Maroc - NEWSDAY.CO.TT - A la Une - 30/Oct 10:41

The two faces of government’s NIS policy

IN RESPONSE to the critical need to bolster the National Insurance System (NIS), Davendranath Tancoo has adopted two completely contrasting positions. On the one hand, the Minister of Finance commendably announced in his budget a phased increase in contributions over two years and, thereafter, a gradual increase in the retirement age in a ten-year period. These adjustments are essential given dire actuarial forecasts suggesting the fund could collapse within years. Their incremental nature will go some way towards cushioning the impact on workers and employers, even if there are questions about the knock-on effect on pay, employment and inflation. But on the other hand, Mr Tancoo on October 24 issued, separately, a startling call to the population not to depend on the NIS at all. "What we need is more participation, more people investing, more people saving, more people building wealth," he said, speaking at the TT Stock Exchange’s Capital Markets and Investor Conference in Port of Spain. "The days when we could rely solely on the NIS, on government assistance, are coming to an end." These remarks are the closest we have come to a definitive indication about the political viability of the NIS within state policy. The UNC government says it is moving to safeguard the system. But read between the lines and the message is more nuanced. In a way, Mr Tancoo’s Stock Exchange speech amounts to him saying the quiet part out loud. In this regard, he is not the first minister of finance to do so. Almost all of his predecessors, PNM and UNC, have sent, subliminally, the same message to the population by pointing out the burden of the programme on the treasury amid an aging population with fewer people to make contributions. Yet, the idea that citizens should turn to the private equity market instead of relying on a pooled insurance scheme is completely at odds with the ethos behind the NIS. Mr Tancoo clearly thinks increasing participation in financial instruments might be part of the solution to long-term treasury woes. But it’s no solution at all; it’s more of a free-market fantasy. Effectively, the NIS is the core of this country’s social safety net. At least 600,000 people receive benefits or are insured through it. The foundational principles behind the scheme are the ideas of universality, the sharing of risk, the protection of earnings, the bolstering of worker productivity and, importantly, the redistribution of income from high wage earners to low. Asking people to invest in shares and bonds and equity products instead is a complete reversal of these ideals, one which ignores the fact that not everybody has the disposable income required to maintain a meaningful and secure portfolio. That’s the deeper social imbalance the NIS was meant to address. The NIS budget changes are a step in the right direction. But Mr Tancoo would be even better served if he next focused on extending participation to the self-employed, bolstering compliance and addressing dual coverage, as recommended in the ILO’s 2020 Actuarial Review. The post The two faces of government’s NIS policy appeared first on Trinidad and Tobago Newsday.