Mr Speaker, fellow members of parliament, I rise today with great humility; knowing the state of our nation’s economy and being aware of the weight of expectations by ordinary people, looking to me to provide the answers regarding their jobs, their welfare and their children’s futures.
Mr Speaker, I will do my best by delivering the package of reforms, monetary and fiscal, which I hope will lead us forward both in the short and medium terms.
The past five years have been tough, not only for us, but for the rest of the world; but it is to our little island home that I am given the great responsibility to pilot the ship of economic stability, growth and, with it prosperity for our people. It is a great responsibility and one that I am not treating lightly.
First, let me get the tough love out of the way: from the moment I sit down, Mr Speaker, every head of department in the public sector, including the main civil service and statutory bodies, will be instructed to come up with proposals to reduce their budgets by ten per cent this financial year, and a further five per cent in the 2014/15 financial year. There will be two exceptions to this requirement, health and statutory education. But primary and secondary schools will have to show great efficiency improvements, which my colleague and friend, the minister of education, will give further details to parliament.
With health, Mr Speaker, the conditions are the same – radical efficiency improvements in exchange for no budget cuts. In reality, the efficiency improvements will be a de facto budget increase. Mr Speaker, there is a mistaken belief that selling our prized assets to the highest bidders will help our foreign reserves; but there is more to upholding the pride and national prosperity our great nation than just holding out our hands for handouts from the super rich.
Mr Speaker, from midnight tonight there will be an absentee tax imposed on all homes that are not the primary place of residence for the owners, on holiday homes and on the homes of people who are not domicile in Barbados for taxation purposes. There will also be an annual one percent tax for all residential properties valued over Bds$5m, with an annual valuation by government valuation.
Mr Speaker, while we extend the hand of welcome to all comers, we do not do so to be exploited or for ordinary hard-working taxpayers to subsidise the superrich to live in our country. Further, by having people who are not impacted by the recession and refusal of foreign-owned banks to lend to would-be homeowners, we are simply witnessing the creeping rise in home ownership reaching further and further down the food chain to ordinary working people. It is our duty as a government to protect the interests of ordinary Barbadian people.
Mr Speaker, the cost of health care is rising and will continue to rise for this generation. It is my intention to meet this challenge head on. From midnight tonight, membership of approved gyms will be VAT free, on the basis that prevention is better than cure. This government will also remove VAT on the sale of new bicycles and at the same time, midnight, it will no longer be a requirement for bicycles to be licensed. Mr Speaker we want to get more young people fit and healthy and bicycling is one way of doing this.
Mr Speaker, at the same time it is the intention of this government to double the taxation of cigarettes and tobacco from 6pm this evening; and also from 6pm, it is our intention to remove VAT from non-sugar soft drinks – so-called diet colas – while doubling the minimum retail price of sugary drinks. Mr Speaker, this is to launch a war on type-two diabetes and the epidemic of obesity that is now plaguing our nation. A healthy nation is a dynamic nation, and it is the intention of this government to make Barbados healthy again.
Mr Speaker traffic congestion is a major problem, not only with the management of the roads, but with the impact of exhaust fumes on our health. It is my intention to do something about that. From midnight the parking fee at every government car park lot will increase from $1 an hour to $5 an hour or $25 for the full day. It is also the intention of this government to introduction a $10 a day congestion charge for all motor vehicles, between the hours of 7am and 10am, and from 3pm to 6pm.
Mr Speaker, there will be one exception to this, vehicles with three or more people, including the driver, will be exempt, from this requirement. Mr Speaker the intention is to remove the one-person vehicles from our busiest roads during rush hour and to encourage neighbours and colleagues to share their transport to work.
One of the gaps in our financial architecture is an appropriate tax-advantaged vehicle for ordinary retail investors. Mr Speaker I intend to put that right. A month from today’s date, government will introduce a long term saving vehicle, called a Long-term Saving Plan. Full details will be published by the ministry of finance when I sit down. But the outlines are it will be available to anyone over the age of 16, taxed money can be invested to a maximum of $15000 a year; growth will be tax free and the withdrawals, only for life-changing events prior to retirement, will also be tax free. Mr Speaker, that means in real terms that the government will be contributing the equivalent of the tax base of the investor to their investment pots.
Mr Speaker, this will be transforming, introducing financial deepening to our society, providing more funding for small and medium enterprises, and enriching ordinary households in a way they have never been. Large number of people who run small businesses and are desperate for cash to support their business strategies, are effectively denied loans by many of our lenders.
