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Holding the line – for now

Economic growth: Bermuda can solve its fiscal problems only through growth

In the Westminster system, Budgets have traditionally been shrouded in mystery.

There’s good reason for this: leaks of tax increases or policy changes would lead to hoarding, profiteering or abuse. In the 1930s, a British Cabinet minister was forced to resign after being accused of leaking budget plans.

Over the years, the less controversial parts of Budgets have been made public in advance. Curtis Dickinson, the finance minister, made it clear weeks ago there would be no new taxes or tax increases in yesterday’s Budget. David Burt, the Premier, revealed on Thursday night that benefit reductions for civil servants would not be extended into this year.

Neither of these announcements would have been cause for misbehaviour, and in the end, there were few surprises in the Budget, which was delivered for the first time outside of the Chamber of the House of Assembly because of the Covid-19 pandemic.

That the Budget contained no shocks did not take away from the fact that Bermuda faces its gravest economic challenge since the Great Depression.

For the most part, this Budget seems to get it right. There are indeed virtually no tax increases beyond a relatively small increase in company fees. Expenditures are kept under control. There is a Budget deficit, but this is no surprise in the circumstances.

Rather than take on further debt, the shortfall will be funded from the Sinking Fund, devised by the late David Saul for a rainy day just like this one.

Mr Dickinson has eliminated budgeted but vacant public posts, which is effectively a paper exercise, but will discourage department heads from filling them. Overall, there is a 5 per cent reduction in spending from the original estimates 12 months ago.

Other expenditures are reasonable. The thousands of people who remain out of work need support. It makes no sense to cut them off.

But other aspects of this Budget are distressingly vague. Mr Dickinson states: “This level of spending will enable the Government to execute on its priorities of improving the quality of education for our children, improving the healthcare system and providing adequate support to our citizens who are less fortunate and more vulnerable.

“It will also allow us to provide targeted investments to grow and diversify the Bermuda economy, and to recover from the impact of the Covid-19 pandemic in as fiscally prudent a manner as is possible.”

There is nothing to argue with there, but the lack of detail makes it essentially meaningless.

Elsewhere, Mr Dickinson did reveal that he had agreed to provide a $10 million guarantee for the development of the Bermudiana Beach Resort. This comes as something of a surprise after he was forced to exercise the previous One Bermuda Alliance government’s guarantee for Caroline Bay. While admittedly of a much greater scale, one might have thought that that experience would have made Mr Dickinson avoid all guarantees like the plague.

In word if not in deed, this Budget continued the signalling that the Government will further relax Immigration restrictions. This is welcome, regardless of whether it is being done out of necessity or as a result of a Damascene conversion.

Mr Dickinson said: “During this pandemic we have welcomed close to 400 new people to our shores with the one-year residential certificate, and we must welcome more. We must welcome newcomers not only to buy our groceries and use our services, but also to bring us new skills, knowledge and capital.

“That so many have come in the midst of a pandemic is the ultimate compliment to our island nation. Their arrival strengthens us, and diversifies our community and our economy to the benefit of all.

“Yes, the new way forward requires us to be open to change, but have confidence that these changes will have the welfare of our people and our future generations embedded in all that we do.”

Mr Dickinson has nailed his colours to the mast. Just how the Government will move forward with more changes remains to be seen, but these words cannot be walked back.

As expected, this Budget mainly held the line after the shocks of 2020. While that approach seems prudent, it also means that some problems are being kicked down the road.

What is clear is that Bermuda needs to rejuvenate its economy as the best way to get out of its fiscal problems. Again, there is little detail in the Budget about how this will be achieved. It is incumbent on the Government to explain this in the Budget Debate net Friday and to elucidate on the 30 ideas that are apparently in the works.

Likewise, Mr Dickinson needs to give a better indication, if not during the Budget Debate, then soon, on the ideas for tax reform.

Clearly, the Government must raise more revenue to dig Bermuda out of its $3 billion debt hole. But taxes that deter investment or stifle enterprise will be self-defeating, as will those that spur capital flight. Mr Dickinson will know this better than some of his colleagues, but he will need to use his most persuasive skills to ensure the baby is not thrown out with the bathwater.

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Published February 27, 2021 at 8:01 am (Updated February 27, 2021 at 7:56 am)

Holding the line – for now

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