“Budget is a gimmick” – Herath

DNA Parliamentarian and JVP strongman Vijitha Herath accuses the Government of allocating funds under the defence budget to maintain hit squads.

Herath charges that the Government, in order to maintain a dictatorship, is on a secret mission deploying special troops throughout the country.

Condemning the budget as a gimmick used by the Government to pull people’s money to finance the bankrupt Treasury, Herath claims the time won’t be far when people turn to another alternative, unable to tolerate the wrongdoings of the Rajapaksa regime.

Following are excerpts of an interview:

Q: The Government has presented a budget with countless expectations. How would you describe this budget?



A: Whatever little hope and expectations the people had towards the Government has been shattered. When they finished the war, the Government said the ‘actual budget’ would be presented in November with numerous benefits, especially for the ordinary people in this country. Therefore, people had hope and were waiting for this budget. But the Government has failed to keep its promise. It has let down the hope of innocent people.

It is clearly visible that the only factor taken into consideration by the Government when making this budget was fulfilling the conditions and terms of the IMF. When the Government borrowed money from the IMF last year, the IMF specifically instructed it to change the tax range. The IMF had also instructed the setting up of a tax administration. Therefore, a tax commission was set up and recommendations were made. The very same recommendations have been implemented in this budget.

Another condition laid by the IMF was to remove foreign exchange controls. The Government has fulfilled that too, expanding the capital market. This will open up the capital account and as a result we as a country will have to face serious problems. President Rajapaksa earlier said that this is not neo-liberalism and he totally rejected it. But the truth is that the reforms in this budget are much more worrying that the reforms made by Ronnie de Mel or J.R. Jayewardene under the UNP regime.

This is not a people-friendly budget. It is not favourable to the national economy or domestic production. This is aimed at the service sector and the international market. We see it as a step further from neo-liberalism.

The Mahinda Rajapaksa administration is bankrupt. They don’t have any money. We can clearly see the Government slyly trying to collect money by setting up various funds under various ministries. They are trying to pull all the money from those funds to the Treasury to cover Government expenses. They have gone to the extreme of implementing a law which says other than funds that remain as capital expenditure for six months, the rest of the money should be sent to the Treasury or the Consolidated Fund.



Q: After ending a 30-year long war and while engaging in massive development projects, the Government has granted a five per cent salary increment. What are your views?



A: The Government was facing a massive financial crisis. The current account had collapsed and it was desperately trying to collect money. As a remedy it took massive loans from financial institutions. When President Rajapaksa took over office in 2005, the total amount of debts we had were Rs. 400 billion. By the end of 2009 the amount was Rs. 999 billion. And this budget is proposing Rs. 1,024 billion for 2011. It shows that we have come to a state where the total debts of the country have doubled within the last five years.

Whatever projects that commenced last year were financed with loans taken at high interest rates. This was the strategy used by the Government to recover the loss in the current account. True, we were showing substantial resources. But the truth was that it was not due to an increase in the production but was a result of the loans we had taken.

Through the media the Government is exhibiting these projects claiming to be a part of the massive development taking place in the country. They boast about the Upper Kotmale Power Plant, they talk big about Norochcholai Coal Power Plant and at the same time increase the electricity bill by eight per cent in this budget. Isn’t there a contradiction here? The truth is that the Government is trying to cover up loan repayments and its malpractices by increasing electricity tariffs.

If we talk about the salary increment of public servants, the IMF has sternly instructed not to allow such increments or allowance to workers. They have set up a target of a five per cent budget deficit in 2011. In order to do that the Government has to adhere to the conditions laid down by the IMF; therefore, it cannot increase salaries.

The President himself promised to grant a Rs. 2,500 pay hike but now says they cannot give anything more than five per cent. The basic salary of a public servant is Rs. 11,730 and according to the budget he will get an increase of Rs. 586. That increment is barely sufficed to buy 12 coconuts. Pensioners received an allowance of Rs. 300, just enough to buy six coconuts. This too is not a salary increment; it is just an allowance. Since January 2006 up to date the Government has not given a single salary increment, whatever little money it gave came only as allowances.



Q: The JVP demanded a salary increment of Rs. 9,000 before the budget. Since the Government has failed to meet your demand, what would your next step be?



