Mr Dickinson, meet Nanci
In August 2012, the late Larry Burchall explained some harsh truths about our national finances. I always admired Mr Burchall, who was a numbers guy and was able to translate the Government’s financial position into a language we could all comprehend.
Here are a few excerpts of some of Mr Burchall’s writings back then, concerning two of our past finance ministers and their management styles:
“From November 1998 until January 2004, Eugene Cox managed Bermuda’s national finances. He was Bermuda’s sixth Minister of Finance. Mr Cox took over a government administration that from 1968 until 1998 had always run a balanced budget. This meant that over any five or ten-year period, revenue generally equalled spending. In the five years between April 1, 1999 and March 31, 2004, under Mr Cox’s management, the Government spent just 1 per cent more than was taken in, equal to a deficit of $29.9 million. The late Eugene Cox inherited the United Bermuda Party’s gross national debt of $163 million. He died in office in January 2004 with Bermuda’s debt sitting at $160 million. This was $3.5 million less than what he had taken over from the UBP. Like his five predecessors, Mr Cox was an ‘in-control’ Minister of Finance.”
“Enter the seventh finance minister, Paula Cox, in 2004. Over the next eight years (2004-2012), we saw the deficit rise sharply and an additional borrowing amount of $1,905,000,000.00” (one billion, nine hundred and five million dollars). During this period, some of these notes were paid off, which ultimately resulted in a total national debt of approximately $1.4 billion by the end of her tenure in 2012, which was then handed over to Finance Minister No 8. While this is an astounding number to comprehend, what is also alarming is that during Ms Cox’s tenure, she publicly described herself as ‘feeling politically neutered’ and a ‘cog in the wheel’. A worrying inference that suggested the sound fiscal discipline of managing the public purse was not actually within her control.”
Here are my observations of the next three finance ministers and their fiscal management styles.
Enter the eighth finance minister, Bob Richards, in December of 2012. By the end of the 2012-13 fiscal year, Bermuda’s debt stood at $1.4 billion. While Mr Richards’s laudable mission of eliminating the $247 million inherited deficit — which went down to $63.4 million under his watch — and reducing government spending yielded some real progress, we see during his four years the total national debt increased to a new high of $2.4 billion as at March 2017.
Enter the ninth finance minister, David Burt, in July 2017. At the end of September 2017, the national debt stood at $2.5 billion. Mr Burt’s portfolio of finance minister was short-lived and 14 months later was relinquished to Finance Minister No 10.
Enter the tenth and present finance minister, Curtis Dickinson, in November 2018. After 16 months in the job, as of March 2020, the debt was recorded at $2.6 billion, while the deficit was forecasted to be reduced to $19.8 million.
It must be recognised that each of these finance ministers has experienced various external/global economic factors, and specific Cabinet policy directives — both inherited and self-imposed — which would dictate their fiscal planning and government expenditure. External examples being the recession of 2008, the effects of which lagged through both Ms Cox’s and Mr Richards’s tenures, and now the ever-present Covid-9 pandemic, which is an economic tsunami the likes of which we have never seen.
Recently, we heard the latest sobering news from our present finance minister, Mr Dickinson. He reported that the economic fallout from the pandemic has been devastating and the Government could expect a deficit of up to $315 million for fiscal year 2020-21. Further, he expects additional borrowing, possibly bringing our net debt to nearly $3 billion, thereby exceeding the existing statutory debt ceiling of $2.9 billion.
Do any of you remember “Nanci”? This was the name Mr Burchall gave for the non-negotiable costs that the Bermuda Government will not be able to avoid. These are the priority costs of interest on the debt plus the sinking fund contributions that have to be paid/met to service Bermuda’s national debt.
The payment to Nanci always comes first — before financial assistance, before Civil Service payroll and before any other cheque that the Government may wish to write.
In 2014, Nanci demanded $170 million from us. In 2018-19, that number was estimated at $188 million, and undoubtedly it will rise even higher given Mr Dickinson’s mention of further borrowing.
The 1978 Government Loans Act allows for a Minister of Finance to borrow any amount that they choose. Bermuda’s finance ministers are not required to get anyone’s specific permission or agreement beforehand.
Just before the 2017 election, Mr Burchall posed this question: what if that law was amended to require a finance minister to rise in the House to gain the approval of the legislature, by explaining why there is a need to borrow; what he/she seeks to borrow; what he intends to do with the borrowed money and how and over what time frame he/she proposes to pay back the borrowed funds?
While this is probably impractical for government purposes, it certainly has a nice “ring” to it from the taxpayer’s perspective.
The national debt remains a noose around our necks, but the elephant in the room continues to be government spending. This finance minister has clearly told us that the cost of government is too high and must be reduced, and the deficit is unsustainable and “fiscally imprudent”.
He has warned that our credit rating is in jeopardy if proper measures are not taken. His words are familiar because they echo those of the eighth finance minister. He has identified some savings and is in talks with the unions to achieve more. He is saying all the right things that an “in-control” finance minister would say.
Recognising that the two most powerful posts in our national politics are the Premier and the Minister of Finance, we should trust but verify that their management of the public purse is always in the best interests of the taxpayer. Now more than ever before, our money managers need to be on our side.
The tenth finance minister’s story has yet to be written. The challenges that he faces are enormous and the decisions he makes will shape Bermuda’s future.
May the force be with you, Mr Dickinson, and may you stick to the courage of your convictions.
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