A budget is simply an announcement of intent of government regarding its plans for raising revenue and for its expenditure. As a public statement, this budget is designed to invite scrutiny from local and overseas investors as well as judgement from bodies such as the International Monetary Fund (IMF) and financial analysts who influence foreign investment and future government borrowing. This Social Alliance budget is typical of governments at the start of their term of office - when the objective of re-election has a fairly low priority- and it implicitly follows the pattern of recent budgets of service-based economies, especially the widening of the tax base. In the aftermath of the erosion of sugar revenue and the end of the Multifibre Agreement, the Chancellor has announced timely measures for a growth agenda; however, this budget lacks focus on the management of domestic issues and especially the “feel-good” factor.

This budget concentrates on facilitating job creation almost exclusively by the simplification of red tape, re-training, and provision of tax incentives. It totally ignores vital social issues such as law and order, transportation, low-cost housing, the efficiency of government departments, the loss of trained personnel such as nurses and teachers, etc. The magic wand of the hubs is hardly mentioned.

Basic economics: The central focus is on future growth, which in turn leads to job creation; this underpins the wealth of the nation. Growth is directly related to the level of investment, which relies on savings (the postponement of consumption) and an efficient financial services sector that facilitates the transition of savings into investment. The budget addresses key issues to promote the viability/profitability of investment and the role of financial services. It contains no measures to increase the level of domestic savings in the hope that foreign investment (savings from other countries) will offset the effect of a declining savings rate - the level of domestic saving has been in decline for the last quarter century. Savings arise from three sources: individuals, corporations, and the government. The corporate sector is not governed by growth criteria.

There is no special incentive for individual savings. Measures such as taxing interest payments at source and the overall reduction in disposable income arising from the abolition of food subsidies, the introduction of the residential tax, the withdrawal of examination and school-feeding subsidies will provide a strong disincentive for saving. There are no measures to facilitate and open access to savings avenues, such as the stock market and government securities.

There are no tangible plans for reducing government expenditure. Governments finance their expenditure via taxation and make up any shortfalls by borrowing. Taxation includes direct taxes - on income and profits – indirect taxes on expenditure such as value added tax, customs levies, etc. and other incidental taxes such as inheritance and windfall taxes.

<B>Not enough token measures</B>

Currently, 13% of government expenditure goes towards debt servicing. Token measures such as the dissolution of the DWC - with the prospect of contracting it out to the private sector - are simply not enough. It is naive to expect that switching lights and air conditioning off or rudimentary control of resources such as mobile telephones and government vehicles will reduce expenditure to such an extent as to lead to a reduction in the tax burden. Bolder measures such as the privatisation of the State Trading Corporation, the Post Office, and the Passport Office, etc. are required not only to reduce expenditure but also to make such services represent better value for taxpayers’ money.

The Government provides central facilities and carries out diverse functions. The Chancellor needs to address questions such as: what is the cost of an injection, a prescription, a consultation, etc. in a given State hospital and how does that compare with the national average cost or the expected cost? This sort of calculation provides a guideline for setting their future budget. What is the cost of not decentralising access to government services?

The social impact of measures announced is detrimental to residents. A positive, albeit not very loud, message is that government sector employment is no longer the safe haven that it was known to be. The gradual postponement of retirement age to 65 will reduce government expenditure and increase revenues; however, this is a popular bandwagon to jump onto and its benefits are short-lived because it contributes to the unemployment of the younger generation – the unemployment rate is reaching 10% – and unemployment reduces tax revenues.

Two million tourists per year may seem like a lucrative source of foreign exchange but may prove very costly. On average, this represents the presence of 5,480 tourists on any day and if they use cars as a means of transport, there would be 1,370 additional cars on the road, each carrying 4 passengers. Congestion is a very costly problem at present: it will simply get much worse. A recent survey of tourists in Mauritius highlighted two key issues that affect Mauritius as a destination: infrastructure and ecology.

The budget has taken stock of the value of the most limited resource in Mauritius, namely land; therefore, it is reasonable to expect that the island will not be covered in tarmac to ease congestion. While the levy on plastic bags seems like a harmless gesture, the reduction in duty on new cars is set to destroy the ecology. Given that new registrations are incremental in Mauritius (the decommissioning of older vehicles is not in line with new registrations), the problems of congestion will be aggravated, unless accompanied by other measures, such as flexible working hours. A greater dependence on cars exposes the country to greater risks of which rising petrol prices is the most prominent. The budget has no measures for the improvement of public transport.

The Budget has no measures to improve public infrastructure. Besides an efficient public transport system, the hallmark of successful countries includes a clean and pleasant environment. Imagine a first-time tourist making his way from the bus terminus near Line Barracks to the market: the pavement is cluttered with tradesmen, the wares of the shops, the storm water drains are open and foul, the actual surface of the pavement changes every few metres, and there are no policemen in sight when his bag gets snatched.

This tourist is in a wheelchair being pushed by his wife who happens to be wearing high-heeled shoes. Just for a change, this couple decides to visit Flacq only to face other aggravation such as electricity poles in the middle of the pavement, no usable public toilets, no food outlet up to expected standards. In Curepipe, they have to negotiate old paint buckets placed strategically to catch rain water inside the shopping precinct. Where are the civic planning and urban renewal initiatives?

The measures for enticing the Mauritian diaspora are trivial. The introduction of tax deduction at source on interest, the requirement of tax returns for multiple house owners and pleasure crafts, and the absence of any financial incentive are sound measures for dissuading the repatriation of both funds and skills: the car import concession is a joke. Some thoughts have been given to voting rights of foreign workers; however, the Mauritian diaspora is still disenfranchised.

In due course, the electorate will cast the ultimate verdict. The abolition of a progressive tax regime, that is, a move away from the ability to pay principle, and the introduction of means testing for state finance seem unfair; this budget has delivered ‘change’ but not of the kind widely anticipated. If it is perceived as a betrayal of trust, the electorate may yet claim the country back by imposing the ultimate sanction at the next election.

Ajay ASKOOLUM</B>