– An abridged version of the speech I would have delivered in Parliament
Mr Speaker Sir,
The Minister is rushing the Bill through despite the case before the Supreme Court lodged by Business Mauritius to test the Constitutionality of the Contribution sociale généralisée (CSG).
Our priority is not short-term gain for long-term pain. For the love of my country, I prefer a pension scheme to a tax burden and I want to secure the future of our kids and grandchildren and not bequeath a legacy of debt to them.
Risk of currency becoming junk is real and under the worst-case scenario, the situation can be apocalyptic. Beware of descent into social chaos.
Some of our friends from the Trade Union will not agree with me and will applaud the Minister of Finance but there is no silver lining, no silver bullet and there is no reason to bite the bullet. CSG is deadly.
It’s a Greek tragedy in the making if the Bill sails through. Yet, as early as June of last year, I warned the Regime.
PNQs and Motion of Disallowance
I put three PNQs — the first one on proposed changes to Basic Retirement Pension (BRP) addressed to the Minister of Finance on 9/6/20 was set aside. Why ? For flimsy reasons best known to you, Mr Speaker, and the political arm of the Executive.
The second PNQ was receivable and I asked in regard to pension reform as announced on page 22-24 of the Budget speech if consultations were held and when the last Actuarial Valuation Report of the NPF was conducted.
A third PNQ was addressed to the Minister of Social Security and National Solidarity on the number of contributors to NPF as at date and forecast on depletion of the funds in the NPF.
How can a MAJOR BILL be introduced if report of the High Level Technical Committee to Review the Pension Scheme that was set up in 2016 is yet to be submitted? Is this seriousness of purpose? How can there be seriousness if there is no unity of purpose? There is cacophony.
The Association of Actuaries made it clear to both Ministers that the CSG will probably be a one-off or two- or three-off and will be depleted after making up for the shortfall of Rs 4,500 to honour its electoral promise. Live like there is no tomorrow, who cares? My trade unionist friends should also bear in mind that the contribution to be made will be doubled to make up for shortfalls.
One more tax, not contribution, which will be credited as revenue to the Consolidated Fund. It’s a rip-off.
This Bill is the outcome of an uncalculated political decision taken by political dwarfs against the interests of the Nation. No in-depth study has been conducted to assess the socio-economic consequences of what is coined as social contribution and social benefits. A vote to endorse CSG without an in-depth study on affordability is a vote for ruining the country’s future.
Disastrous impact on budget
The impact of inflation, depreciation and devaluation of the rupee coupled with CSG on the yearly budget would be disastrous.
This means an increase in budget deficit and/or cuts in items of government expenditure.
At this point, the pandemic effect on long term tourism is actually unknown. Mr DPM should know that Mauritius is not a relatively safe destination.
Only those living in cuckoo land believe that the tourism sector will be near normal before 2024. Unless there are other fast growing sectors to plug this additional cost to the welfare system, increasing the level of welfare payments at this critical point should not be the priority. Who will bell the cat ?
Is this Bill the price to pay for alleged electoral bribery ? Contrary to PAY AS YOU GO, NPF guaranteed predictability and certainty of pension for the workers. Singapore invests the people’s pension fund (CPF-Central Provident Fund) in companies like Google and return on investment serves the interests of the People in sickness, health and on retirement.
France, the cradle of CSG, is saying Enough is Enough. CSG is not sustainable and does not encourage a savings culture. Each employee who contributed to NPF has a personal account unlike CSG which is credited to the Consolidated Fund.
Actuaries and other finance professionals remind us that CSG is not sustainable. As far as I know, they are not speaking on behalf of the opposition only but in the interest of the Nation. Even if the Government does increase the minimum pension with the CSG add-on in 2023, the country may by then be living above its needs with borrowing levels at above 100% GDP. The only solution would be then to further devalue the currency from its current state piling even more misery on the working household. It’s a lose-lose situation because pensioners would equally be no better off.
The Minister of Social Security was incapable of informing the House as to where matters stand on the findings of the Technical Committee to review Pensions scheme. Like the report of WB on the reform of SCI which would not be released, the findings of the pension reforms are in the cloud. This is an insult to the population.
Projections and Modeling
Projections made by Mauritius Statistics forecast an elderly population of 36% by 2058. Someone has to foot the bill, has to fill the hole in the bucket; fewer young people with gainful employment will fund the growing cost of financing the Rs 4500 BRP increase, a bill which will continue to balloon until it bursts. The fact remains NPF has been abolished and replaced by a TAX. It’s throwing the baby out with the bath water.
IMF and WB Recommendations
How many times have the World Bank and the International Monetary Fund (IMF) recommended the consolidation of National Savings Fund, Civil Service Pension Scheme with the NPF? The IMF has suggested that the national minimum pensions growth over time should be more in line with the growth in GDP. If a 50% rise in the base pensions looked unaffordable before, how will it be funded with current sluggish economic growth? Besides, recovery from Economic contraction of 15% will take more than 5 years.
Motion of Disallowance
This is the reason why on Tuesday the 17/11/ 20, I moved a motion of disallowance in relation to the CSG Regulations 2020. I was right to say that the CSG is “in fact, divisive, colourable, unnecessary and a false start”. Shame on this Regime. Mr Speaker, we appeal to the PM not to pick the pockets of workers. Don’t tear apart the fabric of our society.
SV International Convention Centre
History would recall that the Prime Minister, on 1/10/2019 at SVICC before a packed crowd of golden age persons, promised to raise pensions to Rs 13500 before 2024. They were never told that the NPF would be abolished, that a funded pension scheme would be replaced by an uncertain and unsustainable pay-as-you-go system, we were never told that a divisive tax would be introduced. Out there in the shopping centre, market fare, in the pharmacy, there is a lot of fury and angst. We are in the eye of a perfect storm, to quote the World Bank. Of course, when the measure was announced to raise pension prior to the dissolution of parliament the decision was not taken by Cabinet.
Equal Opportunities and Equity, Mr Speaker Sir
The Spokesperson for the Actuaries has stated emphatically that over and above expenditure for BRP, more than Rs 10 billion would be required for FY 2023- 24 and more and more year upon year to reach the manic and not magic figure of Rs 13,500. What happens when a fund is not irrigated? It will be deficit. I quote the BM : “the abolition of the NPF is unsustainable, unfair and regressive”.
The IMF has also confirmed that CSG contributions will need to at least double to shore the inadequacy of the current funding mechanism. The effect on the private sector employees pension will be devastating as private employers will not be able to afford both pensions for their workforce and paying the CSG. Private pensions will be closed off and employees left with lower pension payments dependent on the State for a limited Rs 4,500 which is disproportionate to the contribution levels made over their working lives.
With a demographic deficit as well as Covid, we are in the eye of a perfect storm. Economic recovery is painful and unemployment will continue to rise. Many companies are winding up. It is unsustainable and those who have money prefer to keep it in foreign accounts. Flight capital is inevitable.
It’s a big price for mismanagement of the economy. Where is the revenue from taxes if there is no growth? Greece was bailed out by Germany or Eurozone and has to comply with the set of measures announced by IMF and EU.
Our day of reckoning is now. The Bill should be set aside.