The following is an address to the nation, ahead of the 2009-2010 Budget, delivered by Prime Minister Bruce Golding last night.

On Tuesday, the minister of finance will be tabling in Parliament, the Budget for the new financial year. You would have been aware of some of the difficult challenges we have had to grapple with in constructing this Budget. When the debate is held, we will outline the tough choices we have had to make and why we had to make them.

A country's budget is no different from that of an individual, a family or a business. There are expenses you have to meet, bills you have to pay. And if your income is insufficient to meet your expenses, you have to borrow. But there is a limit to how much you can borrow because you can't borrow more than you can afford to pay back. So, when your income goes down, you have to cut your expenses. This is not high science; it is common-sense reality.

Crisis impact on jamaica

The income side of the Budget has been hurt by the global economic crisis. When businesses are forced to cut back and lay off workers, we collect less income tax. When bauxite companies are forced to close down, we lose the bauxite levy that we would normally collect. When remittances slow down because Jamaicans abroad have lost their jobs, those of you who normally benefit from these remittances have less money to spend, so we have less GCT to collect.

Therefore, just like many of you, we have had to cut back. But there are some things that we can't cut back on. We can't cut back what we are spending to educate our children, fight crime, provide health care and assist the pensioners and the very poor.

These are vital services on which, even in these hard times, we need to spend more, not less. So, deeper cuts have to be made in other areas. We have no choice. We are not alone in this.

Almost every country in the world is struggling with its budget as a result of the global crisis. The United States, the richest country in the world, presented a budget with a fiscal deficit of 12.3 per cent - borrowing more to spend more! Britain resorted to printing money - £75 billion - to boost consumer spending. They can get away with it because theirs are among the strongest currencies in the world. We can't! Puss and dog, they say, don't have the same luck. We have to tighten our belts, find the money where we must and cut expenses where we can.

Government's payroll

It is in this context that we have been in dialogue with the trade unions and other groups representing public-sector workers. Apart from the interest payments which we have to meet, the Government's payroll is the biggest item of expenditure in the Budget - over $100 billion. The MOU between the Government and the Jamaica Confederation of Trade Unions called for an increase in public-sector wages of 15 per cent effective April 1, 2008. We paid that. But the agreement also provides for a further increase of seven per cent as of April 1, 2009.

In 2006, the Government signed an agreement to align teachers' salaries to 80 per cent of private-sector salaries with effect from July 2007. This retroactive payment which became due on April 1, 2009, amounts to some $18 billion. Together, these increases would hike the public-sector wage bill by 46 per cent compared to two years ago. It would push the fiscal deficit to unacceptable levels. It would require a level of expenditure that cannot be sustained, not in these harsh times.

Wage freeze

We have, therefore, had to freeze wages at the levels which obtained on March 31st and we have had to ask public-sector workers to forego the increases due this year. The other option would be to lay off thousands of workers at a time when alternative employment is hard to find. There are some categories of workers, such as nurses that did not benefit from the increases granted last year and we will have to find some accommodation for them but the rest of us will have to hold strain.

And those of us who lead will have to lead by example. Last year, I announced that parliamentary salaries would be tied to those of public-sector workers. In other words, parliamentarians can no longer give themselves salary increases and higher than that granted to public-sector workers. This year, not only am I foregoing the seven per cent increase that would have been due on April 1st but I will be taking a 15 per cent cut in my salary and I ask all members of parliament to join in this symbolically important example by taking a 10 per cent cut in theirs.

It is not just public-sector workers whom we have to ask for understanding, patience and cooperation. The people of Jamaica are entitled to better facilities - better roads and water supplies, repair and rebuilding of drains and gullies. Communities need better amenities. These are not unreasonable demands and, God knows, many of them have been neglected for a very long time. But we are not going to be able to spend as much as we would like on these projects and, for what we are able to spend, we will have to get value for every dollar.

Last week, I met with all permanent secretaries and heads of government agencies and charged them to set about reducing expenditure, to save every dollar that can be saved. It costs us over $70 billion per year to finance government activities not including wages. We have to cut that back. We have to use less electricity, make fewer phone calls and use less stationery, do less driving up and down. We have to take better care of government vehicles and equipment so that we don't have to spend so much to repair them or to replace them so often. I have instructed these public-sector leaders to reduce expenditure everywhere they can without reducing the service they must deliver. They are my managers. Reducing expenditure, especially in these difficult times, is an essential function of management. I expect them to rise to the occasion and I will meet with them at the end of each quarter to evaluate how well they have performed.

Tax structure

It is in the context of the challenges confronting the Budget that we have had to take a serious look at our tax system. Our tax structure is in urgent need of reform. There are some people who are paying too much tax and others who are paying too little or getting away without paying. We have spent a long time studying and analysing our tax system, studying what we have analysed and analysing what we have studied. The time has come when we must do what we have long needed to do to make our tax system just and equitable and one that helps to stimulate rather than stifle investment, production and job creation.

I mentioned before that the biggest item of expenditure in the Budget is the interest payments we have to make on the public debt - well over $100 billion. We are carrying a huge debt burden that has accumulated over many years, hence the large amount we have to set aside for interest payments. Interest payments are determined by the rate of interest so, when interest rates go up, the Budget has to find more money to meet those payments which means that we must either cut expenditure in other vital areas or borrow more money. And if we borrow more money, the interest rates go up even more and we have to find even more money to meet the interest costs. The key, therefore, is to reduce interest rates.

Interest rates

One factor that normally drives up interest rates is high inflation which erodes the value of money. The inflation rate over the last six months has been only 1.1 per cent - the lowest that I can recall for any six-month period. So, inflation is not the problem.

What we have to do is to ensure the confidence of the market, even in these troublesome times ... confidence that the Government is serious about cutting expenditure, keeping down the deficit and reducing the amount of money we have to borrow. In this Budget, the Government is determined to demonstrate that commitment and that seriousness.

We are mindful of the recent downgrade of Jamaica's credit rating. It is not Jamaica alone. Ireland, so often held up as the model that we must follow, had its credit rating downgraded last week. No country has been spared from this global crisis; it is bearing down on all of us, the strong and the weak alike.

The Budget, however, is more than just a bookkeeping exercise. Yes, we have to deal with the challenges of today but we must also build for tomorrow. The crisis that is upon us had a beginning and it will surely have an end. But even as we hope for it to pass, we must prepare ourselves so that when the end does come, we can be positioned to benefit early from the rebound.

But it is not going to be the same world economy we knew before the recession. Banks are going to be more scrupulous in their lending. Consumers are going to be more cautious in their spending. Investors are going to be more careful in the investments they make. Subdued global demand will require higher levels of efficiency and greater competitiveness if we are to find a place in this new marketplace.

The transformation that we need to undergo cannot be gradual and incremental. It will have to be fast-tracked, doing quickly the things that can be done quickly and pursuing with a sense of urgency those things that will, inevitably, take more time. The Budget debate which will commence on April 23rd will provide details of these transformational initiatives.

It was John F. Kennedy, speaking in Indianapolis in April 1959- exactly 50 years ago, who pointed out that the Chinese word for crisis consists of two characters - one signifies danger and the other represents opportunity.

President (Barack) Obama's chief of staff, Rahm Emmanuel, recently declared: "You never want a serious crisis to go to waste. It's an opportunity to do things you didn't think you could do before."

We must not be daunted by the challenges of the current crisis. Let us confront the dangers with courage and confidence. Let's grasp the opportunities that lurk behind the dangers. Let's prepare ourselves to do the things we didn't think we could do before.

May God bless you all and may God bless Jamaica, land we love.