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Parliament will recall that on December 14, 2004, I laid the Report of the Task Force on Educational Reform on the table of the House. The Report provides a blueprint for the transformation of the country’s education system.Based on the historic bi-partisan Parliamentary Resolution of October 2003 and subsequent presentations from both sides in the Parliament there is unanimity on:
The need for the transformation;The urgency of it; and,The extent of the transformation that is required in order to give the Jamaican children a future.
Parliament will also recall that based on the recommendations of the Task Force it was estimated that the country would need to invest $219 billion over ten fiscal years 2005-2014.
It was also estimated that the education system required an incremental injection of approximately $22 billion in capital expenditure and $16 billion in recurrent expenditure over fiscal years 2005-2006.
Mr. Speaker:
Let me at the very outset remind the House that the Report pointed to the need for major rehabilitation of a large percentage of school plants.
It also spoke to the need for a substantial increase in and rationalization of the number of school places to facilitate the elimination of the shift system; and all-age schools, and to increase the space per student from 10ft2 to 14ft2 as recommended by UNESCO.
Mr. Speaker:
It was clear to all and sundry that this level of expenditure could not be met solely from the Consolidated Fund.
Bearing in mind the financial requirements, I established a finance sub-committee of the Taskforce that included members of the private sector. This sub-committee was asked:
to determine a broad-based financing mechanism for the implementation of the recommendations, and
To identify the specific sources of funding that could be triggered in this financial year.
Mr. Speaker, Jamaica’s expenditure on education is 6.6% of GDP, which is well above the Latin American region average expenditure on education.
This year, in light of the Government’s expressed commitment to the transformation of the sector, the allocation to education represents a 24% increase over the allocation for the last financial year.
In my contribution to this year’s Budget Debate, I announced to the nation that the Government would be spending $5 billion to upgrade educational facilities across the island.
This upgrade and expansion programme would result in the best major short-term impact on the quality of the facilities, which in turn, could make a significant impact on the outcomes of the education system.
After careful examination of the options available for funding this upgrading and expansion programme, it was agreed that the National Housing Trust presented the best financing option to the country at this time.
This would require an amendment to Section 4 Subsection 1 of the National Housing Trust Act to give it the legal authority to provide financing for social services and physical infrastructure for communities developed under the projects undertaken by the NHT.
Mr. Speaker:
I believe that it would be beneficial for me to provide a brief overview of the performance of the NHT since it was established in 1976. The NHT was established in response to a social need that manifested itself two ways:
The lack of adequate funding for housing. The supply of funds to the sector was 40% of what was required, and
The distribution of the available funds was highly skewed to the upper 5% of the population.
I do not think that the success of the NHT can be questioned by anyone. Two factors contribute to its success:
Consistency; and,
Flexibility in meeting the emerging needs of its clients and society at large.
Since 1976 the NHT has awarded 101,084 mortgages to 112,514 beneficiaries.
Mr. Speaker, approximately 66% of these mortgages were made available to the Jamaican people over the last 12 years between April 1993 and March 2005. This compares with 34% in the previous 17 years.
The comparatively low level of performance of the NHT was largely due to guidelines imposed by the International Monetary Fund (IMF) which manifested itself in two areas:
The financial resources of the Trust were utilized to balance the budget in the 1980s; and,
The Trust ceased to operate as a developer and hence no new schemes were developed during that decade.
Mr. Speaker, I will not debate the wisdom of the position of the Government of the 1980s. Like all Governments, it took a decision based on the issues and challenges it confronted.
Mr. Speaker, the NHT ensured its institutional relevance and success by demonstrating remarkable flexibility in meeting the needs of its customers and the society as a whole. Many programmes have been introduced, policies adjusted and operational efficiency improved.
Since April 1993, the Trust has:Adjusted its loan limit, reduced interest rates and adjusted income bands, three (3) times. The loan limit moved from a maximum of $400,000 in 1993 to $1 million in 2003. The highest interest rate was reduced to single digit moving down from 14 percent to 9 percent.