A: The Rs. 9,000 increment we demanded was suggested by a formula worked out by the Government. That formula clearly states that the salary should be increased by Rs. 180 per each increasing unit of the cost of living index. Therefore, according to the formula, since 2006 salaries should be increased by Rs. 14,680. Thanks to protests and strikes we had during the last few years the Government has given Rs. 5,270 as allowances. When you take off that from the expected salary increase of Rs. 14,680 the Government has to grant Rs. 9,636 as a pay hike. We set aside the Rs. 636 and urged the government give at least Rs. 9,000 to the workers.

The public servants are disappointed that their pledges were not answered by the Government. The Government itself has accepted that a family of four members requires Rs. 40,000 as monthly expenses. A coconut is Rs. 45, a load of bread is Rs. 48, a kilo of flour is Rs. 92, and sugar is Rs. 110, the cost of living is sky rocketing.

If it was unable to increase salaries, the Government should have at least considered bringing down the cost of living. They could have reduced prices of goods and services. They could have easily removed the tax on essential items. On the other hand when they give a five per cent allowance, the Government has increased the electricity bill by eight per cent.

Both the private and public sector workers are disheartened by the acts of the Government. There are over seven million private workers. What benefit have they got through this budget? Both the public and private sector workers will get together to fight against this injustice. We will take appropriate actions in order to secure an increment for the workers in this country.



Q: You said there are over seven million private workers in the country. For the first time the Government has introduced a pension scheme for the private sector workers. Isn’t that commendable?



A: This pension scheme is the biggest ploy of this budget. The Government will not spend a cent on this pension scheme. They are telling the private sector workers to deposit two per cent of their salary. The employer will also put two per cent of his capital. The Government is not spending a cent on this.

The biggest fraud would be asking to deposit EPF and ETF into this pension scheme. The Government will use that money and the interest it earns from those funds to cover up its expenses. It’s a scam. It’s similar to the money making process of a commercial bank. Now, we don’t need a government to do what a bank does. The Government could have simply asked private sector workers to deposit that money in a bank, so they could at least earn an interest for those funds.

It has played the same gimmick on migrant workers. Migrant workers have to contribute Rs. 12,000 from their salary for two years. Once they reach the age of 65 that money could be obtained as a pension. The Government has said it will make an initial payment deposit of Rs. 1,000 million.

The Government has imposed a Rs. 2 tax on IDD calls. Who is going to be burdened? It is the innocent migrant workers who call their parents, spouses and children. The Government has said it will earn Rs. 1,000 million through this tax. The money they collect from taxing the migrant workers is used to set up a pension scheme for them. What kind of a joke is this?

Money in this fund will also be taken to the Treasury and it will earn from that money and interest. It has also increased the passport charges and the embarkation tax. These are the workers who contribute eight per cent to the GDP. And this is how the Government treats them and looks after them.



Q: The Government describes this as a development-oriented budget. Don’t you agree that economic development is essential in order to meet your demands such as higher salaries and better standard of living?



A: At the beginning of the budget they said they have a three-year long term development plan. But the truth is this budget was presented to the previous cabinet. The allocations have been made to the previous cabinet. The Government has not allocated funds for the new cabinet. Those senior ministers don’t have a secretary or an office to work. They are mere ‘pin padi’ ministers.

It is an enormous cabinet. If the Government was unstable or did not have a two-thirds majority, we could have exempted such cabinet. But this is a stable Government with a two-thirds majority. But the Government somehow went ahead and appointed this cabinet; sadly the budget does not suit the new cabinet.

The Government may use big fancy words to describe this budget as developmental and long term, but the truth is that the Government is unable to implement budget proposals because this is a different cabinet. Any ordinary man can grasp there is a mismatch here.

Increase in the foreign trade income and production are some key factors of developing a country. Unfortunately none of those factors are visible in this budget. The Government has introduced sea planes in certain areas. In Negombo over 10,000 fishing families have lost their livelihood. The Government is not worried about losing production but eager to get the sea planes running. It’s good if tourists come, but what if they don’t come? What will happen to the fishing families?

The Government is more interested in making fast money through easy methods rather than engaging in long term development projects. This is why they have removed foreign exchange controls. All the development talks by the Government are just fairy tales. If they were genuinely interested in long term development, electricity would not have been increased by eight per cent.

When the Mahaweli project was initiated, Gamini Dissanayake said we would provide electricity to India, but today Mahinda Rajapaksa returns from India with 15 contracts signed jubilantly announcing we are getting electricity from India. All the talks about development are only for the media; the truth is that nothing is actually happening.

