David Burt will give his last Budget Statement as Premier, and possibly his last as finance minister, tomorrow.

Every finance minister has had to deal with having more demands on spending than there are revenues, but it is fair to say that Mr Burt, like many of his colleagues around the world, has had a particularly difficult time in the recent past as the world emerged from the pandemic and has generally faced sluggish economic growth since.

But tomorrow, Mr Burt finds himself in the happy position of having vastly more revenue than at any time in history. For once, he will be able to say yes more often than ever before owing to the windfall of the corporate income tax, which is expected to generate at least $600 million more in revenue.

To put that in perspective, if the tax does produce that much, it is almost half of Government’s total tax take this year and the equivalent of the whole of payroll tax, historically the Government’s biggest source of revenue. In fact, the tax may yield more than that.

That begs the question of what to do with this bounty.

It is likely that every Cabinet minister will have presented a wish list of how the money would be best spent on their particular priority, while all interest groups will also have ideas on the best way to use it.

However, Mr Burt also has the Tax Reform Commission report he commissioned as a guide. This is a useful tool since, as an independent and bipartisan report, it can be used to push back on political demands for spending.

Mr Burt also gave many hints in his Pre-Budget Report in December, and in fact there is a consensus that the bulk of the new revenue should be used to reduce the island’s high level of national debt.

The devil, as ever, is in the details, and more specifically on how aggressive the Government should be on cutting debt against spending on social needs and infrastructure, which has suffered from underfunding ever since the 2008 financial crisis.

There are other factors to consider as well, however.

Most of the CIT revenue will come from the island’s re/insurance companies, whose earnings are notoriously volatile. As it happens, they are coming out of a period of unusually strong earnings, buoyed by high reinsurance premiums and bullish investment markets.

However, the so-called hard market is now over, and many reinsurance rates dropped substantially in the January renewal period. At the same time, there is no telling for how long the investment markets will boom, and many respected forecasters are predicting a correction at some point.

For that reason, the TRC recommended that the Government set aside money in a rainy-day fund to ensure consistency in revenues going forward. The danger is that money will be allocated for a long-term programme this year, but there is no reason to think it will be there every year in the future. So a rainy-day, or stability, fund makes eminent good sense and the Government has accepted the idea in principle, but only in 2027, when it will put $100 million a year in it.

The reason for the delay is what Mr Burt stated in his December report: the Government plans to pay $500 million of a $605 million government bond, which comes due in January 2027, while presumably rolling over the remaining $105 million in a new bond.

There is then a further $450 million due to be paid in February 2029, which Mr Burt projects will be affordable as he has accepted a recommendation that the Government set aside $200 million a year to the debt sinking fund, along with $100 million a year to the stability fund.

Although Mr Burt seems likely to take this approach, there are arguments for a more aggressive policy. The logic of this is that debt service constitutes $127.5 million of government spending. If it was a ministry, it would be the fourth largest.

Freeing up that revenue would have a long-term impact not only on spending but also on the need for revenue raising. As it stands, the Government expects to reduce debt service by about $22 million after next January, but a more aggressive approach would accelerate this.

Mr Burt has also committed to reviewing a number of spending items in the Budget, primarily health insurance subsidies for seniors, the unemployed and people on low incomes while committing to funding expansion of universal healthcare.

A range of tax cuts are also under review. These include proposals to further cut the cost of electricity and fuel as well as the cost of cars, and cut employee payroll tax. There are also likely to be further cuts or reduction of customs duty on items deemed to be essential.

The Government is also considering proposals for a cap of 7 per cent on the employer’s share of payroll tax.

All those proposals are worth considering, and if taken up, will reduce taxes by $45 million, although it means that government revenue will in fact remain stable at $1.28 billion.

All this is well and good, but the question should be raised over whether these tax reductions — which amount to a revenue freeze rather than a cut — are enough.

Bermuda has imposed a $600 million-plus tax on a group of taxpayers who already pay a significant proportion of taxes on the island. This relatively small group of companies represent, for the most part, highly mobile businesses and capital.

While it is true that they might end up paying a 15 per cent tax on profits wherever they are based, this measure levels the playing field between Bermuda and the rest of the world. Like it or not, the CIT provides one less reason for them to stay in Bermuda.

For now, they are remaining, and the tax credits on offer may well benefit them while also helping the community. But Bermuda is a fiendishly expensive place to operate and it behoves the Government to find ways to reduce the cost of living and the cost of doing business in order to do all it can to keep them here.

To date, these companies have shown remarkable willingness to stay and that redounds to their and the Government’s credit. But there are no guarantees this will continue.

One approach would be to reduce the overall tax burden as debt is reduced and to accelerate the debt reduction programme. Another would be to reduce the payroll tax burden on both sides more aggressively.

Mr Burt will have already made his choices for tomorrow’s Budget and to some degree these arguments are moot now. But they should be part of the debate in the weeks to come.