How do you analyse a Budget?

Jan 21, 2025 Features / Columnists, Peeping Tom

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Peeping Tom…

Kaieteur News-  What if in tabling the 2025 Budget, the Minister with responsibility for Finance did not include any benefits for pensions, did not offer the $100,000 per new born, the $50,000 school’s cash grant, the $41,000 old-aged pension, the increase in the income tax threshold or the disability grant? Would you consider that to be good Budget?

The point being made is that many persons have got into judging the country’s annual Budget by the ‘transfers’ that are offered from the treasury – such as the pensions, the tax concessions and the cash grants. But a Budget should be judged within the larger context of the ideology informing it and the extent to which it supports this economic ideology.

Guyana is supposed to be following a neo-liberal model of economic development and that model is supposed to limit the role of government.  In a neo-liberal economy, the role of government is generally minimised, with an emphasis on supporting free trade, free markets, individual entrepreneurship, and limited state intervention. Such a model does not support massive state subsidies and cash transfers to the public, except in the case of emergencies such as a pandemic.  However, the Government is still expected to perform specific functions to ensure the efficient functioning of the economy and to address market failures.

In such a model, the Government is supposed to ensure a predictable and stable environment for economic activity. Regulatory bodies may be created to oversee sectors prone to monopolistic behaviour, such as utilities or telecommunications. The Government supplies public goods that the market may not efficiently provide, such as national defence, public infrastructure, and basic education and healthcare. In order to attract investment and to stimulate growth, the government may offer tax concessions to businesses. And, in order to promote equity, it may have a progressive tax in which the higher your income, the higher your taxes.  Governments also control monetary policy to manage inflation, stabilize the currency, and influence economic growth. This is to create an enabling environment for business growth.

It is not as if the preoccupation with markets and free trade, means that governments should not support the vulnerable members of our society. Even in a neo-liberal framework, governments provide basic welfare measures, such as old-aged pension and public assistance.  But universal old-aged pensions are not an entitlement. Even in the United States social security is contributory and requires persons working at least 10 years for eligibility. But here in Guyana since Cheddi Jagan removed the means test for old-age pensions, there is an attitude that suggests that the Government is entitled to pay such pensions and, in fact, to increase the amount each year.

A neo-liberal budget must be judged by its ability to foster economic growth, stimulate employment, ensure open and fair markets, and reduce the role of government. These align with the neo-liberal philosophy that free markets, not government interventions, are the primary drivers of prosperity.

In neo-liberal economics, infrastructure development is emphasized as a critical enabler of economic growth and market efficiency. It is argued that infrastructure—such as roads, ports, energy systems, and telecommunications—lowers transaction costs, enhances connectivity and productivity, and facilitates the smooth functioning of markets. However, neo-liberalism also stresses the need to minimize government overreach, advocating for infrastructure projects that are financially viable and do not impose excessive burdens on public finances. Thus, the focus is on strategic, market-driven infrastructure that supports economic expansion without compromising fiscal discipline.

In other words, the Budget should focus on creating an environment conducive to investment and private sector development, stimulating private enterprise, growing the economy and creating jobs. Neo-liberals believe that a growing economy generates wealth, generates employment increases productivity, and raises living standards, thereby benefiting society as a whole.

Reducing the role of Government is essential to allow markets to function freely. Also bloated Government bureaucracy stifles economic efficiency. Neo-liberal budgets therefore tend to focus on limiting state intervention – including subsidies and hand-outs-and cutting wasteful spending to foster a more efficient allocation of resources.

The very things that most Guyanese look for in a Budget -subsidies, handouts, increased old-age pensions, and direct cash transfers are poor metrics for evaluating a neo-liberal budget. In neo-liberal thinking, while these measures may address short-term social needs, they perpetuate dependency and strain public finances. Similarly, according to neo-liberal economic philosophy, raising the income tax threshold or increasing redistributive policies distorts incentives and hampers economic growth.

When you are therefore analysing a Budget, you should consider the lens through which you are doing so. Is it through a neo-liberal lens or a socialist lens? If you want unemployment relief, greater subsidies, hand-outs, then you may be thinking and seeing things through a socialist lens. The majority of Guyanese do not wish to have a socialist state. Never mind that more than 95% of them voted for parties that had a socialist background.

(The views expressed in this article are those of the author and do not necessarily reflect the opinion of this newspaper.)

(How do you analyse a Budget?)

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• economic ideology, neo-liberal economy, Peeping Tom, role of government

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