Richards’ first budget set to raise debt ceiling and clamp down on spending

  • Finance Minister Bob Richards: Walking a financial tightrope in his first Budget Statement

    Finance Minister Bob Richards: Walking a financial tightrope in his first Budget Statement

Finance Minister Bob Richards will read his first Budget Statement in the House of Assembly today.

Plans for the next financial year, which starts on April 1, will likely include more borrowing and a new statutory debt ceiling that may be raised to just shy of $2 billion.

The national debt stands at $1.4 billion, and the statutory debt ceiling is $1.45 billion. While the previous Government increased the ceiling by $200 million each time, Mr Richards has hinted that the ceiling may be raised by a greater amount in last month’s update of the country’s finances.

But Mr Richards is also likely to promise stricter controls on Government spending, offer a plan to reduce the debt over several years, and reiterate earlier statements that the budget will be “iron clad”.

Mr Richards will likely continue tax relief programmes for the retail and hospitality sectors put in place by the former Government in its bid to stimulate the economy.

The statement will walk a financial tightrope in balancing the need to move the country’s finances toward a surplus position, as promised in the election run-up, without cutting back on essential social spending while reducing long-term debt.

Premier Craig Cannonier has already hinted, in an interview with The Royal Gazette, that the Education and Cultural Development ministries will get more resources.

Public Safety is also likely to get more money, in fulfillment of an election promise to increase resources to the Bermuda Police Service, establish the Operation Ceasefire programme and a Throne Speech promise of a gun bounty programme.

But the economy continues to be beset by declining imports and visitor spending, an ailing construction sector and significant unemployment, according to the mid-year economic review released by Mr Richards last month.

Revenue for the current fiscal year is running about four percent below estimates, while expenditure is almost two percent above the original targets.

But the budget will not contain any structural adjustments, such as privatisation of certain Government services as a new body — the Spending and Government Efficiency Commission — will be charged with making such recommendations.

Government does have some wiggle room on the revenue front, however. A modest increase in “sin taxes” and higher bus and ferry fares, while unpopular, could be on the cards this morning.

And Mr Richards is likely to announce an aggressive effort to collect the millions of dollars owed to Government by tax defaulters.

The former administration had set a spending freeze of around $923 million for the subsequent three fiscal years when planning the current budget.

It remains to be seen whether Mr Richards will stick to the former administration’s targets. But he has already indicated a number of measures to keep spending in check.

Besides the SAGE Commission, the Finance Minister will be setting up a Budget Implementation Group, entering negotiations with the public sector workers aimed at pay cuts and will set up new “rules, limits and targets” to govern Government debt and expenditure.

Mr Richards will also make much of Government’s Jobs and Economic Turnaround Plan which includes a two-year employer payroll tax exemption for new Bermudian hires, measures to reduce the cost of living such as a waiver on stamp duty for first time homeowners who buy property valued at less than $1 million and a new procurement policy which will reserve $80 million of annual spending to small businesses.

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Published Feb 22, 2013 at 8:00 am (Updated Feb 21, 2013 at 10:44 pm)

Richards’ first budget set to raise debt ceiling and clamp down on spending

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