We know, Mr Speaker, that a short-term borrowing strategy is key to the success of small enterprises, whether that money is used as working capital to finance the business, as a hedge against an emergency, or to fund acquisitions. Whatever the purpose of that borrowing, we know that funding small and medium enterprises is a major key to economic growth. Mr Speaker, at this stage in our development we cannot tolerate lenders who avoid for whatever reason lending to success and well-managed businesses. I will be having words with the governor of the central bank and the heads of our commercial banking operations about how to get over this lending gridlock.
Mr Speaker, this Budget is about turning a banking crisis and recession in to an opportunity for ordinary people – that is what this DLP government is all about. My colleague, the minister of education and myself, have agreed that although the service sector, especially tourism, has served us well, our long-term future is as a knowledge-based economy. As such, Mr Speaker, the focus going forward will be on training and education. As of now, we put the University of the West Indies on five-year notice to come up with solutions for self-funding. We will work closely with UWI officials to make this transition as smooth as possible, but no change is not an option. Mr Speaker it is wrong and unjust that those who have had no higher education should be paying the fees through their taxation for those who do. That, Mr Speaker, is unfair. It is our intention, from the beginning of the new financial year – 2014/15 – that all school leavers not continuing in education or going in to a job, will be given an option of learning a trade, staying on in some form of education or training for a further two years, to the age of 18.
Mr Speaker, this is the future, and at the other end, the infant and primary school end, there will be a radical change in the curriculum, emphasising science, technology, engineering and maths, to prepare them to be at the cutting edge of global technological developments. Mr Speaker, we also plan to offer five two-year bursaries for those qualified to take the CFA Institute diploma, which will enhance the quality of our financial services professionals. Mr Speaker, that will send a message that Barbados means business.
Mr Speaker, there has been a lot of talk in the media about improving our inner city areas, bulldozing the slums, and building new home, businesses and recreational space for the City. This is a good idea, but it is one that we should not rush in to hastily. I will this afternoon announce a high-powered working party of experts to draw up a feasibility study within three months on how best to improve a defined geographical area and how to raise the funding, including a private/public initiative. Part of the remit would be looking at mortgage provisions for private buyers and social housing. I shall be reporting back to parliament in due course.
Mr Speaker, as Mariana Mazzucato says in her excellent book, The Entrepreneurial State, we cannot tolerate a situation in which government, in the guise of the taxpayer, funds the risks, while the private sector reaps the rewards. With this in mind, it is government’s intention to create the legislative and regulatory framework for the creation of a credit union and post office banks, using the mutual business model and legally structured to allow balance sheet lending only. Government will also enter discussions about the funding of small hotels, which are so central to the tourism sector, with cert ain conditions.
Mr Speaker we think it is only right that if government is to fund family-owned or shareholder owned businesses we should be able to monetise that involvement, either through equity for debt, or by securing an interest-bearing loan on the property. Mr Speaker, in this way, small businesses will get the short-term loans they so desperately need, while at the same time taxpayers’ money will be protected.
Mr Speaker, this is a new way and more dynamic of managing public funds and one which will put meat on the bones of the much talked about Barbados model. Mr Speaker we also intend to encourage those with substantial savings, high net-worth individuals and corporates with substantial liquidity to invest in start-ups and other small and medium enterprises by incentivising them through the tax system. We will also for the first time introduce legislation creating venture capital, hedge funds, collective investments, all incentivised through tax-free and deferred tax arrangements. This is to introduce another funding stream for those enterprising young men and women who are anxious to start their own businesses but cannot get the funding. This policy initiative will drive economic growth and reduce unemployment and is good for Barbados.
Finally, Mr Speaker, I have left the best for last. For the first time in our history, in fact for the first time in the history of the English-speaking Caribbean, I will be laying before parliament details for a Sovereign Wealth Fund. Mr Speaker this will be a radical move, creating an arms length body to run all our investments on commercial principles, with a mandate to return an annual pre-determined yield.
Mr Speaker, for the first time a major state body will be created not reporting to a minister of government, but to parliament; this is a deepening of our democracy, giving parliament the authority to interrogate a major financial institution without the dab hand of the minister. It is not the role of government to take risks with taxpayers’ money. However, Mr Speaker, it is part of our responsibility to ensure that the interests of future generations are protected. One way of doing that is by rolling a number of public bodies in to a single Sovereign Wealth Fund, and give it a mandate to return an annually set benchmark.
Mr Speaker, we believe this will be best for the nation and best for young and unborn Barbadians.
As a minister of finance, it is like turkeys voting for Christmas. But that represents the integrity of my government, that is the honourable intention of this government to return power to the people. Mr Speaker, this is a transforming Budget, a restructuring Budget, a Budget that looks our economic troubles full in the face and has proposed solutions. Mr Speaker this is a Budget that will make the people of Barbados once more proud in their nation, a Budget for the people; a Budget that incorporates reform and growth.
Mr Speaker I commend this Budget.