Finance Minister Bob Richards insisted last night that Government would not write off any of the $35 million in state pension arrears owed by delinquent employers – despite comments to the contrary made by Premier Michael Dunkley.

Mr Dunkley told the David Lopes radio show on ZBM yesterday morning that some of the debt would have to be written off because “you can’t cry over the spilt milk all the time”.

But Mr Richards told The Royal Gazette: “We have no intention of writing any of this money off. People who owe Government money – we are not writing it off.

“I think that the Premier was speaking in general terms as opposed to specifically in relation to this. When things are owed to the Government, you don’t want to give people the impression that if they don’t pay, it will go away.

“I would interpret [the Premier’s remarks] as a general comment on a business practice.”

Mr Dunkley was asked by Mr Lopes to comment on The Royal Gazette’s front page story yesterday, which revealed that state pension arrears have risen by $20 million or 140 percent since the Contributory Pensions Act was amended six years ago to bring in tougher penalties for lawbreakers.

The Premier said it was “unfortunate and wrong” that 45 percent of the Island’s employers and self-employed were breaking the law by not paying contributions into the massively underfunded pension pot.

But he added: “I believe that if you are owed money, you’ve got to go out and collect it and if you can’t collect it then you’ve got to write it off at the appropriate time. You just can’t keep it on your books.

“In any business organisation, you can’t keep carrying money forward year after year. You’ve got to do your best to collect it and then go where you can after that.”

The Premier said it was up to government accountants to determine which debts should be written off “because I’m sure of that $35 million that is owed a lot of it will be collectable but there’ll be some that can’t.

“At the end of year, any businesses that are looking at their accounts, if they don’t apportion a certain amount of money to bad debts that they are never going to collect then they are whistling in Dixie.

“That’s just the way of the world. It’s unfortunate, it’s inappropriate, but that’s the way it has to go. I believe in life that you’ve got to make decisions, you’ve got to move forward, do the best you can but you can’t cry over the spilt milk all the time. You’ve got to hold people accountable and then move forward. Problems you have today, if you don’t fix them, tomorrow they are going to get worse.”

Mr Richards said his stance on pension arrears hadn’t altered since he was in Opposition when, as chairman of the parliamentary Public Accounts Committee (PAC), he argued for aggressive action to recoup the money.

“The fact that we have large amounts owing is, I think, principally due to the difficult business environment that we are in right now,” he said.

“We certainly have been looking at structures and procedures to try to improve our debt collection. In due course, I think there’s probably some legislation that needs to be enacted.”

The Ministry of Finance admitted on Tuesday that better enforcement and “more creative tactics” were needed to recoup the missing $35.4 million, which could be earning investment income for the overstretched public purse.

Just two criminal prosecutions have been brought against delinquent employers since 2002.

Several changes to the law have been made in the last decade to try to deter employers from breaking the law, to no apparent effect.

Mr Richards said: “Debt collection is something that needs to be done better. Certainly we are looking at ways of trying to improve our performance in that area.”

Economist Bob Stewart said yesterday the scale of the pension debt was a “public disgrace” as was the lack of recent audited accounts for the Contributory Pension Fund, for which he said there was “no excuse”.

“I am appalled about the laxity of enforcement of employer obligations to remit both employee and employer contributions to the fund,” he said. “However, I am not too surprised, as I imagine many small employers in such sectors as construction, taxi drivers and retail simply do not have the funds.

“I also suspect that the employee contributions are deducted and used by the employer as an interest-free loan.”

Mr Stewart said the rapidly growing number of pensioners in Bermuda and the decline in young, working-age people to pay into the pot had “been on the cards since Jesus was a carpenter”.

He added: “The new contributions, from [working-age] suckers, simply keep the shaky edifice in place for a little longer. All over the world, government-sponsored social security retirement funds are in trouble for the same reasons that Ponzi schemes comes to an end — the number of takers soon exceeds the number of payers.

“Virtually all government schemes are in trouble and are unsustainable. That Bermuda falls into this category is to be wholly expected. In the last 20 years, our politicians have simply turned a blind eye to the questionable finances of the old age fund.

“Time is now running out. Either granny gets stiffed or kids with backpacks going to school get stiffed. Someone will. I have been saying this for about ten years and I doubt if anything will change — except that the money will run out. Who bears the brunt of this fiasco remains to be seen.”

Mr Dunkley told ZBM: “It is indeed unfortunate and wrong that people who owe taxes and pension money and all that type of stuff are not paying. Sadly, it’s a sign of the times and something we have to address going forward.”

He said when times were tough, businesses were likely to use the funds “just to make it through” and it was up to Government to “chase people to get the money in the coffers, because if we don’t, then the programmes that we offer and the benefits that people expect are not going to be there. It’s unacceptable.”

Yesterday’s story revealed that 2,565 employers or self-employed individuals are in arrears for more than 120 days with their contributions to the state pension fund. The figure represents 45 percent of those who should be paying into the pot.

The $35.4 million is missing at a time when seniors have been told they are not getting a pension increase for the fourth year running and the number of new claimants is rising dramatically — from 276 residents turning 65 in 2010 to 2,256 this year.

The lack of enforcement by Government has been flagged up before, including in the PAC’s most recent report from July.

The report noted that the Debt Enforcement Unit of the Attorney General’s Chamber — which is responsible for chasing social insurance debts of $10,000 and above — was under-resourced and should be assigned “additional and dedicated resources...to aid in the recovery of debts”.

“The unit has had success in obtaining judgement against debtors,” noted the PAC. “However, the enforcement of those judgements remains a challenge.”

In her report for 2009/10, Auditor General Heather Jacobs Matthews wrote: “When taxes are written off, Government loses revenue. When pension contributions are not collected, employees lose pension benefits for which they have made contributions. Timely collection of outstanding revenue by Government helps to reduce the need for borrowing along with its associated finance costs.”

Mr Dunkley did not respond to a request for comment from this newspaper yesterday. Nor did PAC chairman and Shadow Finance Minister David Burt or the Progressive Labour Party.

n To check whether your employer has been paying pension contributions you need to email socialinsurance@gov.bm or call 294-9242, extensions 1117 or 1718.