The Trades Union Congress says recent hikes in electricity and water tariffs is a manifestation of government's insensitivity to economic hardships Ghanaians are facing.

In a release issued by the TUC Thursday, the Union noted that "the gloomy economic situation and the underlying governance challenges in the country" took centre stage at deliberations of the General Council of the Trades Union Congress on June 26 and 27, 2014.

The General Council is TUC's second highest decision-making body.

"What is even more surprising is the 17.5 percent VAT on the so-called non-core banking services which was to be implemented from July, 2014.  We have taken note of the indefinite suspension of the VAT on financial services. Contrary to messages and assurances by government, it was clear that the cost of banking was going to be higher for the general banking public", TUC said in the release.

The TUC is recommending that government should consider raising taxes on the super profits of the banks and other financial institutions instead of charging VAT on banking services.

The TUC also maintained its call on government to subsidise the cost of utilities  in the country, saying the current pricing formula for fuel, electricity and water punishes consumers even though the National Petroleum Authority (NPA) insists Ghanaians must to pay realistic prices for petroleum products.

Below is the full release by the TUC:

Recent economic and social developments in Ghana

Once again the gloomy economic situation and the underlying governance challenges in the country took centre stage at the deliberations of the General Council of the Trades Union Congress (TUC) held in Tema from 26th to 27th June, 2014.

The General Council is the second highest decision-making body of the TUC after Congress.

In a statement issued in February, the TUC drew attention to the deteriorating economic situation and the negative impact the declining economy was having on the working people of Ghana and their families.

We recommended some policy changes and called on government to convene a national dialogue on the economy. Government obliged and convened the National Economic Forum in May in what has come to be known as the Senchi Consensus.

The forum, which was attended by prominent Ghanaians, made far-reaching recommendations to address short, medium and long-term challenges of the economy. Nearly two months after the forum, we are yet to witness any concrete signs of implementation of the Senchi Consensus. Given the huge and experienced government bureaucracy, it cannot be, as is claimed by some government spokespersons, that the untimely death of Mr. P.V. Obeng is the cause of the delay.

Meanwhile the economic situation is getting worse by the day. The Cedi continues to depreciate in spite of the exchange rate controls.

 As prices keep rising, nominal incomes stagnate leading to a drastic fall in real incomes. Workers are losing their jobs as businesses fold up. In the mining sector, nearly 3000 workers are being sent home. Unemployment among university graduates keeps rising. The energy crisis is worsening and the taps are not flowing as potable water continues to be rationed.

The National Health Insurance Scheme, one of the most important social protection schemes introduced as a safety net for the poor is under serious financial stress. The scheme is unable to pay service providers. Some hospitals have already served notice that they are no longer going to accept NHIS cards due to non-payment of claims. Special schools, including schools for the blind and the deaf have either closed down or about to do so.

The psychiatric hospital in Accra has been in the news for all the wrong reasons because government has failed to release their subvention. Nearly all statutory funds are in arrears. A significant number of public sector workers, including nurses and District Chief Executives employed by government over a year ago have not been paid.

Concurrently, existing taxes have been increased and many new and, in some cases strange taxes,'are being introduced. The national debt has nearly doubled and government continues to incur more debt. Government continues to withdraw subsidies and abolish long-established allowances either to teacher trainees or nursing trainees. Yet, the budget deficit remains unacceptably high.

The general view in Ghana now is nothing is working and that government appears to lack the solution to these social and economic challenges. Government functionaries seem to have switched into a denial mode leading them to become overly insensitive to the plight of the ordinary Ghanaian.

The insensitivity of government is amply manifested by the recent increases in electricity and water tariffs.

What is even more surprising is the 17.5 percent VAT on the so-called non-core banking services which was to be implemented from July, 2014.

We have taken note of the indefinite suspension of the VAT on financial services. Contrary to messages and assurances by government, it was clear that the cost of banking was going to be higher for the general banking public.

For instance, although government intimated that salaries were not going to be affected, communications from the banks suggests that the cost of e-banking for workers who receive emails and SMS alerts or check their salary transactions online was going to increase.

Interaction between the TUC and its members in the banking sector suggests that the introduction of the forex controls by the Bank of Ghana earlier in the year and the announced 17.5 percent VAT on some financial services have dampened banking confidence. The TUC therefore, identifies with and supports the intentions and actions of the Union of Industry Commerce and Finance Workers (UNICOF) in this direction.

The policy inconsistency exhibited by government and in particular, by the Bank of Ghana in respect of the banking industry is clearly worrying.

The string of forex measures that are being implemented by the Bank of Ghana in its attempt to arrest the fall in the value of the cedi have already proven disastrous. The cedi continues to fall despite, and in some cases, because of the measures the Ban of Ghana is implementing.

The Bank of Ghana and government seem to be under the illusion that the Cedi’s woes are borne solely out of speculation by people and businesses that hold forex accounts. Therefore, if by some political fiat, the Bank of Ghana is able to deny the ‘speculators’ access to forex the problem would be solved.

The proposed financial service tax and the discussions around it combined with the exchange rate controls have already dented the credibility of both the monetary and fiscal authorities and undermined confidence in the banking system.

We urge government to abandon the idea of VAT on some financial services for good. Instead, government may consider raising taxes on the super profits of the banks and other financial institutions.

In doing so, we expect the authorities to avoid the introduction of any measures that will only further undermine the sustainability and confidence in the banks and other financial institutions.

We maintain our position that given the current economic situation in Ghana, a subsidy regime on utilities is warranted. Besides, given the rapid economic decline, especially the fall in the value of the Cedi, we think the current pricing formula for fuel, electricity and water punishes consumers and should be reviewed especially when we do not see any improvement whatsoever in the services being provided by the utility companies. It is unfair for consumers to be compelled to pay higher tariffs whenever government, by its policies, mismanages the exchange rates. The continued indexation of fuel prices and electricity and water tariffs to the dollar/cedi exchange rate constitutes a dollarization of the economy by the government. The effect of the prevailing economic hardships on working people is unbearable and there is a limit to what workers can take

The state of pensions and specifically, the second tier pension scheme in Ghana has attracted the concern of the TUC. Although in six months some Ghanaian workers would qualify for lump sum payment under the second tier, the institutional framework to do this is to say the least, unprepared.

The TUC joins public sector unions and their members against any attempt by government to impose a pension scheme on public sector workers. The TUC in collaboration with public sector unions shall use all means to resist this imposition.

We remain ready to support government in efforts aimed at addressing the prevailing economic and social challenges. We reiterate our commitment to suppon any endeavour by the President aimed at alleviating poverty and improving the social and economic situation of the working people of Ghana and/the|r families. Time is not on our side.

Signed

KOFI ApAMOAH SECRETARY GENERAL July 3, 2014