Another perspective on the NHT situation came out this week from former Prime Minister Orette Bruce Golding. It is shown below. Wonder why the JLP didn’t let Andrew Holness write it? It probably could have helped their cause.
Also there’s a commentary below from Mark Wignall regarding his proposal. Let’s hear your views.
That $44 billion NHT ‘contribution’
Bruce Golding, Contributor
The government’s decision to expropriate $44 billion from the National Housing Trust (NHT) must be seen in the context of the rock and hard place between which it finds itself and the imperative of reducing the fiscal deficit to satisfy the requirements of an International Monetary Fund (IMF) programme. The alternative would be drastic cuts in public expenditure that it finds unpalatable and/or heavier tax increases that are not only just as unpalatable, but unrealisable. It is to be noted that, despite some $45 billion in new taxes imposed over the last five years (not including the recent $16-billion package), revenue collections have increased by less than 30 per cent while inflation (already built into most taxes) has been around 50 per cent. It is clear that the economy has little or no capacity left to cough up more taxes, the inefficiencies in tax collection notwithstanding.
However, this extraction of funds from the NHT must also be seen in the context not only of the NHT Act on which the courts are now being asked to pronounce and which the Minister of Finance has declared his preparedness to have Parliament amend if necessary, but also of the moral obligations implicit in the management of NHT funds.
The NHT, as its name asserts, is a trust fund. Every cent of contributions that flows into the Trust is made by or on behalf of a person with a name and a unique number. Its purpose is to offer housing benefits for those named and uniquely numbered persons. The Government’s role, exercised through the board of directors it appoints, is to manage those funds in an efficient way to ensure the maximum benefits to those named and uniquely numbered persons.
Some have posited that the income earned from investments made by the NHT constitutes a “surplus” that the Trust, i.e., the Government, is free to disburse as it chooses. I adamantly disagree. This income belongs proportionately to the named and uniquely numbered persons whose monies were so invested. It is no different from income earned from investments made by a company that properly belong to its shareholders and is not a “surplus” to be dispensed by its managers at will.
Nonsense!
The Government insists that the extraction of these funds will not affect the NHT’s ability to provide houses and mortgages to its named and uniquely numbered contributors. That is nonsense! The $44 billion that is to be paid over to the Government is money that would otherwise be available to provide houses and mortgages to its named and uniquely numbered contributors. At an average cost of $4 million per housing solution, it means that 11,000 families that could have received benefits over the next four years will not now do so. The thousands of jobs that the provision of these housing solutions would have created will not now be created.
This is not the first time that a government has raided the NHT for funds. Five billion dollars was extracted in 2005 to fund the Education Transformation Programme. Other funds were extracted to finance the Inner City Housing Programme, to provide houses for persons in dire need, but the majority of whom had never contributed a cent to the trust fund and were, therefore, not among the named and uniquely numbered contributors. Repayment of the mortgage loans in this programme has been a predictable disaster. I am on record as being in opposition to the use of NHT funds in both instances.
It is grossly unfair to the named and uniquely numbered NHT contributors who see these NHT deductions recorded on their pay slips every week, fortnight or month, but who, despite repeated applications, have never been able to secure a benefit from the NHT. Many are told that they don’t qualify. How then does the Government qualify?
Having said all that, we must return to the fiscal dilemma confronting the Government, the implications of which could have bizarre consequences for everyone, including the named and uniquely numbered NHT contributors. The NHT represents an attractive store of cash. It receives $21 billion in annual contributions and earns an additional $10 billion from investments (including mortgage collections). Despite its obligations to refund employees’ contributions after seven years ($3 billion annually), it is cash rich. A government faced with a fiscal crisis will inevitably look to this cache of funds to bail itself out.
There are ways in which this can be done without violating the fundamental moral obligations the Government has towards the NHT. One way would be for the NHT to provide a loan to the Government. This would be repayable with interest and the NHT would then book it as an income-earning investment, thus not affecting its balance sheet. It is understandable that the Government would not be able to accommodate this option as it would simply add to its debt stock – a no-no for the IMF agreement.
Land bank
There is another way that would have been painless. The NHT is in the business of providing housing which requires land. It would have been a much better way for the Government to provide land in exchange for the $44 billion. The NHT maintains a land bank to facilitate its house-building programmes. There are fast-growing urban centres across Jamaica (e.g Spanish Town, Old Harbour, May Pen, Christiana, Spaldings, Santa Cruz, Savana-la-Mar, Montego Bay, Ocho Rios) with large numbers of NHT contributors who are and will increasingly be in need of housing. In most of these areas, there are large tracts of unutilised government-owned lands that could be transferred to the NHT at market or even discounted value, in exchange for the $44 billion.
There are other non-housing related government-owned assets that could make up any shortfall and be treated by the NHT as investment assets. This approach would still reduce the ability of the NHT to provide benefits in the four-year period, but these benefits would be available in the future, the Government’s cash need would have been met, the NHT balance sheet would not have been affected, and the trust implicit in the operation of the NHT would not have been violated. This is the method that was used to allow the NHT to fund the building of new barracks for the Jamaica Defence Force. It is a template that could have been used to find a more appropriate solution to the current fiscal crisis.
An inescapable concern that this action evokes is whether, over time, the NHT will be treated more and more as a supplementary Consolidated Fund. And how long will it be before the NIS Fund is brought within the same grasp? What implications does this have for pension reform where we are contemplating a segregated fund into which public-sector workers will be required to make payroll contributions to finance their pensions, but which fund will be within Government’s reach to address fiscal crises that will arise from time to time?
