reduction in subsidy is what the country should be looking at.
“The point here then is that adjustments in the area of transfers and subsidies are likely to form part of any successful adjustment strategy because it is such a big item,” Robinson stressed.
He told those gathered for the midday lecture that the Transport Board, the Queen Elizabeth Hospital, Sanitation Service Authority, Barbados Tourism Marketing Inc, along with the Barbados Tourism Product Authority, the Barbados Agricultural Management Company, the University of the West Indies, the National Conservation Commission, Caves of Barbados, and “grants to individuals to capture the pensions” accounted for the lion share of the transfers and subsidies.
Robinson questioned whether some of these entities were as efficient and nimble as intended, and warned that unless there were changes to the funding mechanism for these state agencies, it would require a revenue solution through higher taxation, selected cost recovery, reduced service levels, targeted reduction, means testing or other forms of cost recovery.
“Beyond that though, there are some larger and bolder options. One could be to abolish or wind up. So you could go through this list of [57 state-owned enterprises] and say, ‘some of these entities were set up back then and [are] not needed and we decide we don’t need this anymore’ . . . Does the Barbados Government need to provide this service in 2018?” he said.
The senior lecturer also said the privatization option could include “an outright sale”, leases and management contracts, joint ventures, and the sale of shares to the public, while some agencies “could become self-financing autonomous vehicles”.
He said any administration that chooses to adopt any of these recommendations would need to expend much of its political capital, and reform of these state agencies would require a “high level of expertise, careful and detailed analysis and a consideration of the broadest possible range of options”.
“When we do that we are going to need clear plans, clear targets and clear timelines,” he advised.