WE EXPECT that there will be ill-informed analysis and a fair bit of sanctimonious declarations over the fact that the National Housing Trust (NHT) reported a $1.85 billion deficit on its operations for its 2005/2006 financial year. The negative performance is directly related to the $5 billion taken from the NHT, in the face of some controversy, to help finance the education reform programme.
It is not that there is no point debating the outcome of the NHT finances, for there is. What we feel, though, is that the issue to be put on the table is far more fundamental than the political point-scoring that is now likely to take place.
Indeed, it was always going to be the case that the $5 billion "gift" to the central government would have an impact on the NHT accounts. This is no investment on which there would be a specific return to the trust - a point that was made during the parliamentary debate on the matter. The Opposition initially suggested that the money should be loaned.
But it is sophomoric to suggest that the deficit posted in the past fiscal year would leave the NHT broke and cause it to collapse. In fact, as the accounts show, even after the $5 billion outflow, the NHT has nearly $79 billion in assets and is taking in cash at a rate significantly faster than it provides benefits to its contributors. This is where we believe that the fund needs review.
The NHT was established to finance homes and housing solutions for people who contribute directly and via their employers. It is funded by loans from employees of two per cent of their gross salaries and a payroll tax of three per cent on employers.
NHT invests this cash, including in the provision of mortgages to its contributors at below market rates. Firms get nothing for this tax.
It is not surprising that with this mountain of cash before them, governments are tempted to dip into it for purposes other than designated, or to widen the interpretation of the rules so much as to make almost anything applicable.
As we have argued before, we are not against governments applying resources to critical areas of national development, but we are against smart-aleck circumvention of the rules, in the case of the NHT, the additional tax on firms should go to the Consolidated Fund, and thus give the Government untroubled access.
But more rationally, the Government should, if elimination is not practicable at this time, lower the contribution by employers to the level of that of employees and, similarly, treat it as a loan. This would leave more cash in companies for investment, job creation and, ultimately, economic growth. This would not hurt the NHT, which now has far more money than it can use. And it would be good for Jamaica.
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