Richards:: Cox’s Budget estimates are a work of fiction
The One Bermuda Alliance would make it a priority to grow the economy in order to generate jobs, reduce the national debt and control Government spending, said Bob Richards in his Reply to the Budget Statement yesterday.
Cost-cutting measures, he said, include freezing the size of the Civil Service, ending the Grand Atlantic Project and creating the office of the Contractor General to be appointed by the Governor.
And Immigration reform measures would include suspending term limits and streamlining the work permits process to “reduce the hassle factor and increase speed”.
Employers who hire more Bermudians will get a two-year payroll tax exemption, and steps will be taken to speed up Planning approval for job-creating projects.
And 20 percent of Government spending on goods and services would go to small businesses.
Under an OBA Government, company law will be reviewed by “recognising” the 60-40 ownership law is outdated, and “recognising that Bermuda needs foreign capital to redevelop the Hamilton and St George’s waterfronts”.
Premier Paula Cox’s Budget fails to address the needs of the people, and its estimates are a work of fiction, he insisted.
Mr Richards predicted that the Budget would come in at a “whopping big deficit, the worst ever” and far bigger than Government’s estimates.
“The Government’s handling of the Budget constitutes a serious challenge to our collective security, and it fires our concerns for our beloved Island. Bermuda is being walked toward the edge of a cliff,” Mr Richards said in his Reply to the Budget.
Mr Richards criticised Government for blaming the global recession for the Island’s economic woes.
And he blamed the Country’s debt on Premier Cox, who is also Finance Minister.
Mr Richards outlined a series of initiatives which he said would help build an “opportunity economy” and put an end to “this era of anxiety, doubt and disappointment”.
“The OBA’s approach will replace disillusion with confidence,” he said.
“A disillusioned Bermuda will fail. A confident Bermuda will succeed, going from strength to strength. That is my vision, and that is the mission of my colleagues.”
While much of the rest of the world economy is emerging out of recession, Bermuda is still in the throes of the “Great Bermuda Recession”, Mr Richards said.
“It would be easy for Bermudians to conclude by listening to Government commentary, that the world is still in the grip of the Great Global Recession,” he said. “It is not.”
He described the Island’s recession as “home-grown”.
Mr Richards argued that Immigration should be an economic policy tool but that successive Progressive Labour Party governments had used it as a political tool which had devastated the economy by causing an exodus of “economically valuable customers from our shores”.
“Job and income losses for Bermudians from all walks of life have been the price for this policy debacle,” he stated.
On the national debt, Mr Richards said that the OBA believed that one should not live beyond his means.
“If a person lives beyond his means he will face financial ruin.”
Government had become addicted to debt and “no longer has the strength to change its ways”.
Government spending under Paula Cox as Finance Minister “consistently far outstripped approved budgets,” which was not the case with her predecessors, he said.
“This lack of restraint predates the global recession by three years, conclusively proving that this is not the fault of the global recession, as the Government would have Bermudians believe,” Mr Richards continued.
“The lack of restraint also predates the Premier [Ewart] Brown era and continued after his retirement and is for current spending nothing to do with building hard assets.
“The Government desperately wants us to believe this global recession story because, if we do, it gives them a free pass insofar as who is responsible for this, the greatest economic disaster in Bermuda’s history.”
Mr Richards argued that the Premier’s contention that Bermuda’s debt was affordable because the Island’s debt to GDP ratio was lower than many other countries is wrong because the standard is inappropriate for Bermuda.
The OBA planned to “wrestle this debt to the ground” with policies which grew the economy in order to increase government revenues, and by cutting spending.
Mr Richards questioned Ms Cox’s budget estimates, saying she had provided no basis for forecasting a $40 million increase in revenue.
He predicted $875 million in revenue and $1 billion in spending for the next fiscal year.
“Bringing together our estimates for revenue and expenditures, we peg the Government’s Current Account deficit at $255.2 million, instead of the $95.9 million forecast by the Minister.
“We then made an adjustment for the $62 million the Government is taking from the civil servants’ Public Service Superannuation Fund, to peg Government’s overall estimated borrowing at $393.4 million,” he said.
The Ministry of Finance issued the following release in response:
“The Shadow Minister of Finance’s graph on page 18 of his reply shows the difference between Government budgeted spending and actual spending for the current account for various periods commencing in 1990/91. These graphs are misleading and do not present a complete picture.
“For instance, if we look at the SMOF’s graph for 2004/05, it shows additional spending of just over $62 million. If one reviews the financial statements of the Consolidated Fund for this year it is clearly noted that in 2004/05 relief was provided to the Public Service Superannuation by way of a $52.2 million write-off that was due to the Consolidated Fund from the PSSF.
“This balance due from the PSSF had accumulated over the few years before 2005 and was due to PSSF contributions being less that benefits paid from the fund. This problem has been rectified when Government increased PSSF contributions commencing in 2006. This item was recorded as a special contribution to the PSSF and was a one-off accounting entry.”
The statement continued: “The additional spend of approximately $48 million recorded in the graph for 2006/07, again includes an extraordinary accounting entry and does not represent normal recurring current account expenditure. If one was to review the Financial Statements of the Consolidated Fund it would be clearly observed that in the 2006/07 fiscal year Government wrote-off the Bermuda Housing Corporation (BHC) loan due of $49.5 million which was due to Government. If this one-off amount is removed, the $50 million additional spending reported would actually become a minor current account surplus.
“The Government made this decision to assist the Bermuda Housing Corporation with the carrying out of its mandate to assist with the development of affordable housing, by providing relief for amounts outstanding on loan to BHC. This action also reduced the debt on BHC’s balance sheet so that they could access capital markets without Government assistance.
“It was also done to relieve them of the interest they were paying to Government for the loan. This write-off had to be accounted for as a grant to the BHC even though no cash was expended in this year.
“The most important thing to note is that these items above were affordable. In 04-05 the Government took in $88.5 million dollars more than budgeted, and in 06-07 the Government took in $48 million more than budgeted.
“If we exclude these extraordinary on time items, the Government’s management of the public finances prior to the financial crisis is one of prudence and restraint.”
*For the full Budget Reply see the attached PDF.
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