Heavy is the head that ignores the debt
I listened to the Government's Throne Speech and while there were many promises, the one I was looking for was missing. There was no promise or even a mention of the Government’s (our) debt and long-term plans for its repayment. However, I was pleased to see that the One Bermuda Alliance’s Reply to the Throne Speech made tackling the debt a subject of its opening statement, which is right where it belongs.
The Auditor-General keeps asking for a debt-reduction plan in every one of her annual reports, which has yet to materialise from this government. In her last report she wrote:
“To ensure the sustainability of public services, the Government should develop as soon as possible a comprehensive and realistic plan to reduce the deficit and level of public debt, aimed at not only adapting to the current and future economic environments, but also influencing those environments.”
We know that in February of this year, at the Bermuda Chamber of Commerce Budget Breakfast, Arthur Wightman, PwC’s Bermuda Territory leader, made references to the economic crises facing Bermuda, including: mounting government debt, deficit spending, unfunded liabilities, substantial pockets of poverty, a shrunken tax base, emigration, high unemployment and a homeless population of approximately 650 Bermudians. According to the chamber’s business survey, only one third of business owners in Bermuda are confident in Bermuda’s economic future, and there is palpable concern around the risk presented by Bermuda’s debt, liabilities and guarantees.
Mr Wightman said the combination of interest-bearing debt, together with unfunded liabilities and guarantees add up to a total of about $7.4 billion. This, he said, for an island of 60,000 people, of which only about 50 per cent of that population is working, equates to almost $250,000 per worker. Government guarantees alone exceed $1.1 billion and are expected to rise to more than $1.3 billion with the recently approved Fairmont Southampton development project and the Government’s latest initiative to redevelop Morgan’s Point, which also will include more borrowing.
According to the KPMG Bermuda Budget Snapshot for 2023-24, government interest-bearing debt stands at $3.29 billion. Let’s fast forward through Bermuda’s significant debt history over the past 20-plus years. In 2000, under the first Progressive Labour Party administration, our debt — net of the sinking fund — stood at about $139 million. By 2004, that number had been reduced to $117 million by the finance minister, Eugene Cox. During the years from 2004 to 2023, various finance ministers strolled out to the markets and borrowed what is now the present total of $3.29 billion.
Do you know what every one of these finance ministers have in common? They never had to ask anyone for permission to commit the taxpayer to this $3.29 billion of debt. While legislation requires that ministers must tell us after the deal is done, they do not need to ask us beforehand.
From the Loans Act 1978: “As soon as practicable after the execution of an agreement under this section the minister shall inform the legislature.” The same applies to financial guarantees. Parliamentary scrutiny? None.
Eleven years ago in 2012, just after the One Bermuda Alliance became the government, the late, great Larry Burchall, was alarmed at the $1.4 billion of debt which had accumulated during eight years of the previous administration, and he suggested that the new OBA finance minister should make this promise to the taxpayers: “I will not borrow funds on behalf of the people of Bermuda without first publicly informing and, after debate, receiving the permission of a majority of parliamentarians.”
Mr Burchall was adamant that the unchecked borrowing of the previous administration should not be repeated. He went even further to suggest that the Government Loans Act 1978 should be amended by these 27 words:
“Before borrowing such sums, the minister shall inform the legislature and shall get the approval of the legislature before entering into any agreement to borrow such sums”. (I would add “including guarantees”.)
It stands to reason that government policy, particularly with regard to borrowing, is more carefully thought through when ministers and officials know that it will be scrutinised by parliament. This would then put every finance minister under the real control of the elected members of the House of Assembly. Through the House, Mr Burchall said, the minister comes under the control of the people of Bermuda. This sage advice was ignored by every successive administration, and here we are in 2023 saddled with a debt of $3.29 billion that we are obligated to repay — no ifs, ands, or buts.
Our auditor-general says the sustainability of our public services can be ensured only when debt reduction becomes the top priority, and long-term plans for such must be set in place. As we look around our beloved island, we can plainly see that our dilapidated, essential public infrastructure is not getting the attention it needs — and we know why. The main reason is lack of funds, and each year the finance minister continues to “pick and choose” what should get top priority, but only after he writes a mandatory cheque for our annual debt-service cost, which last year was about $143 million.
I end this with the wise words of Larry Burchall, written in 2013:
“Yes, it attaches a heavy cross to the back of a finance minister. But that cross places every minister under the real control of the elected members of the House of Assembly. Through the House, the minister comes under the control of the people of Bermuda. And it is the ordinary people of Bermuda who are the ultimate payers-back of those financial obligations, and the people who suffer the most when the national economy declines.”