Parliament Tuesday evening passed without opposition support a resolution allowing the Ralph Gonsalves government to raise an EC$15 million loan from the National Insurance Fund to liquidate outstanding contributions owed by the Government to the National Insurance Fund.
In presenting the resolution, Gonsalves attempted to assure public workers that their benefits are not at risk, even as his government has not paid workers’ national insurance contributions for at least seven months.
“Nobody’s NIS benefits, no individual’s benefits, is in jeopardy — anybody who work with the government. None! And I think that point has to be made over and over again. What we are involved in here is the management of an indebtedness, and to do so in a manner which contributes, to the NIS’ own sustainability,” said Gonsalves, who has ministerial responsibility for the NIS.
And, Leader of the Opposition Arnhim Eustace told lawmakers that while he understands the government’s proposal, he was also uncomfortable with it.
Eustace said he had information suggesting that the government in fact owes the National Insurance Services (NIS) some EC$23 million, and that the government has not paid NIS contributions since April 2013.
“So, here you have the public servants having had the money deducted from their salaries, but government is spending that money without giving it to the NIS, and so it has been also with government’s contribution. So the full contribution was not paid over, as it should have been,” Eustace, a former minister of finance told Parliament.
“So, any effort you make right now to make that right is going to require that amount being paid by the government and the government gets its money from taxpayers, who are the same people who you deducted the money from in the first case from their salaries. You are asking them to play twice,” Eustace said.
In presenting the resolution, Gonsalves who is also Minister of Finance, noted that the NIS is governed by the National Insurance Act, and offers a series of benefits for employees on the basis of contributions by employer and employees.
He outlined that under the act, an employee much receive benefits from the NIS, if it can be proven that NIS deductions were made, even if they weren’t paid in to the NIS. In addition, the government is the guarantor of the NIS, Gonsalves said.
“In short, the government owes the NIS certain sums of money in respect of the contribution, and rather than have the matter remain as a debt, simpliciter, we have come here in this resolution to raise that sum of $15 million by the issue of Treasury notes, which would be an investment for the NIS to be paid on an on-going basis over a 10-year period at 4.5 per cent,” he said.
Gonsalves said that since the December 2013 floods and landslides (which left EC$330 million or 17 per cent of GDP in loss and damage) his government has been very careful in making sure that it takes care of on-going obligations.
The government should pay monthly to the NIS EC$1.7 million for workers’ contribution to the social security agency.
But Gonsalves said that with declining revenue, the government first ensures that it satisfies the purchase of essential items like drugs for the hospital, and payment of state pensions.
“In the context of the tight fiscal situation, this is a matter where we paid other bills and simply agreed that when we see an uptick to correct this problem, to come to the house, inform the people how we are addressing this matter so that all the NIS payment are up to date,” he said.
He said that from this month, his government intends to pay the EC$1.7 million monthly while repaying the EC$15 million over 10 years.
Gonsalves defended the move by his government, amidst criticisms that a private company would not be allowed such leverage.
That is the case because the private company is not the guarantor of the NIS money, he said, adding that in such a situation, a private firm can arrange scheduled payment with the NIS.
“They (NIS) don’t go about putting people in court,” Gonsalves said.
He said his government would have prefer to pay the EC$1.7 every month. “But since the December crisis, the December disaster — and even little before, but particularly since the December disaster, … we have made sure that you take care of all the immediate essential things,” Gonsalves said.
NIS ‘very liquid’
Gonsalves told Parliament that the NIS is currently “very liquid”.
“That means they have a lot of money, liquid, cash,” he said , adding that 23 per cent of the NIS’ assets are held in the form of money market instruments, which exceed the international benchmark of 10 per cent.
“They have them in instruments, which can be easily converted,” he said.
He told lawmakers the use of Treasury notes to settle contributions means that the NIS would avoid the transaction cost of buying securities on the market, had the government make cash payments.
“… once we get the authority of this Parliament, we intend to have the notes listed on the regional government securities market. This would allow the NIS to easily sell the securities, should there be a need for liquidity before the maturity of these notes,” Gonsalves said.
He said the NIS is “happy” to get the notes at 4.5 per cent interest, rather than simply to have the debt repaid in instalments.
“… in the final analysis, we are the guarantors of everything inside of the NIS. The law says so and practice demands it,” Gonsalves said.
He told Parliament that the notes provide a competitive rate of return, compared to the interest rates and fix deposit, adding that a fix deposit will yield between 0.25 per cent and 3 per cent interest, compared to the government’s 4.5 per cent.
“Incidentally, when settlements are reached with employers, the NIS doesn’t get any money,” he said in reference to private sector entities that do not pay workers contributions, adding that if the NIS does take such an entity to court, the standard interest is 5 per cent.
But Eustace gave Parliament information additional he had about the monies owed to the NIS.
“Today, I see here that the loan being proposed is about $15 million. I have some information that suggests that that should not be all; it should be closer to $23 million. I also have information that suggests that with respect to statutory bodies, there is some withholding of those payments also, amounting possibly to $3 million. And I believe that of the general public, the private sector and so forth, there is another $10 million or so in contributions that have not been paid over to the NIS,” Eustace said, adding that various reasons will be given for the non-payment of these monies.
“If one looked at it in that context, Mr. Speaker, we are talking about $36 million that should have been paid over. That is the issue. It was not, and therefore, there comes a point when, if that were to continue, you could well face the accounts of the NIS being qualified, if one didn’t deal with this issue,” he said, adding that a qualified report would be a serious issue for the NIS to deal with.
Eustace, a former chair of the board of directors of the NIS, said Gonsalves’ presentation was “very nuanced”.
“It doesn’t fool anybody. The reality is that money that was deducted and not paid over and those owed by government itself was not paid over either,” he said.
“What kind of example is the government setting? What kind of example is that to the public of St. Vincent and the Grenadines?
“I know that there are financial difficulties that he government faces; we see it in the financial accounts. There is no question about that. We see it in our widening deficit, no question about that.
“But you come to excuse it here by saying, ‘Oh I had to take that money, don’t pay it in, because the fiscal situation was bad.’
“You must come up with mechanism that don’t make the NIS worst off. That is the fundamental point, that whatever you do, don’t put the NIS in a worse position. People have to get their pensions down the road.
“So, while it might be a good guise to make the presentation the way he made it, the reality is the NIS has to pay. That is the reality. Now, you have a situation which really causing me some difficulty,” Eustace said.
He said while he understands the Prime Minister’s argument he also understands that the nature of the NIS’ operations is a long term one.
“I am not comfortable with the proposal made by the Prime Minister, although I understand it. I feel the NIS should have been paid back the money that is owed to it, and that would have given comfort to those persons who contributed that money.
“We have fiscal problem, yes, but you use some of those monies even before the flood. … What happen to the period May to November 2013? Is that period going to be paid now?” Eustace said.