Cabinet has made a giant misstep in awarding ministers a 50% increase in salaries and political commentator Christopher Ram has urged that the National Assembly appoint an independent Compensation Committee to look into the question of compensation for political appointees.
The David Granger administration has come under severe criticism for the pay hikes for ministers. Public servants were given a small salary hike after having been promised a “significant” increase by the APNU+AFC government. Ram pointed out that the ministers profit from millions more in benefits.
In his blog chrisram.net, Ram pointed out that the increases for the ministers take effect from July 1, less than six weeks after the officials had been on the job. He said it is astronomical when compared with what Cabinet approved in the Finance Minister’s Budget for
government employees and pensioners.
“In that Budget, the minimum salary in the public service was increased from $42,703 per month to $50,000 per month, or 17.1%. But there was a catch: unlike every other year in the past thirty years, the increase was for half the year only. The effective increase then, for the people at the bottom of the scale, for 2015 over 2014, is 8.5%. For public servants receiving a salary of $100,000, the increase was 10%, or 5% over a full year, and for those receiving $200,000 and $500,000 the effective annual increase was 3.75% and 3.0% respectively,” he wrote.
“There was an additional increase of $5,000 per month for persons above the minimum wage. Note that for public servants the higher salaries attracted lower percentages and lower salaries attracted higher percentages. Cabinet clearly did not think that principle applied to them,” Ram said while pointing out that the APNU+AFC’s 100 days commitment was “Significant salary increases for government workers, including nurses, teachers in primary, secondary and tertiary education; security personnel; and civil servants on the traditional payroll.”
He also said that the 2015 pension increases were subject to no retroactivity. “While the Finance Minister announced a $3,875 increase in the monthly pension from September 1, 2015, the Budget withdrew the monthly subsidy of $2,500 and $990 for GPL and GWI previously enjoyed by pensioners. Net increase: $385 per month but payable from September 1, an increase in 2015 of less than 1%,” he declared.
He recalled that the APNU +AFC’s 100 days commitment was “Significant increase in Old Age Pensions.”
Egregious
“It seems however, that no percentage, however egregious, can truly reflect the palpable outrage felt by citizens over the increase awarded to themselves by a Cabinet in office after less than half a year. This is not about bad optics, bad timing or bad politics as some are suggesting without any regard for the finances of the country. Unless the Government can transform the 2015 projected $50,000 million deficit into a surplus, pay its public servants a living wage, and afford its pensioners some dignity, the increase will be as bad next year as it is now,” Ram wrote.
He noted that the unprecedented increase has been justified on some unusual grounds namely that it is about wage-led growth; that Cabinet is made up of quality persons; the beneficiaries were earning more in their private practice; they deserve the increase; or the increase will stop them from thieving. The merit of each of these is not only arguable, it is dubious, he said.
“The question for me is if the financial situation which confronted Cabinet when it took office was worse than they thought, and which therefore prevented them from honouring commitments they made to voters, how come they can meet commitments they did not make? That is not the integrity and transparency which many thought would be the principles on which an APNU+AFC Government would operate,” he declared.
Tax returns
He invited the Cabinet to make public their tax returns to show the kind of income which they now demand, because, as they claim, that is what they used to earn. “And if that is indeed the case, why did they not tell us about their plan? And is there no element of public service to their work? And can they confirm that they have all shut shop and have given up their private businesses?” he questioned.
Ram noted that many commentators argue that the increase is really about income maximisation, and that what was involved was the use of creative counting to achieve the desired result. “So take the salary of the Attorney General which in turn is the salary of the Chancellor. Now, because the Chancellor gets a tax-free salary, the thinking is that the AG’s salary should be treated as net. And since the AG cannot earn more than the Prime Minister, the Prime Minister’s net salary has to be higher than the AG’s, followed by VP’s, followed by Ministers and MPs,” he wrote.
“But the base is clearly wrong. Only three persons are statutorily permitted a tax-free salary: the President, the Chancellor and the Chief Justice. Anything else is illegal and even Cabinet cannot make it so. I respectfully recommend that they read the Income Tax Act and the Financial Administration and Audit Act,” Ram said.
He said that as the Ministers make their case for entitlement, they must not ignore the range of benefits which they receive at taxpayers’ expense which includes 24-hour security, all expenses paid vehicle and chauffeur, tax-free gratuity for their chauffeur, free electricity, free telephone, housing or housing allowance for Senior Ministers and the Attorney General, even when they live in their own homes, entertainment allowance when everyone knows the Ministers are the ones to be entertained, free crossing on toll bridges, no airport tax, generous leave and leave benefits, access to valuable medical benefits, and perhaps as valuable as all the other allowances put together, the right to duty exemption on a vehicle every three years.
The chartered accountant pointed out that MPs are also paid an additional $20,000 per month for being a member of a Parliamentary Sessional Committee; an additional $25,000 per month as a Chairman or Deputy Chairman of such a Committee; and an allowance of $15,000 per month as a representative of a Geographic Constituency. Conservatively, these are easily worth another million per month, Ram said. He also pointed out that MPs earn a pension after four years while the average person has to work and contribute to the NIS for fifteen years.
He said that there is a way out. “Cabinet needs to admit that they have made a giant misstep. It is not too late to reverse the decision and have the National Assembly appoint an independent Compensation Committee to look into the question of compensation for Ministers, MPs and other political appointees. Indeed, this should be a permanent arrangement which prevents what is a clear conflict of interest for Cabinet members,” he said.
Ram added that the terms of reference of such a Committee should not be difficult to establish: not too high to make it a coveted job and not too low to deter suitable persons; comparability with jobs in the public sector; ability to pay; and evaluating the compensation package in its entirety, including all perks. “To the extent that there is any comparability with other countries, regard must be paid to the economic and other conditions of those countries,” he added.