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Time to bite bullet

In September last year, this column explored some of the key drivers of the Government of Barbados’ expenditure growth since 2008 in an article titled The Cost of Old Wineskins. It was estimated that about $175 million in additional annual expenditure since 2008 could be attributed to increased Barbadian student enrolment at the UWI, Cave Hill Campus ($70 million), operating shortfalls at the Transport Board ($70 million) and waste management services ($30 million).

Another $50 million in debt servicing cost could be attributable to the prison at Dodds and the judicial centre. Other expenditure increases could be traced to vital institutions like the QEH and the Barbados Water Authority. These findings are even more significant against the background of the Central Bank governor’s warning that the Stuart Administration will have to cut about $400 million in expenditure from Government’s budget if it is to stave off significant erosion of the country’s foreign reserves.

Cognisant of this eventuality, since 2011 advocating the need for the Government to come up with an affordable mechanism to preserve universal access to tertiary education while reducing the cost to Barbadian taxpayers became one of my pastimes.

A great deal of time was also expended outlining the prudence of selling crown corporations like the Caribbean Broadcasting Corporation, undertaking a comprehensive restructuring of the BWA as well as the public transportation system (including the Transport Board), and offering a minority of shares in profitable state owned enterprises to the public.

Many of these options should still be on the table. Time is now running out on the fiscal time bomb and any effective adjustment would be harsher at this moment than a year or two ago. At this stage of the game, pain and dislocation cannot be avoided.

However, we must recognise that there is either a lot to lose from failure to act quickly and decisively or a future to secure if action is forthcoming. Since rolling back all of the above mentioned expenditure growth is not a realistic proposition, many other categories of Government expenditure will have to be put on the chopping block; starting with the pre-election excess labour that was added to an already bloated civil service.

Given the circumstances it is reasonable to ask prospective and current university students (and their families) to pay for a portion of their tuition. Similarly, a credible solution to the Transport Board’s insolvency is urgently needed — variants of divestment or restructuring are the only options.

This brings us to the Minister of Education’s forewarning last Friday that the time is drawing nigh when Barbadian students attending the UWI will have to contribute financially to the cost of their education. Of course the country’s fiscal position demands this, but it should be done in manner that does not deny qualified aspirants from entering the halls of the UWI campuses.

This pending policy change on tertiary education has been a long time coming. The writing was on the wall for many years now. The country simply cannot afford to sustain the existing policy given that public finances were not expected to keep pace with the rapid expansion of UWI, coupled with the plethora of other demands on the State.

Hopefully the changes to tertiary education funding that are ultimately implemented will look something like the following prescription:

(i) Combine UWI economic costs, tuition and amenities fees and require students to cover a third of the total cost of pursuing their university education.

(ii) Set up and capitalise a UWI enrolment fund for the purpose of offering UWI student loans to cover the students’ portion of the costs of providing their education. Upon graduation, repayment should be initiated by direct deposit or by garnishing the wages and salaries of UWI alumni as soon as they begin to work.

An employment grace period of up to a year could be permitted. Students should be allowed to begin unscheduled repayment before graduation if they receive a scholarship, bursary or wages from summer/evening employment.

(iii) Require students to pay out of pocket for repeated courses and extended enrolment (i.e. more than three years for full-time students and more than five and half years for part-time students).

(iv) Introduce UWI tuition loan repayment tax credits or allowances in addition to tax credits or allowances for tertiary education savings plans. This single initiative should enable the Government to cut $56 million from the deficit. Another $50 million can be cut if the issues at the Transport Board are resolved. This still leaves $300 million of the governor’s recommendation of a $400 million cut in public expenditure.

A more aggressive approach to the introduction of compulsory recycling of recyclable household and commercial refuse and separate collection and disposal of compost may also go the distance in cutting expenditure on waste management and sanitation while protecting the environment. Perhaps incentives and disincentives could be built in.

For example, households could be paid for weekly recycling and charged for garbage disposal in a manner that nets to zero for households that separate their refuse for garbage, recycling and compost.

In terms of cutting public expenditure on healthcare, it is desirable to keep access to healthcare “free” at the point of delivery. However, perhaps the time has come when those who can afford to do so could be required to pay for an expanded range of medical services. This too could be coupled with a regime of healthcare tax credits.

For some of these initiatives to work, financial information will have to be shared between the Inland Revenue Department, the QEH and polyclinic network, and the Higher Education Department of the Ministry of Education. There is no doubt that policy intervention to promote healthy diets and lifestyles is likely to reduce long-term healthcare costs.

Of course, to reach that $400 million target, wastage and duplication in the public service will have to be seriously addressed. Unlike the previous suggestions, this one will result in some job losses in the public sector and hopefully a leaner, meaner, more effective civil service.

Tough choices lie ahead. Please make them quickly, Mr. Prime Minister!

* Carlos R. Forte is a Commonwealth Scholar and Barbadian economist with local and international experience.

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