Reduced its eligibility requirements from 169 weeks to 52 weeks of which 13 weeks must be in the last 26 weeks prior to application
Allowed married persons whose names are not on residential title at the time of marriage to access a non-homeowners loan (with the exception of a Scheme unit)
Introduced programmes such as:
Individual Benefit Programme to allow for more than one person to co-apply to afford a unit;
Fixed interest rate of 2% for persons aged 55 years and over;
Increased the age limit for receipt of benefit to 65 years;
Senior citizens are allowed an extra five years, up to age 70, to pay off mortgage loan;
Interest on loans to disabled beneficiaries set at 2% below the rate for relevant income band
Retirement age for women was increased to 65 years;
Elimination of service charge for persons in the 2% income band;
Disabled persons pay 2% service charge;Joint Finance Housing Programme;House Lot/Service Lot Programme;Reduction of interest rate on interim finance loan to developers from 20 and 12 percent to 12 and 8 percent respectively.
Quite apart from these interventions that are benefiting contributors directly, the Trust has been involved in a number of projects designed to improve the social and economic well-being of its present and future contributors and beneficiaries.
The Sugar Workers’ Housing programme, the Relocation 2000 programme and the Inner City Housing Project are examples of the projects being undertaken by the NHT that contribute to national development.
The Best Scheme Competition that was introduced in 1993 was an early indication that a broadened vision was influencing the work of the NHT. I believe that this Competition must be regarded as the front-runner of the Emancipation Park which was opened in 2002.
Mr. Speaker:
The success of the NHT has resulted in emerging social challenges not least of which are the demands on the education sector.
In light of the considerable expansion of the housing stock, the physical living conditions of a vast number of Jamaicans have been and continue to be improved.
This has resulted in the need for additional school places and the upgrade of the physical infrastructure of existing schools.
The NHT recognizes the nexus between having an educated population and securing both its contributory population and ensuring the capability of its beneficiaries to repay their mortgage.
Mr. Speaker, in 2001, as part of its broadened vision, the Trust committed to establishing a fully equipped computer lab in at least one primary school in each parish.
Fifteen computers were provided for each school and five teachers from each school trained to use the software effectively.
Impact assessments have shown that this intervention has resulted in improved attendance and student performance in Reading and Mathematics.
Mr. Speaker:
The National Housing Trust has been able to perform at this level of consistency and with such flexibility while experiencing high levels of asset growth, and strong liquidity and solvency levels.
Between March 31, 2000 and March 2005, the Trust more than doubled its net assets, which moved from $19.8 billion to approximately $46.6 billion.
Consequently, the Trust has a sizable Accumulated Fund of approximately $43.8 billion as at March 2005.
Mr. Speaker:
The NHT has determined that in keeping with its broadened vision and the need to guarantee its own continued longevity, it is prudent at this time to make a payment of $5 billion to assist the Government in providing decent education shelter for the children of their contributors.
Mr. Speaker:
This will not impair the ability of the Trust to continue meeting in full its obligations to its contributors and beneficiaries.
At my request as Minister with the portfolio responsibility, the Board of the NHT has reviewed its existing policy in relation to loan limits, income bands and interest rates.
We intend to reduce interest rates to borrowers, increase loan limits and adjust income bands so that contributions at every income level will receive increased benefits.
Today, I have given Ministerial approval so that effective August 15, 2005, the following changes will be implemented:
The loan limits have been adjusted as follows:Loan limit for non-homeowners increased from $1m to $1.5m for single applicants and from $2m to $3m for co-applicants for the purchase of houses on the open market, built on owned land or the purchase of a scheme unit.
Serviced/house lots will be increased from $450,000 to $600,000 per single applicant and from $700,000 to $800,000 for co-applicants.
Home owners or home improvement loans have been increased from $400,000 to $600,000 for single applicants and from $800,000 to $1.2m for co-applicants.
The income bands have been widened to now allow persons earning a higher weekly income to pay a lower interest rate. Persons earning up to $500.00 per week will now pay only 2 percent.
The occupational groups that will benefit are minimum wage earners and agricultural workers.
Persons earning $5501 to $7500 per week will pay 3 percent.
Categories of workers to benefit from the change are clerical workers, elementary occupations, such as assistant nurses and pre-trained teachers.
Persons earning $7501 to $10,000 per week will now pay 5 percent.
Categories of workers include police constables, trained teachers and registered nurses.
Persons earning $10,001 to $20,000 per week will now pay 7 percent instead of 9 percent.
Categories of contributors who will benefit are supervisory and technical staff, such as vice principals, registered nurses, nurse supervisors and Inspectors of police.
Persons earning over $20,000 per week will now pay 8 percent instead of 9 percent.
