Budget may prove unsustainable sooner than we think
The first thing I was vividly reminded of when reading the 2018-19 Budget in detail was just what a fantastic job the Progressive Labour Party did in opposition and how it truly is the master of spin, hyperbole and blatant trickery.
Trickery, it seems, that even the supporters of the PLP cannot see clearly.
There are a number of things in the Budget Statement that I can support, which should worry the base of the PLP. Supporters should be asking themselves how their leader is setting out to do the very things that the PLP loves to hate.
Before looking at the specific areas of the Budget that I am in broad support of and those about which I have concern, it is worth spending a brief moment recalling the many times the PLP spent vilifying everything undertaken by the One Bermuda Alliance — to expand Bermuda’s economy, curtail wild public spending — and demonised the Government as anti-Bermudian.
I remember like it was yesterday. The constant sniping to undermine the very real progress that the OBA made in turning around our economic fortunes. The shouts of “No” to the Minister of Finance, Bob Richards, when he tried to outline public-sector reform. The shrieks of “Go back to Canada” when I tried to explain immigration-friendly policies to expand our economic opportunities. The protests over the airport deal and allegations that the OBA was stealing the people’s land. The weekly tirades about supposed loss of beach rights in St George’s about a development that had the capacity to significantly rejuvenate a dying town. The PLP banged on the drum of the alleged protection of Bermudian rights.
Who can forget? Not I. Before the community falls over itself to congratulate David Burt, they should recall the utter hypocrisy.
Turning to the Budget Statement, the Premier declares that the PLP will transform the 60:40 Bermuda ownership rule in domestic business to 40:60 Bermudian-owned. I am in broad support of this, but are PLP stalwarts? This is quite the about-turn for the PLP. For years the PLP has thwarted any attempts to encourage the investment of non-Bermudians for fear that it would stampede upon the rights of black Bermudians.
If the OBA had tried such a thing it would have faced fierce protests. It would have been labelled anti-Bermudian and would have been accused of selling Bermudian birthrights.
At the hands of the PLP, it seems there is no such problem despite having spent 4˝ years shrieking wrongly about the supposed loss of the rights of Bermudians, whether it was because of the airport deal, concessions for hotels, or the rights of permanent resident’s certificate holders and long-term residents.
The interesting point here is that the Premier is basically saying that PRCs will be able to invest in locally owned businesses — the very PRCs that the PLP did not want to have Bermuda status. “Invest in our businesses, PRC holders, but don’t expect any rights”.
So here’s the rub: the adage “no taxation without representation” comes to mind. The Premier will do well to remember that. I’m not sure this reality fits with “Putting Bermudians First”, and I certainly do not recall such things being said at PLP rallies.
The Budget also deals with height restrictions in the City of Hamilton. It should be noted that I raised this issue internally during the creation of the latest Bermuda Plan, and a number of OBA colleagues supported the end of such restrictions. But one can imagine the protests the OBA might have faced if it put forward such a proposal. PLP supporters would have called out without compunction that the OBA, in allowing such a proposal, was blatantly ignoring the historical significance of the economic empowerment zones and that larger, taller buildings would destroy the unique character of such zones.
I was persuaded by that argument. Now that the PLP premier is making such a proposal, perhaps such concerns no longer exist for its supporters.
The Budget seeks to reserve 20 per cent of capital spending for businesses that traditionally do not get a look-in. Work had already been undertaken by the OBA to ensure that this happened, but it is now being touted as a PLP idea.
It is important to give small business real opportunity, but it should not be at an increased cost to the taxpayer. I recall the promises made by a previous PLP government about the reasons for stripping away the cement silos from Jim Butterfield: that they would be given to a consortium of small, black-owned businesses. That never happened.
What is also supportable is taxing notional salaries, suspending professional services tax, and the lowering of duty on certain healthy foods from 5 per cent to 0 per cent. Not proceeding with the commercial rent tax makes sense in this economic climate, as does a technology incubator and any efforts to attract new types of business to Bermuda.
This, however, must be measured against the reputational risk that could result from attempting to bring new untested industries such as blockchain to Bermuda. Although I broadly support these steps, I do not think that the introduction of a sugar tax will do anything to either help local businesses or improve the health of our community — see two of my previous opinions on this.
I wonder how PLP supporters who own small businesses, reliant on sugar for their sales, feel about the latest Budget? How do they feel about the announcement that sugar tax will be implemented despite the consultation period not having reached its conclusion?
My areas of greatest concern relate to sustainability. The PLP promised a balanced budget by 2019. That promise has already been broken, despite the Premier taking credit for the previous Minister of Finance’s sterling work.
The projection of a 4.6 per cent increase in revenue is far too high and the continued lack of recognition of the boost to the economy by the 35th America’s Cup reveals a stubbornness that may very well be unprecedented in the face of the obvious. The revenue generated as a result of AC35 essentially allowed the PLP to give a pay increase to civil servants.
The grant of $3 million for eight buses — or $375,000 per unit — without a new bus schedule, and a dispensation to taxi drivers without the necessary reform of that industry all point to the Premier paying the pied piper.
There are dozens of these smaller details in the budget speech, which when analysed should be very worrying. That, along with half a dozen committees to analyse and advise shows a lack of depth with regard to the need for sustainability.
There was a very obvious missed opportunity and that was the opportunity to make a speech that was all-inclusive. The language was deliberate in its intent and does very little to reach out across the racial divide.
Clearly, columnist Christopher Famous was not consulted.
Despite most PLP supporters feeling like they have been tricked with regard to the large policy items, as they should be, the Premier’s central policies should be positively received by others. However, his biggest issue will be following through with his plans. With too many competing interests, this will be difficult. He no doubt will be forced to demonise the Opposition to defeat his internal naysayers and will also have to demonstrate to everyone else that he is not like his mentor, Paula Cox, the previous PLP premier and Minister of Finance, by being wildly and disastrously inaccurate in his financial projections.
One thing is for sure: he is likely to get an easier ride from the Opposition than the OBA had. Good luck, Mr Burt. You will need it.
• Michael Fahy is a former Minister of Home Affairs, Minister of Tourism, Transport and Municipalities, and Junior Minister of Finance under the One Bermuda Alliance government