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Parliamentary salaries

There’s a good deal of political point-scoring going on around Parliamentary salary cuts, and it is important to remember first principles in this.

First, it is welcome news that the Progressive Labour Party Government has finally embraced the idea of salary cuts, one year after Premier Paula Cox flatly rejected it.

The idea is that the Island’s leaders should share in the sacrifices that many people are making, and should live the reality that virtually all Bermudians are having to do more with less.

The symbolism of this is the important thing rather than the number. In the total scope of the Budget, the amounts being discussed, while not insignificant on a personal level, make very little difference to the $1 billion or more that Bermuda owes.

But the message that is sent out is invaluable.

Secondly, this newspaper remains firmly opposed to the idea that current spending or savings should be achieved by not contributing to pension funds.

This is a robbing Peter to pay Paul financial tactic that builds up more problems for the future and delays the inevitable hard decisions that need to be made. It is a short term solution that does not solve the fundamental problem; the equivalent of using your child’s education fund to pay the rent when the real problem is that you either don’t earn enough to match your spending.

It is wrong that private citizens should be able to access their pension funds, even in times of need, because in a few years, their need for that money will be even greater.

It is wrong to tell public servants that they need not pay into their pension funds so that their proposed pay cut does not affect their take home pay.

And it is wrong for parliamentarians not to pay into their pension funds under the guise of making a greater financial sacrifice.

That’s because, assuming that the actual structure of the pensions system does not change, this money will have to be paid, and given the structure of the Government pension funds, it is the taxpayer who will end up footing the bill.

That is not satisfactory when it comes to the civil servants’ pensions funds, but it is worse with regard to the parliamentarians, because they are supposed to be setting an example, and should not expect the taxpayer to fund their post-political lives through their very generous pension scheme.

What this really amounts to is a political stunt. The PLP can make this offer and frame it as a 17.5 percent reduction in “total compensation” a five percent salary cut and foregoing the 12.5 percent they pay into their pension fund. But it’s not, because the contributions will have to be made up later and probably not by the politicians.

As a political stunt it worked. It certainly caught the One Bermuda Alliance flat-footed.

First the OBA agreed to the deal, with the caveat that Cabinet Ministers take a deeper pay cut of ten percent. Then they reversed themselves, rightly rejecting the pension segment of the deal, and offering to start the five percent cut on March 1 which would add a month to the savings.

It would have been better if they had offered a deeper cut in salaries perhaps the eight percent cut Government workers are being asked to take, then they could not be accused of seeking a lesser pay cut.

But all of this manoeuvring distracts from the bigger issue.

Government is facing a Budget crunch because its revenues will not cover its expenditures.

So it either needs to cut spending, like personnel costs, which make up a large proportion of revenues, or increase income from taxes. Neither is an easy choice, because cutting spending takes more money out of the economy and raising taxes will also stunt growth.

Bermuda will only come out of this Budget crunch when it gets the economy working again and tax revenues rise because of growth.

That’s where Bermuda’s leaders should be focusing their attention, and not on the sort of juvenile point-scoring that took place last week.

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Published February 14, 2012 at 1:00 am (Updated February 14, 2012 at 6:44 am)

Parliamentary salaries

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