If the Government really cared about this country, it wouldn’t let the people buy a coconut at Rs. 46. Why have coconut prices increased so much? Is it because of a drought or coconut cultivation being affected by some bug or disease? Nothing. And sadly the Government has no answer for this. But it has gone a step further and appointed a minister for coconuts. Now what will happen? All the expenses of maintaining that minister will also get added to the price of a coconut and prices will increase further.



Q: During the war everyone encouraged the Government’s attempts and said they would bear the high cost of living. Today they are accusing the Government for having a high defence budget. How do you describe this situation?



A: During the time of war the Government said once the war is over people would not be burdened by defence expenses. They said that money would be used for the development of this country. Now the war is over, but the Government is allocating funds more than they did during the war. When the Government allocates Rs. 210 billion for defence, they have set aside Rs. 31 billion for education and Rs. 62 billion for health. What does this mean? This Government has no interest in the future investments or welfare of the people.

We don’t see any reason why the Government has to allocate such a massive amount for defence. Now that the war is over, the Government should encourage democracy. But what it does is carry out dictatorship, suppress the people and rule the country like gangsters.

True, the expenses of the Ministry of Defence are higher. Why? They have a separate team to take off all the posters. An armed team roams around Colombo City early morning just to make sure there are no anti-government posters in the city. These people need to be given a salary and looked after so the Government needs more money. Then they have a hit squad to assault ministers.

We do believe that a considerable amount of money needs to be allocated for the national security of a country. But it cannot be more than what we had during the time of war. If they had taken loans and money is required to repay them, then the Government should expose those details to the country. But what the Government is doing today is totally unacceptable.

They are preparing for a secret mission to make sure there is no view or opinion other than theirs. All the massive funds for defence are for the functioning of a dictatorship. In each district the Government has deployed a special regiment for this purpose. A team of four Police officers has been set up in each Police station. These officers are not answerable to the respective OIC; they are coordinated by the Ministry of Defence. This is a serious condition. People need to be aware of this situation. It is our responsibility to ensure the people rally to rise against such suppression by the Government.



Q: What are your views on the revenue proposals in this budget?



A: Revenue proposals are mainly based on taxation. One is the Nation Building Tax that has been reduced to two per cent from the previous three per cent. The Government is saying that it is targeting Rs. 12,000 million through this. If the tax rate has come down, how could the Government earn Rs. 12,000 million? There is a contradiction. The truth is that the tax range has been expanded so the net effect is that we will be paying more tax than before. Passport charges and vehicle registration charges have been increased. The tax on mobile phones has increased to 20 per cent.

The IMF has said that 14. 6 per cent tax revenue is inadequate and therefore the figure should be increased to 20 per cent. Recommendations released by the IMF Executive Board on 19 October state: “...Directors stress that the 2011 Budget would be a key step in embarking on a credible reform strategy aimed at broadening the tax base simplifying the tax and tariff systems and improving the tax administration.”

Apart from taxation, loans are the other main component of revenue proposals of this budget. When tax income comes to 13.6 per cent of GDP and 1.6 non-tax income, the balance 85 percent comprises loans foreign and local. How can we sustain ourselves as a country in such a situation when we are burdened with such massive debts?



Q: Dr. P.B. Jayasundera has said through this budget the Government has prepared the groundwork for the people to engage in the development process. He has said it is the responsibility of the people to make correct decisions and work accordingly in order to lead the country to economic prosperity. Do you agree?



A: They have not introduced a single system or provided any facilities for the people to get involved in the production. They could have simply introduced a loan scheme or some other method so that people could use resources in this country to enhance production so they too will make an income and improve their standard of living. But nothing has been done. The Government is keener on making easy money through casinos than encouraging production.

The cess tax on tea, rubber and coconut has been increased; in the case of tea it has been increased to Rs. 10, coconut to Rs. 4 from the previous Rs. 2 and rubber from Rs. 4 to Rs. 8. The money made from these taxes is not utilised to develop tea, rubber or coconut and that’s an open secret. The Government is once again using a gimmick to find money for the bankrupt Treasury. But who is going to suffer? It is the exporters of these sectors. The Government has not given any pull or provided any facilities for any ordinary man to get involved in the production based on their skill and abilities.



Q: Since1992 this was the only budget to state a low budget deficit of 6.8 per cent. Isn’t it a commendable achievement?



A: Following the global economic crisis in 2008, the IMF announced that it had changed its strategy. It said its condition when granting loans would be based on financial reforms. Therefore, the IMF insists on bringing down the budget deficit when granting loans. It will instruct on other methods that would be helpful to bring down the budget deficit as well.

