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Govt passes legislation raising debt ceiling

Bermuda's lawmakers last night raised the debt ceiling to $1.45 billion, over the objections of the Opposition MPs, from $1.25 billion.

Premier Paula Cox had signalled her intention to raise the statutory debt limit in her Budget Statement.

She defended Government borrowing in her introduction to the Government Loans Amendment Act 2012, repeating her argument that it is affordable and that her administration had invested in hard assets and provided an economic backstop through concessions and relief for businesses and people to assist them through the economic downturn.

“Since April 1999 to March 2011 this Government has invested over $1.2 billion in hard assets,” the Premier said.

“These assets include: modern and upgraded school facilities; modern public transportation, other social infrastructure such as public housing, senior care facilities and national sports facilities and economic infrastructure such as airport works, docks and bridges.

“Indeed part of the borrowing requirement in 2012-2013 relates to further investment in economic infrastructure at the LF Wade International Airport, namely, building our capacity to take control of Bermuda's commercial airspace.”

Shadow Finance Minister Bob Richards led the criticism against Government's management of the purse strings, arguing that Government had put the entire community at risk.

“When a business fails a lot of people fail but the whole community doesn't fail,” he said.

“There are no shareholders in the Government, but everybody's a stakeholder.”

Mr Richards said that the debt would have to be paid off by younger Bermudians and not the current generation of decision-makers.

And he denounced the trend of rising debt.

“The escalation of debt has been caused by bad decisions,” he said.

“We have a country of 62,00 or 63,000 people and the Government of the Country is planning to owe almost $1.5bn. That's a heck of a lot of money.”

He said: “What we have here is built on virtually nothing. And when you put almost $1.5bn of debt in that context, it's a scary thing. It's a very scary thing.”

He rejected the argument that much of the debt was spent on hard assets saying much of the overspending was on current accounts.

“All of this stuff about hard assets is a bit of a smokescreen.”

And he stated that the country had not received value for money on the hard asset investments.

“We've gotten one for the price of two, in many cases.”

Mr Richards warned that “financial ruin comes when you don't have cash to pay your bills”.

He said: “This debt is the result of cumulative deficits. It just didn't drop from the sky.”

The debt was too high and was on an upward trend and that Government had not indicated how the debt would be reduced, Mr Richards argued.

And he warned that some local businesses refuse to accept Bermuda Government purchase orders because they know that the Bermuda Government is “really, really slow to pay their bills”.

“The only way is to take specific, effective measures to grow this economy,” he said.

“And we've had no measures to restart growth in this economy.”

Mr Richards said that his calculations showed that the debt per young person under 35 worked out to be about $53,000 and per worker it is $55,000 - a near tenfold increase since the Progressive Labour Party came to power.

“We haven't seen ten times the amount of hard assets that the Government owns in 13 years.”

He said: “Government has the temerity to tell Bermudians that they shouldn't be worried about this.”

Bermuda has fought no wars, maintains no “huge employment insurance” system, does not provide hughe amounts of aid to developing nations, “yet we have debt levels that are of the same order of magnitude of countries that have all these things”.

He then compared Bermuda to a number of American states.

California's $8 billion debt worked out at $233 per person, Hawaii comes in at $364 per person while Florida's debt was $105 per person.

Bermuda's deficit comes in at $3,365 per person.

Mr Richards also expressed doubts about Government plans to float a bond locally, saying that he did not believe that would work because “Bermuda dollars are US dollars in Bermuda shorts”.

He expected that Government will be offering them to local pension funds, including the Government pension fund.

Mr Richards also warned that interest rates will inevitably rise and the cost of servicing the debt could become astronomical.

Families Minister Glenn Blakeney defended the Government plan saying that Government was managing finances responsibly.

Mr Richards was “always on his high horse lecturing anybody,” he said.

“We've used the money for the people of this country, especially the people of this country who were having hard times.”

He noted that Government had given the $200 million guarantee to Butterfield Bank which had saved jobs.

“That's what we're here to do - to help our people and sometimes it takes a little more than you project because nothing is absolute in life. And credit and debt is what makes this world go round in the beginning,” he said.

Kim Swan of the United Bermuda Party said that Government had inherited a “clean set of books” in 1998.

He agreed that young Bermudians are going to have to deal with the debt problem “without any particular indication by the Progressive Labour Party Government that they're going to wrap their minds around moving in the other direction.”

He said: “If for the last six years, your expenditure is more than your income, Mr Speaker, and you haven't made any particular effort to reverse that particular trend then the country has to be concerned.”

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Published March 08, 2012 at 1:00 pm (Updated March 08, 2012 at 1:48 pm)

Govt passes legislation raising debt ceiling

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