Chief Editor, Business Anthony Wilson explores the background to T&T’s reliance on subsidies to support the economy.
In the original 2016 budget, the Government allocated 52 per cent of the country’s budget to transfers and subsidies.
That’s an expenditure of $34.7 billion out of total expenditure of $66.4 billion that is used to lower the cost of education of the nation’s children, reduce the cost of drugs to treat diabetes and hypertension and build houses for the nation’s low to middle-class citizens to live in.
The huge expenditure on transfers and subsidies is also used to reduce the amount of money that T&T residents pay to fill their cars with gasoline and lower the amount of money that comes out of the pockets of breadwinners to pay electricity and water bills.
Transfers and subsidies touch everyone in T&T, from the newborn whose mother pays nothing to deliver her baby in a public hospital to the retiree who is able to travel by water taxi from San Fernando to Port-of-Spain for free.
Many aspects of life in T&T are subsidised — from the cost of going to Tobago by air or fast-ferry to the two per cent mortgage interest that some people pay for their state-built houses.
To put the transfer and subsidy allocation in context, at $34.7 billion it is nearly three times more than the next largest allocation, which is the cost of personnel expenditure at $12.6 billion.
T&T has been able to subsidise the cost of living for its citizens largely because of the taxes that Governments have collected from the liquefaction of natural gas (LNG) by the multinational energy companies that operate in the country.
Atlantic LNG’s Train I was commissioned in 1999. In that year, the Government’s total budget was $10.5 billion with $3.2 billion being spent on transfers and subsidies, some 31 per cent.
Five years later, the amount of money the Government was able to spend almost doubled to $20.6 billion, but the allocation for transfers and subsidies nearly tripled to $9.2 billion from $3.2 billion.
After the 2004 fiscal year, the administration, led by the late prime minister Patrick Manning, began to increase the transfers to the population, establishing Gate in 2004 and expanding it into free university education for all in 2006.
Given the first flush of LNG dollars, the Government was able to establish the Chronic Disease Assistance Plan in February 2003 which provided citizens with free prescription drugs and other pharmaceutical items to combat many chronic health problems.
Many other social programmes followed or were expanded.
But the price that T&T receives for its oil and gas exports today is a fraction of what it was ten years ago, which means that the revenue that the Government is able to generate from the energy sector has collapsed in the last two years.
T&T faces a double whammy because not only are prices much less, but the amount of oil and gas being produced here has fallen steadily for the last ten years.
In August, the Minister of Education announced the scaling back of Gate.
The real fear among the population is that other transfers and subsidies could be scaled back — or even eliminated — as well by the Minister of Finance in his month-end 2017 budget.