Monday, January 07, 2013


During his address to the nation last night on the present negotiations between government and the unions, the PM made these statements to let Lucians know what the impact will be if government grants the unions a 15% salary increase.
( The full text of this address can be read by clicking on the link below)
"The current proposal by the Trade Union Federation for a wage settlement will increase the Government wage bill by about $55 million annually for every year in the future. The back pay associated with this proposal would cost about $40 million, leading to a worsening of the current deficit of close to $100 million for this financial year. It also means that for every ensuing year, Government would have to borrow an extra $55 million just to meet the increase. This is clearly a path that a responsible government should not take.
Even with the offers on the table from the Government Negotiating Team of a lump sum payment, which is equivalent to a one-off three percent increase, Government would still have to borrow an extra $10 million just to pay wages.
We still have the chance to avoid going to the IMF but this will involve some very tough decisions. It will involve rebalancing our expenditure and taking steps to ensure that we borrow only for high-return capital projects. These are the realities that face us. That is why I urge that we need - all of us - to sacrifice collectively.

If we agree on a wage settlement higher than what our country can afford then we would have to immediately reduce or eliminate a number of programmes to fund this new expenditure. The subsidy on petroleum would have to be reviewed and we may have to move to a full pass-through mechanism where fuel prices increase every time the price of oil goes up on the world market. The Government subsidies on rice, sugar and flour would have to be reviewed. VAT would have to be imposed on water and electricity and a range of other items that are now VAT-exempt or zero-rated.
We would also have to revisit the size and configuration of the Public Service to see where we can obtain the savings required to finance the salary increases that are being requested. These are the steps that Government would have to consider in attempting to guide the country away from the looming fiscal crisis. In fact, even without the impact of the union-proposed wage increases, there is still a need to cut back on a number of activities because we simply cannot continue to borrow at the rate of the past three years.
I wish to state categorically that our Government does not want to reduce spending on education, health services, national security or social safety nets to assist the poor and vulnerable in order to pay higher wages to Public Officers. Neither do we wish to reduce the size of the Public Service and increase the pool of unemployed people in our country at this time."

Sent from my BlackBerry® device from Digicel

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