Why should public servants have to pay?

Without a doubt, most people, particularly public servants, have been discussing the imminent moves for the government to cut the salaries of public servants by 5%. This information first began circulating as a rumor; however the 2014/2015 budget has provided the confirmation that this measure is actually on the table for implementation. It is fair to say that the attention of public servants has been riveted to the television stations in an attempt to get a clear indication of what their future holds, as many struggle to put it all in perspective. Perhaps it will be useful to see just how we got there; so let us back track and see.

Many people have been grappling with the shock that their salaries will be cut. In trying to answer their questions, we can begin with what we know. It would seem that the PM started off in typical fashion, to blame the previous administration for the country’s financial woes.

The PM has been in the Parliament of Saint Lucia for an unbroken period since 1997 to the present and on three occasions, as chief policy-maker, prime minister and,
most importantly, Minister of Finance for three of the four Parliaments of which he has been a part. We know when he entered in 1997 that St. Lucia’s debt to GDP ratio was approximately 37 percent, with a corresponding national debt stock of just over 500 million dollars.

We also know that when he last demitted office in December of 2006 St. Lucia’s national debt stock had nearly tripled to the astronomical height of 1.6 billion, or a debt to GDP ratio of approximately 64 percent (based on the appropriate GDP base at that time). That’s an increase of about 27 percentage points in just under ten years. In this period debt had grown much faster than the economy.

During his third term in parliament, Anthony was on the opposition side, with a UWP government managing the nation’s coffers. During that time, St. Lucia’s debt to GDP ratio increased in what was arguably the most tumultuous time in St. Lucia’s recent history. During this time St. Lucia’s debt to GDP ratio increased by approximately 6 percentage points.

Those who recall would appreciate that it was a time when the country lost its prime minister, and had to readjust in terms of its leadership. It was a period in which oil prices climbed dramatically from less than USD70 a barrel of oil to a record USD147 in July 2008.

It was when food inflation climbed significantly as a result, and when the country went through two natural disasters—Hurricane Dean and later Hurricane Tomas. There was the associated economic and social dislocation, a lengthy drought, an earthquake and the economic impact at the peak of the Global and Financial Crisis.

Demands to government from all sectors increased. The hotel sector, the public transportation sector and, how could we forget, the militant marches of the unions, ostensibly in the best interest of the workers, who settled at an unrealistic and unreasonable 14.5 percent, which in the view of many was considered unconscionable. Despite being well aware of the fiscal situation, Anthony, then opposition leader, is on record as being very supportive of the agitation by the unions. Perhaps he took this stance in order to gain cheap political points and to gain favour with the unions to have supported this unreasonable demand.

It must be noted that back then Dr. Anthony did not call for restraint and understanding, but instead supported this burden on the national treasury which by all accounts was not offset by an increase in productivity. He did so even when the responsibility to meet the increased wage bill would have fallen to him upon reassuming office, which he did in 2011. As our folklore says it, “the same stick that beats the white dog will beat the black dog.”

So clearly, Kenny Anthony helped to create the fiscal deterioration which has continued from his assumption of office into this current term. His tenure was also marked by demands for wage increases by the unions which settled at a still unsustainable 4 percent. On this occasion, the record is distinctly different, perhaps showing the other side of his disposition, but suffice it to say the PM was not too thrilled about the demands for a 9 percent increase by the public sector unions. This time around he called for tolerance, patience, understanding, appreciation of global circumstances, regional challenges and outlined all the difficulties the government was facing.

Despite the stated fragility of the national economy, which we are being told has been perched at the edge of a fiscal cliff, the PM and his administration are known to have taken a number of steps or policy actions which caused further deterioration of the fiscal situation through accelerated increases in expenditure, despite the introduction of VAT. Some of these measures include a number of Step and Step Up Programmes costing millions, in addition to associated interest payments, and popular but unsustainable measures like giving computers to thousands of secondary school students (following in the steps of oil-rich Trinidad). Neither are the NICE programme, SMILES, acquisitions of buildings and the implementation of expensive capital projects helping the plight of the economy.

We have also seen the reckless and baseless employment of an army of sycophants, supporters and sympathizers that now occupy the upper echelons of boards, government offices, government departments, statutory bodies and overseas missions on contracts of grades between 19 and 21, as reward for their patronage. So there is no mystery as to why we are in this fiscal quagmire and why Saint Lucia is on the brink of IMF austerity programmes—at this stage like chemotherapy to a cancer sufferer—in which harsh measures like retrenchment, salary cuts and departmental closures are all part of the standard prescription.

In sum, we can call this “kennynomics.” In this environment, when debt to GDP ratio is just short of 90 percent, it is no wonder that investors including institutional investors are wary of taking on more exposure to the Government of St. Lucia by purchasing more of its bonds of treasury bills which must now have a higher interest rate and discount.

We are in this situation because in the intervening years, many of the bond issues of the GOSL were not amortized with payments into a sinking fund to allow payment upon maturity.  As a result we have been rolling over debt and making bullet payments from the proceeds of new bond issues—often at higher rates of interest which contributes to further increases in our debt service levels. And we all know the depressive impact of VAT on the local economy in terms of demand for goods and services, given the inflationary effect of price hikes.

With this being said, the question now is: Why should the ordinary civil servant, whose representatives rejected an offer of four percent from the government in the heat of negotiations, be asked to accept a 5 percent reduction in pay as a result of actions and policies of which they had no part?

It is certainly unfair to do so. Is that what is meant by “better days”?  If the PM is interested in remedying the situation, he should begin by cutting out the excess wage bill caused by countless cronies masquerading as consultants, collecting salaries from approximately $9,000 to $30,000 per month. Let us cut the fat on a last in—first out basis. We were doing just fine without the lot of them.

Who would have dreamt a mere two and half years after the sweet sounding, lofty economic solutions which included an immediate injection of $100 million into the economy and the creation of “jobs, jobs, jobs,” that instead, civil servants are facing the dreadful impact and pain of loss of income, wage cuts, non-renewal of contracts  and possible retrenchment. It would seem that the popular mantra and slogan “Better days are coming” have certainly proven to be a hoax, a farce or at very least, an empty promise.

However the Kenny Anthony government has certainly kept their promise to keep the country’s books in the red as local calypsonian Morgie told us. Is this what they mean by proper fiscal management?