The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s former top financial official yesterday argued that increased social spending would better help Bahamians struggling with the cost of living crisis than the imposition of price controls.

Marlon Johnson, ex-acting financial secretary under the Minnis administration, told Guardian Radio yesterday that the Government would be better able to target support to those who need it via increased social welfare spending.

He argued that price controls, and tax cuts such as the elimination of VAT on so-called ‘breadbasket’ food items, would be a more inefficient method for delivering this assistance because they will benefit the wealthy as well as those struggling to cope with the cost of living.

“All governments are challenged, but they want to respond because they recognise that they have to certainly help marginalised people. We get enamoured with believing that we can control prices to do such and such, but it can actually have the unintended impact,” Mr Johnson said.

“Most economists will tell you that rather than trying to control prices..focus on providing support, direct support for the families that need it.” He explained that when governments apply price controls and tax breaks, they are also reducing taxes for higher earners that do not need the concession, thus making it more efficient to increase social spending and direct it to the persons requiring help.

Mr Johnson said: “So my earning levels are such that I don’t need my food prices to be artificially controlled. I can afford to eat… so rather than do that, it may make more sense to say to people who are under a certain threshold that we will provide the right support to them to help them be able to eat rather than making the prices artificially low for me who don’t need the subsidy…

“We cut tax, cut duty and such, and I always ask the question: When you’re cutting duty, or you’re cutting VAT, you’re giving not only the working class and the poor a break, you’re giving a break to the rich who could afford to pay.

“So it may make more sense if you charge the appropriate tax level, and provide the support to the families and individuals who can’t make it and that’s a much more efficient way to be able to get it done”

Mr Johnson said the demand by petroleum retailers for an increase in fixed price-controlled diesel and gas margins is understandable given the impact of high inflation and escalating operational costs.

“I think, as a general rule, we have got to understand that we’ve had price inflation just over the last two or three years,” he said. “That, compounded, is probably somewhere around close to 20 percent. So it’s kind of hard to ask the guys to work on the same margin when price levels generally, for the things that they have to consume, when minimum wage etc, has gone up, so their cost components have gone up. I don’t think it’s unreasonable for them to look at it.”

Mr Johnson said consideration should be given to smaller grocers, especially those on the Family Islands, when considering adjusting the price of breadbasket items as they already face higher import and operational costs while providing a smaller selection of goods.

He added: “On the food price controls, one of the interesting things I think you have to bear in mind is notwithstanding whatever government may want to do in policy, if your price controlling a sum of items, just think about it.

“If you have a small merchant, whether they’re in a Family Island, where it’s very more expensive and you’re selling a smaller basket of goods... the ability for you to be able to make market margins on other things is limited.”