The Honourable Bruce Golding is a former prime minister and leader of the Jamaica Labour Party.”
Financial desperation and the NHT raid
MARK WIGNALL
Thursday, February 28, 2013
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In the late 1800s when the engineering genius Karl Benz had patented the modern motor car, powered by an internal combustion engine (known then as the horseless carriage), the political leader of Germany, who was an ardent lover of horses, labelled Benz as unpatriotic.
With even the church at the time calling the horseless carriage the work of the devil, it is quite possible that in the minds of the secular and religious authorities in Germany in the 1880s, the inventor/forerunner of the Mercedes Benz was as an enemy of the state.
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Today, hard times are upon us and it appears that, in the short term, it will get worse. Selling the voters of this country in its election campaign of 2011, a two-week resolution of the IMF agreement which had seemingly come to a standstill under the then governing JLP administration, the PNP also promised the voters that nice times would return.
The JLP told us the truth and lost. The PNP was pathologically mendacious in its campaign promises and was rewarded handsomely by its base of low information voters and those who had become disillusioned with the JLP administration’s handling of the Dudus matter from 2010 onwards.
Faced with harsh IMF pre-conditions for a new Standby Agreement and fully immersed in the tough times which then JLP Prime Minister Andrew Holness had promised would arrive by now, the PNP administration had no choice but to accede to the IMF. In the process, it raided the NHT ($44 billion over four years), said the removal of funds was legal (while attempting to amend the NHT Act in Parliament) and pretty much said to the people of this country, we had no other choice but to do what we did.
I sympathise with the government because its problem is simply the real representation of our’s. We are paying the price for years of consuming what we have never produced while living in a flat and oftentimes, declining economy. Add to that, systemic governmental corruption and the very fact that, just previous to this, the PNP held governmental power for 18 1/2 years and it tells you that we are not likely to crawl out of this hole anytime soon.
Just recently I had a telephone conversation with my friend, Hugh Wildman, attorney-at-law, the person who had won the pyrrhic victory in the CURE vs JPS matter and lead attorney for CAPI (what does that mean again?) in taking the government to court over the NHT raid.
I saw the illegality in the snatching of funds from NHT even before Wildman pointed it out to me. A bright 10th grader could see illegality.
What is there to stop them from raiding the NIS funds? I asked him.
“You have the same concerns as I do,” he said.
It was my view that the government should have borrowed the funds from NHT at a ridiculously low rate with even a 10-year moratorium on repayments.
Former Prime Minister Bruce Golding has put forward some practical alternatives in an article written in the Jamaica Observer, headlined ‘That $44 billion NHTcontribution’.
He has correctly rubbished the argument put forward by NHT head, Easton Douglas that the $44 billion withdrawal will not interfere with the delivery of housing solutions to contributors. Again, even a 10th grader could see that Mr Douglas was selling us an un-saleable fairytale. Even subtly blaming a shortage of medium-sized contractors for the non-delivery of housing solutions to contributors, was a dead giveaway that the government knew the move was illegal.
According to Mr Golding, there is much government land that the NHT could have purchased for $44 billion. In other words, use the NHT’s $44 billion over four years to purchase lands which would be showed on the NHT’s books. In the fiscal emergency that is upon us now, even though the NHT would be devoid of $44 billion cash, it would have in its position land worth $44 billion.
The NHT takes in about $31 billion each year. With the government extracting $11 billion over the next financial year that leaves $20 billion, plus land available for providing housing solutions. Mr Golding’s idea is a most sensible one and the model for it is the JDF’s new barracks construction.
One assumes that the PNP administration has no intention of taking Golding’s advice. The fact is, the PNP has never really been a party of fiscal discipline or indeed, economic performance. Too much of its credo is tied into ‘redistribution’ and the fact that people like Finance Minister Peter Phillips and Transport Minister Omar Davies were grounded in old, academic socialism theories.
The Prime Minister herself was immersed in and gained her initial power from her involvement in the politics of the state providing housing when her mentor, Tony Spaulding the late firebrand Housing Minister in the PNP of the 1970s was showing us how to build out PNP garrisons.
When $5 billion was snatched from the NHT to build out inner city housing in 2006, it was under the leadership of Portia Simpson Miller. Very few of those who gained housing solutions in those projects were NHT contributors. That they have failed to pay back anything, only satisfies the implied belief in the PNP that distribution of state benefits is a shorter line and an easier route than building an economy and creating wealth.
Therein lies my greatest fear. That this PNP administration like all since the 1970s, is driven by those in top leadership who are short on vision for an economic future that does not involve a disproportionate concentration on redistributing state benefits.
There are times when we cannot afford to bleat over what took place in the past but, if the past is an indication of what we are likely to do now and in the near future then we must consider our past. To that extent, I believe that there is space for the co-existence of CAPI taking the government to court over the NHT matter and, the argument by the government that it had no choice but to raid the NHT coffers.
To label CAPI as an ‘enemy of the state’ as I have seen on some crazy Facebook posts, is quite foolish. While I believe that CAPI has JLP blood in its vitals, it must be stated that the PNP is quite skilled at waging the ‘patriotic’ banner around and labelling those who think differently as enemies of the state.
That stance, like the PNP’s democratic socialism was perfected in the 1970s. It seems that too many of those in the top leadership of the PNP, devoid as they are of any new political thought or economic lessons, are now reprising a part of the 1970s.
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