By NEIL HARTNELL
Tribune Business Editor
The 22 per cent reduction in the Government's first quarter deficit was "exactly what we want to see", a governance reformer said yesterday, while warning celebrations are premature.
Robert Myers, a principal with the Organisation for Responsible Governance (ORG), told Tribune Business that while the $18.9 million year-over-year narrowing was a start, it was "not enough to jump up and down over" yet.
He took encouragement, though, from the fact spending was down by $17.1 million, while revenue was ahead slightly by $1.7 million, as signs that the Minnis administration was "going in the right direction" with its fiscal management.
"That's exactly what we want to see," Mr Myers said of the reduced deficit for the three months to end-September. "The two [revenue and spending] are going in the the right direction, with one going up and the other down.
"To see government expenditure going down by $17 million, and revenue up by almost $2 million, it's a snapshot that things are going in the right direction. If we see that happen in the next quarter, we will have even more confidence their measures are working, and that will cause consumer and investor confidence to rise.
"It's encouraging if it's a net decrease of almost $19 million. It's not enough to jump up and down about, but it's certainly a good start. We've got to hope they continue to do that."
The Central Bank, in its monthly economic report for October 2017, said the 2017-2018 first quarter deficit had dropped to $65.6 million against its counterpart from the previous year.
"During the first quarter of fiscal year 2017-2018, the deficit narrowed by $18.9 million (22.3 per cent) to an estimated $65.6 million, when compared to the same period last year," the regulator added.
"Underlying this development was a $17.1 million (3.2 per cent) decrease in total expenditure to $517.7 million, together with a $1.7 million (0.4 per cent) increase in revenue to $452.2 million."
A deeper look at the Central Bank data showed that the spending reduction was linked entirely to reduced capital spending on infrastructure-type projects, as this "almost-halved" to $34.4 million.
"In particular, infrastructure-related expenditure contracted by $22.6 million (45.4 per cent), as a number of roadwork and coastal protection projects were concluded," the Central Bank said. "Similarly, the acquisition of assets was $8.2 million lower, reflecting in part reduced investments in land."
However, the Government's recurrent spending, which accounts for its fixed-costs such as wages and rents, and is the more important component to get under control, jumped by $13.7 million or 2.9 per cent to $483.4 million.
Identifying the major culprits, the Central Bank said there was "a $25 million (10.4 per cent) expansion in consumption outlays, due to a $16.7 million (9.7 per cent) increase in payments for wages and salaries, and growth in purchases of goods and services by $8.3 million (12.3 per cent).
"However, transfer payments decreased by $11.2 million (4.9 per cent) to $218.2 million, underpinned by a contraction in subsidies and 'other' transfers, particularly related to healthcare services."
Mr Myers questioned the increase in wages and salaries, given the Government's announced hiring freeze, and suggested the rise may have resulted from commitments entered into by the former Christie administration.
On the revenue front, the Central Bank said there was a $15.5 million or 3.9 per cent increase in tax receipts, driven largely by improvements in motor vehicle licensing and business/professional fees.
"The VAT registered a more muted gain of $3.3 million (2 per cent)," the Central Bank added. "In contrast, taxes on international trade declined by $5.7 million (4.3 per cent), due mainly to a fall in import duties. Further, non-tax inflows contracted by $13.8 million (26.6 per cent) to $38 million, as income from non-public enterprises narrowed by $14.3 million (92.6 per cent)."
It is unclear whether the Central Bank data is based on the cash-based accounting system traditionally employed by the Government, or the accrual form, which records spending commitments when they are made, as opposed to being paid. The Government has signalled its intention to adopt the accrual method, widely recognised as giving a truer picture of its financial position and assets and liabilities, by 2022-2023.
Mr Myers, meanwhile, expressed hope that "the era of irresponsible governance is gone forever" after the Central Bank brought its figures in line with the Minnis administration's to reveal a $669.4 million deficit for the 2016-2017 full-year.
While slightly lower than the Government's $695 million figure, the Central Bank nevertheless noted that there had been a "two-fold expansion" in the 'red ink' with spending overshooting by $490 million or 21.9 per cent to $2.73 billion.
This more than offset the $131 million or 6.8 per cent gain in revenues, which totalled $2.06 billion despite Hurricane Matthew, providing further evidence that the benefits of VAT were squandered on increased social spending and pre-election hiring.
"The expansion in expenditure was driven by a $334.7 million (16.7 per cent ) gain in current outlays to an estimated $2.34 billion, as consumption spending firmed by $248 million (24.9 per cent), owing mainly to the $208.2 million (63 per cent) increase in purchases of goods and services," the Central Bank said.
"In terms of the components, the largest gains were noted for rent, communications and utilities ($80.9 million), other contractual services ($60.7 million)--related mainly to payment of medical health insurance premiums. In addition, wages and salaries expanded by $39.8 million (6 per cent), and transfer payments by $86.7 million (8.6 per cent)."
Mr Myers told Tribune Business: "That's where your VAT money went, on hiring more people, inefficiency and waste. They [the Christie administration] tried to buy an election by hiring people they had no business hiring.
"I only pray that the era of irresponsible governance is gone for ever. It's so old news, so old style. The populace know that, and it's why we are where we are. That kind of governance has no place in a sustainable future. I can only hope it's ended, that kind of thinking, and archaic governance is gone for ever."
On the revenue side, the Central Bank said tax receipts - accounting for 90 per cent of revenues - rose by $160.4 million or 9.6 per cent to $1.837 billion for the 2016-2017 full year, including "a $76.3 million (15.1 per cent) advance in taxes on international trade, which featured significant gains in excise and import taxes of $57.6 million (25 per cent) and $22.4 million (8.5 per cent), respectively.
"Similarly, VAT receipts moved higher by $10.1 million (1.6 per cent) to $638 million, while selective taxes on services posted a more muted gain of $1.5 million (5.7 per cent), comprising mainly higher revenue from gaming taxes," the Central Bank added.
"Further, business and professional fees expanded by $42.6 million (29.2 per cent), led by an increase hike in 'other"' license fees ($42.7 million), while other taxes inclusive of property and financial stamps taxes grew by $29.8 million (8.1 per cent). In contrast, non-tax revenue - which accounted for the remaining 10 per cent --decreased by $29.3 million (11.6 per cent) to $223.9 million, reflecting lower receipts of fines, forfeits and administration fees."