Budget’s mixed messages
In yesterday’s Budget Statement, David Burt made this observation: “There are many persons in our community who, in some way, shape or form, have become disillusioned by politics and government.”
The reason for this, the Premier and now finance minister says, is because “they believe that there is no difference between the political parties and their philosophies”.
Mr Burt then tried to demonstrate how the Progressive Labour Party differed from the One Bermuda Alliance.
But it is possible that the public are disillusioned, not by the two parties’ supposed similarities, but because they are tired of politicians trying to score points and reflexively opposing whatever it is that their opponent has suggested. There may be many in this community who want less partisanship, not more.
If that’s true, they will be disappointed with the Budget Statement. For a leader whose party has been back in power for almost five years, Mr Burt still spends an inordinate amount of time criticising the former One Bermuda Alliance government.
Worse, he dodges the bad news when he can. He said in the statement that services will need to be cut to meet Budget targets. But rather than detail those cuts yesterday, he threw those grenades into his Cabinet colleagues’ laps — they will let people know when they deliver their ministerial briefs over the next few weeks.
But if Mr Burt can skip the worst news, he still had to report on the broader philosophy of this budget and this government.
On the basis of this speech, it is hard to discern one.
If this government wanted to tackle the mountain of economic problems it faces, it had two choices.
It could have opted for a free-market approach, which would have resulted in lower taxes, increased infrastructure spending and a general easing of regulation, including immigration.
While there would have been a short-term risk of adding to already large budget deficits, this would also have supercharged the economy, creating jobs and generating economic activity, which would in turn have increased tax revenues, especially on the consumer side.
Alternatively, Mr Burt could have chosen a more interventionist approach, which might also have been aimed at narrowing differences in wealth and income that have been exacerbated by the pandemic.
Instead, Mr Burt did neither. This budget looks like it was chosen from a brunch buffet rather than from a dinner menu.
So it has a bit of everything, the result of which may be economic indigestion. And some economic problems, such as inflation, are virtually ignored.
There are tax cuts for the lowest paid, but not significant enough to make a difference to people’s lives. A person earning $48,000 a year will get a $240 annual reduction in their payroll tax — the equivalent of $5 a week, a ludicrously small amount.
Why not eliminate the employee’s portion entirely at the lowest levels?
Better yet, why not reduce the employer’s portion — which remains unchanged — at the same time as an incentive to increasing employment.
Similarly, the 10 per cent reduction in vehicle licence fees makes little real sense. Surely it would be better to reduce the fees by more for smaller vehicles while continuing to get more tax from those who choose to drive larger vehicles, and who presumably can afford to pay the tax anyway?
And it makes a nonsense of the Government’s commitment to the environment — of which there was nothing in the Budget — by not lowering the vehicle fees further on electric cars.
Elsewhere, Mr Burt laid out cogent arguments for the need to increase the population. But then, when it might have been reasonable to expect a series of ways to encourage new investment or the return of Bermudians to the island, there was only a vague promise to “make it easier for Bermudians to pool their resources and invest in their island”.
There was an expectation, in this newspaper and elsewhere, that the mystery of Curtis Dickinson’s resignation might be solved in the Budget Statement.
Mr Burt did refer to a guarantee in the statement, but only to say that none would be offered to a hotel developer unless the project was fully funded. This newspaper has little sympathy for the Fairmont Southampton’s owner, Gencom, but the Premier is creating a chicken-and-egg situation.
In general, developers seek sovereign guarantees so they can take them to lenders to show their money is safe. If they could get the funding without the guarantee, they would do so. So this looks like a trap.
Mr Burt’s announcement that the Government will offer tax concessions to hotel developers for longer than ten years, with the inference that Gencom will be the first beneficiary, may also contain a clue to why Mr Dickinson left.
Mr Burt said in his statement that “revenue from direct taxation of hotels pales in comparison to the money and employment generated for the country through having hotels open and operating”, and baldly stated that the failure to get the Fairmont Southampton open was the cause of the Government’s inability to balance the budget.
It is true that hotels and other businesses help economies and public finances in myriad ways apart from through direct taxes. But offering tax concessions to one industry, or one property, and not to others distorts the economy, and begs the question of whether the industry is viable if required to stand on its own.
These may have been the concerns Mr Dickinson was raising; when he speaks, perhaps he will reveal more.
These are difficult times and there are hard decisions to make. Mr Burt’s tendency, evidenced through this speech, to selectively put the best gloss on past events while ignoring evidence to the contrary, means hard decisions do not get taken.
There may be short-term gains in this, but the longer these decisions are put off, the worse the consequences.