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Bermuda depending on Burt getting it right

Dear Sir,

What a difference a few weeks makes. One moment Bermudians are preparing to “breathe” a collective sigh of relief with real evidence of the pandemic subsiding, as the Government reveals plans for lifting associated Covid restrictions and hope is in the air for the success of the upcoming tourist season. Then, in a calamity of events, our finance minister quit two weeks before presenting the budget — amid rumours of a “contentious” government guarantee for the redevelopment of the Gencom/Fairmont Southampton — Russia invades Ukraine, broad Nato sanctions against Russia are implemented, oil hits $100-plus a barrel and world financial markets have turned upside down. I’m exhausted just writing this. So what’s next? Here are my thoughts.

Never in our history has the Government’s budget been more important. Our government coffers are bone dry, infrastructure is failing, our economy is stagnant, we have serious unemployment, increasing antisocial behaviour, the ageing population has risen and the working/resident/tax base population has shrunk, our public pension plans are broke, and public debt looms large without a dedicated plan for reduction. So we look to the new finance minister’s 2022-23 budget presentation for some hope and a plan for Bermuda’s economic future.

First impressions:

There were no new taxes, which will be welcomed by everyone, and a number of tax relief proposals are on the way, including payroll and vehicle licensing-fee reductions. The proposed economic recovery plan mentioned in the Budget contains 81 policy initiatives, including four main strategies deemed likely to generate significant socioeconomic and employment impact in the short term. Our economy and labour minister, Jason Hayward, listed them as follows:

• The rehabilitation of the Tynes Bay infrastructure

• The development of North East Hamilton

• The creation of a casino industry

• Emphasis on vertical farming

We were told that these areas were identified by outside consultant KPMG as key components of the Economic Recovery Plan and seen as most likely to trigger an economic revival. (I am not sure how). The usual pledges of growing international business, fintech and tourism were included and there was recognition of the need for immigration reform and, by extension, population growth in order to increase the tax base. (To that, I say, hallelujah).

Proposals are under way for stabilising and strengthening the Contributory Pension and Public Service Superannuation Funds. (Essential and long overdue). We are promised the formation of yet another new committee, ie, the Tax Reform Commission, which will bring overall recommendations for Bermuda’s tax reform, and will be assigned the task of near-term changes to our present system of taxation to ensure that a more progressive, fairer tax regime is implemented swiftly. (Presumably, if you make more, you pay more).

The “Managing Bermuda’s Debt” section consisted mostly of plans to roll some of it over sooner rather than later, before interest rates climb. There is an intention to achieve a $50 million surplus by the year 2026-27, and annually thereafter, to begin paying down the debt, which will depend largely on successful and sustained economic growth. The finance minister was keen to quote — and proposed to follow — many of the recommendations of the 2022 Fiscal Responsibility Panel’s report, which would give some comfort to those who are actually paying attention to our dire, fiscal state of affairs.

The “harsh reality” and importance of reviving tourism took up a fair bit of space in the Budget and it is clear that in order to be competitive in this industry, Bermuda has to offer potential investors more bang for their investor buck, which is apparently what will happen with the Gencom/Fairmont Southampton redevelopment project through increased concessions. The Fairmont Southampton is our largest employer and is essential to our hospitality job market, so getting it back online will put many people back to work.

Regarding this project, you may remember in 2019 under former finance minister Curtis Dickinson, the Government negotiated a letter of intent to provide Gencom with a guarantee, but the stipulations therein were not met and the LOI expired in December 2020. Fast-forward to today — one of the most recent recommendations in the Fiscal Responsibility Panel’s report said: “We would caution against the temptation to use off-budget expenditures and commitments – for example, the provision of government guarantees or use of state pension funds — as a source of finance.”

So I was relieved to read one particular sentence in the Budget as follows: “We are making sure that all hotel development is fully funded so that taxpayers are not left bearing the cost.” Then, at the end of the next paragraph, I read this: “Tourism is essential and it is the responsibility of the Government to use all of the tools at its disposal, including appropriate guarantees where necessary, to facilitate successful hotel development.” (So which is it?)

David Burt, the Premier and new finance minister, with his predecessor, Curtis Dickinson at left (Photograph by Akil Simmons)

After reading this budget document, I got the feeling that I was a passenger on a runaway train, with no brakes. Maybe I’m missing something. Managing an economy, setting sustainable economic policy, attracting foreign investment, boosting revenues, balancing a budget and paying off debt, all at the same time is certainly a challenge. I would like to send the same wish to the new finance minister as I did to former Mr Dickinson in 2020 when he was faced with further borrowing owing to the economic repercussions of the pandemic.

May the force be with you, David Burt, because Bermuda is depending on it.

BEVERLEY CONNELL

Pembroke

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Published March 09, 2022 at 7:56 am (Updated March 09, 2022 at 7:37 am)

Bermuda depending on Burt getting it right

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