The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Making a ‘Balanced Budget’ a constitutional requirement would be akin to “putting a noose around your own neck” from a government perspective, a former finance minister said yesterday.

James Smith, CFAL’s chairman, said such a mandatory goal was “not the optimum way” to run the Government’s financial affairs, as its hands would be “tied” in responding to national emergencies such as major hurricanes.

Backing the Constitutional Commission’s decision not to include a ‘Balanced Budget’ among its recommended amendments, the former minister of state for finance and Central Bank governor said: “For a small, open economy in the hurricane belt, it would be putting a noose around your own neck.”

One Commissioner had called for a ‘Balanced Budget’ clause to be inserted into the constitution, but Mr Smith added: “There’s simply too many unknowns in an economy to tie your hands by matching the exact amount of revenue to expenditure.

“It can’t be done, and it’s simply not as desirable as it sounds. It’s not even good economics, as it makes no provision for a surplus or deficit.”

He explained that if the Government were to achieve a fiscal surplus in any given year, the ‘Balanced Budget’ provision would prevent it from using the excess revenues for investment purposes.

The Government would also be “asking for trouble” if such a clause were inserted, because if unexpected events happened and it suffered a deficit, it might be exposed to sanctions.

“I don’t think it’s the optimum way to run the financial affairs of an economy,” Mr Smith told Tribune Business.

The Constitutional Commission, though, had recommended creating the post of Contractor-General to oversee the award of government contracts and bidding on them.

And it has also proposed giving Parliament’s Public Accounts Committee (PAC) constitutional standing; boosting the Auditor General’s independence; and the two bodies working more closely together.

The Contractor-General post appears to be based on the same position that was created in Jamaica, but there the office holder’s role is to investigate allegations of impropriety with regard to government contracts and financial dealings - not oversee the ‘front end’ award.

And this recommendation would also appear to cut across the Government’s existing procurement reform initiative.

Michael Halkitis, minister of state for finance, said the draft regulations envisaged creating a Public Procurement Board, which will replace the existing Tenders Board.

This will be supported by the creation of a Public Procurement Department within the Ministry of Finance, headed by a chief procurement officer, and aggrieved bidders will have the opportunity to appeal Board decisions to a Public Procurement Review Tribunal.

Mr Smith yesterday said that while it was necessary to have proper oversight of how government funds were spent, he felt the existing system “could work if properly manned and given more autonomy”.

He added: “It calls for a very transparent process, where all parties are at the table at the same time when opening the bids, and everyone is given time to present them.

“It’s improving the system in place, and manning it efficiently and effectively.”

The former finance minister also backed the Government’s plan for an appeal process, as currently none existed in relation to government contract awards.

Mr Smith added that it was a similar story with the PAC, as it had not been given sufficient resources to carry out its mandate, such as hiring an outside accounting firm.

“Again, what was foreshadowed in legislation was not given feet to walk,” he told Tribune Business.

“The Auditor General’s Department has always been treated as very low priority over the years, in terms of the resources given to it, and when that happens it becomes less and less effective as an overseer of government.”