Economist Indera Sagewan-Alli is cautioning Government to be careful about subsidy cuts when it presents the 2016-2017 budget on September 30.
Sagewan-Alli in an interview with the T&T Guardian yesterday said that from an “affordability perspective Government needs to cut subsidies, as we can no longer afford the size of subsidies we have grown accustomed to because Government no longer has the revenue streams to meet them without having to borrow money.”
But she said that given the long reliance and dependence on subsidies “we have to be realistic to the kind of social fallout that could take place if the issue of transfer and subsidies is not handled in a very careful manner.”
There are a few big ticket items which the Government currently subsidies to keep costs to consumers down.
These include the Water Taxi Service, used daily by thousands of commuters from North to South and vice-versa. The allocation for that subsidy in the 2015-2016 budget was $39.4 million.
The inter-island ferry service which is used by local tourists and traders is also heavily subsidised to the tune of $284 million. The Public Transport Service Corporation is also heavily subsidised at a cost of $138.3 million.
CEPEP, the so called “make work programme,” is subsidised to the tune of over $600 million while the food card programme is subsidised to the tune of $288 million.
Sagewan-Alli said the money spent on subsidies was high and could not be sustained but she said: “We cannot simply entertain a drastic cut in transfers and subsidies, because for so many years a segment of the population have grown accustomed to it.”
She suggested that Government may want to “relook at the kind of people who are accessing and if you are able-bodied you should not be on the food card programme but in one of the other programmes that will be designed to increase productivity and economic diversification.”
Currently the State spends $1.7 billion on the fuel subsidy and Sagewan-Alli said once that was cut again “food prices will increase, the cost of transportation will increase and it will impact the cost of living.”
She added: “One appreciates that the Government does not have the resources but what these measures do is put a lot of pressure on the middle-class which is already reeling with very little surplus to be able to deal with increasing taxes, cost of gas and to pay for their children’s education.”
She said Government should consider engaging in partnership projects between the State and the agricultural sector and between the State and the manufacturing sector.
The benefits, she said, would be two-fold. The agricultural sector and the manufacturing sector will get the labour they need and a new more sustainable type of employment will be created.
The CEPEP model, she said, should be changed so that the $600 million allocated to the programme should be in the first instance cut by 25 per cent which should be kept as expenditure directed to the thrust of economic diversification.
Sagewan-Alli said the Prime Minister was right to ask people to bite the bullet “but people need to get a sense that the Government has a plan. “The Government needs to articulate a plan in the public domain, people must feel comfortable that if we make drastic sacrifices there will come a time in the not too distant future when things would be good again” she said.
Marketing manager Daniel Austin, of Xtra Foods Supermarket, told T&T Guardian that his organisation “is all about the consumer and he hopes that there will be incentives for consumers in the budget because there are many people at the lower end who can barely make ends meet and we need to ensure they do not get left behind.”
Austin said world shipping prices have increased and only recently an international shipping company went bankrupt. He remains optimistic that the government would look at the global scenario when presenting the measures and ensure that “the lower end” is not negatively affected.
He is also optimistic that incentives will come in the budget to help business owners expand their operations “because we can help stimulate the economy and create employment.”
Rosemarie Sant