That’s how former Prime Minister Owen Arthur has described proposals by the Barbados Labour Party (BLP) to grant a 45 per cent increase in pensions if it were elected to Government in the May 24 general election.
While warning that such a proposal would only force the National Insurance Scheme (NIS) into bankruptcy and place young contributors under tremendous burden, Arthur today dismissed it as mere election folly.
“I would urge the Labour Party to review this proposal, not to proceed with it, but to put matters pertaining to the National Insurance front and centre in the campaign and come forward with constructive ways of dealing with the real challenges that confront that most important national institution.
“What is being proposed would do irreparable damage to the well-being of the country as a whole and, especially so, bear adversely on those who would soon come to the pension age, and leave a massive burden for the young workers of Barbados,” he cautioned.
Arthur, whose administration had established a special task force headed by Stephen Alleyne to make recommendations to ensure the future viability of the fund, pointed out that since 2008 the NIS has been able to pay increases in pensions amounting to 28 per cent “at a time when the Government of Barbados was not in a position to pay wage increases, and that was because it followed the formula for the management of the fund as prescribed in the Alleyne report and put in place by a Barbados Labour Party administration.
“[Therefore], it should appeal immediately to rational minds that to ask the fund now, in one fell swoop, to pay a 45 per cent increase would effectively do great damage to the fund,” he said, following a declaration made by BLP leader Mia Mottley during the party’s campaign launch on Saturday that if elected the BLP would move immediately to increase old age pensions.
However, Arthur further cautioned today that “the fund, if it follows this advice, would either become bankrupt sooner rather than later, or to remain viable would have to increase the contribution rate from young people who would have to pay the pension of older people to a level that could put a tremendous burden on the young working people of Barbados. So that it has a superficial attractiveness to it, but stripped of that it is just a folly given that there is an arrangement in place that has worked for the benefit of the public and for the benefit of the fund”.
Given the fundamental problems already affecting the NIS, he said the entire country would be better served if the BLP were to give a commitment to restore the financial viability of the NIS by clearing the “hundreds of millions” in arrears owed by Government in non-contributory pensions.
“The full amount therefore, in terms of the increase in non contributory and contributory pensions, would fall on the National Insurance. It also has to be borne in mind that under the present arrangement, the non contributory pension should be no more than 80 per cent of the minimum contributory so if the non contributory is increased, it will trigger a substantial and consequential increase on the contributory. That would be a massive burden on the Government.
“I think that a responsible next administration of Barbados should give the commitment that it will over a period of time restore the financial viability of the National Insurance by clearing the Government arrears.
“Government departments and statutory boards have not been paying the fund and if this continues, a day will come when people will find that they are going to their retirement without the benefit of the assurance of a pension.
“And I would be glad if the party that I used to lead would just give that commitment that the Democratic Labour Party has not been paying the fund but the Labour Party will fix it,” he told Barbados TODAY.
With elections due here in just over two weeks, Arthur also warned that the question of the refinancing of Barbados’ debt must be seriously considered and constructively dealt with.
“The Government is trying to control most of its expenditures, but the expenditure under which it has not exercised control is the growth of its debt payments. That is a large part of our problem and the future growth of the Barbados economy requires that that be addressed,” he cautioned while pointing out that a large part of Government’s debt was to the NIS.
However, he suggested that before a refinancing plan was put in place, a special actuarial study needed to be commissioned to determine “how and to what extent the release from the payment of debt by the National Insurance to the Government would affect the integrity and the viability of the Fund”.
“The National Insurance status is an important matter that should be the subject of an intelligent conversation by the people of Barbados. A process of reform was put in place and it has yielded benefits . . . If it is working, allow it to work but do not go on a mad clap expedition in the interest of cheap popularity to take that most fundamentally important institution and put its future in peril,” Arthur stressed.