For all existing income bands the corresponding interest rate will be reduced by 2 percent except for those who are already paying at 2 percent.
Expected Impact
The increase loan limits will therefore, have the following effect:
Single applicants, such as agricultural workers, earning at least $4,800.00 per week, will now be able to purchase at least a one-bedroom unit, given the new loan limit of $1.5m maximum per applicant.
Co-applicants will now be able to purchase a two-bedroom unit given the prevailing market prices, on more affordable loan terms. Previously, co-applicants purchasing a two-bedroom house at today’s estimated price of $3m were entitled to a maximum of only $2m from the NHT. They would have been required to find additional funding of $1m.
These changes will result n thee increase for NHT loans as qualify applicants will now be able to borrow larger sums and lower interest rates. In the short term, the Trust estimates thst there will be an overall increase of between 20-25% in the demand for its loans, given the increased loan limits. This will translate to increase housing expenditure of an additional $2-3B per annum.
The reduced interest rates will result in reduced income for the Trust amounting to approximately $540M annually
These changes could result in further growth in the construction sector which, given the multiplier effect, will spill over into the wider economy.
The Trust continues to make refunds as requested by contributors. Between January and june this year, the Trust refunded over a billion dollars to 72,892 contributors
The income band will be widened to include a fifth category dealing with those contributors earning over $20,000.00 per week.
Mr. Speaker, the members of this Honourable House may have questions regarding transparency and accountability with respect to the use of the funds.
I am open to an oversight committee which would include the private sector and members of the trade union, employers and the political parties to ensure that the funds are spent wisely and in accordance with the rules governing the award of contracts.
Following my announcement during the Budget debate to seek Parliamentary approval….
Mr. Speaker,
Following my announcement during the Budget Debate to seek Parliamentary approval for the allocation of financial resources from the National Housing Trust in order to address major limitations in the structure and content of our educational system, there were some who questioned the efficacy of utilising those resources to fund the development of education.
As one of those who contributed at the ministerial level in 1976 to the concept and eventual decision to establish the NHT, I recall that it emerged from other existing initiatives and considerations to mobilise savings at the level of the school and the nation.
In the earlier stages of conceptualisation, we were seeking to mobilise domestic savings as a sustainable resource base to support industrial and agricultural expansion. Eventually, having regard to the state of the housing stock at the time, a policy decision was taken to focus on the development of residential solutions.
As an institution, the NHT has demonstrated exceptional performance in fulfilling its mandate to provide affordable housing solutions. The time has come not only to reap the benefits from the prudence with which the funds have been managed, but to look ahead as to how we mobilise savings for strategic interventions which foster national development. This requires a fundamental re-examination of the terms and structure of contributions and rates paid by employers, employees and those self-employed to deepen the resource base and expand opportunities for a wider range of beneficiaries.
Mr. Speaker, we must also note the several proposals which have emanated from different studies and reports on taxation, whether by International Funding Agencies or our own expert groups which we have established, such as the Matalon Committee on Tax Reform.
We are committed to rationalisation of the NIS, the Education Tax, HEART, the National Health Fund and the NHT contributions to reduce the total percentage paid by both employers and employees which accounts for a significant percentage of the total payroll.
The Ministry of Finance has been mandated to engage the necessary professional expertise that can identify options which would:
Reduce the pay load? of both employers and employees;
A simplified system with a reduction in the number of pay-roll deductions;
Ensure that no institution is over-funded to the detriment of any critical sector;
Provide a sustainable flow of additional resources to improve the social sector, particularly health and education.
The new system must ensure tangible evidence of benefits and funding should be linked to measurable results.
This exercise should be completed in time for the next Budget exercise and so I do not anticipate that we will need to resort, in the next Financial Year, to a transfer of resources from the NHT by virtue of today’s enactment relating to the provision of NHT Funds for the education system.
It, therefore, could prove to be a one off exercise.
Mr. Speaker:
I will end where I began. There is no division in this House on the need for urgent attention to be paid to the education sector. The NHT funds will help us to address this need.
The upgrade and expansion of our schools must be carried out if we are to:
Achieve a reduction in pupil to teacher ratio;
Enhance equity in the system by standardizing our facilities; and,
Aggressively implement the e-learning programme.There is too much at stake. We must act now.
Our children must hold us responsible for their future but they must never hold us responsible for squandering a good opportunity to give them a bright future.

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