It is a good sign that the Government has brought down the budget deficit. But we believe that should happen along with the increase in income. What is the point of having a low budget deficit when whatever little relief the people enjoyed is also taken away from them? Therefore, this budget deficit is not acceptable.

Targets and estimates the government had during 2009 and 2010 Budgets were not achieved. Expectations it had for certain sectors were not accomplished. Therefore, we can expect that most proposals made in this budget – especially the revenue related ones – are most unlikely to become a reality. Such a situation would make the crisis situation we are having right now even worse. We have to expect that.

For example, the Business Turnover Tax of the Provincial Councils of one per cent has been removed. This is the time for approval of provincial councils and the income of the BTT tax is included in those budgets. But then at the same time the Government says that it has removed the BTT. The provincial councils are in a big trouble because they will not get the expected income. The Government has said they will provide two-thirds of the Nation Building Tax for the provincial councils, but the PCs do not know the exact amount they get from the NBT, whereas they had the exact figures of the BTT. This is why we say this Government doesn’t have a plan or a vision. At the end of the year we will face an economic crisis.



Q: Do you believe that the JVP needs to be changing according to the times?



A: Yes definitely. We have been changing with the times. The JVP was started in 1965 and during our journey we have adjusted according to social, global and political changes when required. But our policies never change. The tactics and strategies used by us may change according to the time and requirement.



Q: What do you have to say about allegations that the JVP’s Marxist thinking is taking the country backward?



A: The principals and beliefs we had have never had a negative impact on this country. We were against the executive presidency; the UNP, the very same party that introduced the executive presidency, says it is unacceptable. We said the provincial council was a white elephant; it has been proven. In 1977 we said the neo liberal economy cannot be accepted and that it would not do any good for this country. Today the entire world rejects neo-liberalism.

Where the war is concerned, the JVP always said the only way to eliminate terrorism was to go for a military solution. The same people who try to take credit for the war victory were afraid at that time. Today nobody gives us any credit for having such faith in the military, but that is the truth. No party can accuse us of being a backward political party.



Q: What has happened to the once-powerful JVP? Today you are unable to have an effective poster campaign or conduct a successful protest rally or a trade union activity.



A: If you are saying we are weakening as a party, let me emphasise that we are not weak. There is no change in the JVP’s internal energy. But every party has ups and downs; they face difficulties. In 1989 when we were overpowered they said the JVP was over, our leaders were murdered. But within a short period we came out stronger and tougher.

People who say we have been weakened make such accusations based on our votes. True, we have lost some votes. But that was mainly due to the war victory. The Government had the benefit of the war victory and it was visible during the previous elections. But we are not weak; we are getting stronger. The Government may continue to harass and suppress us. Why is that? Because we are the only threat the Government has. None of the other parties are as organised and strong as the JVP. They don’t have time to criticise the Government or talk on behalf of the people because they have internal problems to sort out.

We will continue to fight for the people; we will continue to criticise the wrong acts and malpractices of the Government, which will continue to suppress and harass us. But we will never give up our struggle. Let me tell you one thing, the way this Government administrates this country, people will soon look for another alternative. They will not tolerate the Government’s dishonesty and misconduct.



Q: The Government openly accuses the JVP for crippling the university system. Do you agree that it is the JVP behind the student unrest?



A: University students all around the world protest when they see injustice. That’s a global phenomenon. Recently a similar situation occurred in England and over 10,000 university students took to the streets protesting against the removal of an allowance of US$ 12,000.

Today the crisis situation in the university system is mainly due to the Government’s move to commence private universities in the country. We refute baseless accusations by the Government that it is the JVP that is behind student unrest. We are not behind each and every unacceptable act that takes place among university students. But we have to make one thing clear, that when it comes to protecting free education, the JVP will not be backing them but leading the students to take appropriate action.

Q: Don’t you think the Government is at the helm of power due to the weakness of the opposition?



A: The truth is that people in this country have rejected this Government. At a time like that, the people need a strong opposition to rise against the Government. Unfortunately, the UNP as the main opposition has failed to play the role expected from it. It is responsible for bringing in the 18th Amendment. It went for discussions with the President, had coffee and sacrificed its members to the Government.

While pointing fingers at the UNP, I also admit that we too have failed to fulfil the wishes of the people. Though the JVP has done more than it could to cut back misconduct by the Government, it has been unable to meet the expectations of the people. They expect more from us. We want to be stronger and have a close link with people in this country, not only in south but other parts in this country – north, east everywhere – so that people would have an alternative to fight against this Government.