Burt’s maiden Budget must be mindful of everyday Bermudians
Bermudians will not have to hold their breath any longer as the 2018-19 Budget Statement will be tabled on Friday. This will be David Burt's maiden budget as Premier and Minister of Finance, and it will set the tone for Bermuda's fiscal policy going forward.
The people of Bermuda are waiting to see if Mr Burt has the discipline to implement a budget that Bermuda families can afford while meeting the needs of the most vulnerable in our community.
The One Bermuda Alliance had a strategy to grow jobs, lower crime, enhance tourism and lead Bermuda out of debt. Evidence today confirms that this strategy was being successfully executed.
The Bermuda Tourism Authority's figures, recently released, show that the 2017 results were extraordinary. The release noted that 2017 brought the highest number of visitors to the island in recorded history and stated the total arrivals for that period of 692,947 is “the best statistical performance dating back to 1965”.
The BTA release also indicated that “in 2017, the 35th America's Cup played a critical role in driving demand and higher visitor spending not only in May and June but throughout much of the year”.
The release stated that “Bermuda's tourism industry has been on a path for growth since 2015, after decades of decline; the America's Cup helped to accelerate the growth trajectory”.
This outstanding economic performance is borne out in the America's Cup Review Report, which confirms the overall positive impact of this historic event on Bermuda and Bermudians.
It should be noted that the America's Cup Review Report, Economic, Environmental and Social Impact of the 35th America's Cup on Bermuda, has not yet been formally released to the public. As well, the Government has not acknowledged that the expenditure on this event produced the desired results and was a fiscally prudent risk-reward revenue growth option.
This tourism success was also coupled with success in other critical economic areas.
The Bermuda Economy 2017: Updated Review, released in early December, reported that there was an increase in the total value of new construction projects started and that employment income increased. Additionally, there was significant revenue growth resulting from the collection of higher payroll taxes and customs duty.
No doubt, the OBA's success in securing new hotel and resort development helped to drive these positive results.
So as the Premier brings forward the first budget under the new PLP government, it must be noted that the OBA has left the Bermuda economy on solid financial footing. Will the new government build on this base? The 2018-19 Budget will provide some answers.
To support the 2018-19 Budget, the Premier has developed and presented the Pre-Budget Report. The stated purpose of the Pre-Budget Report is twofold: first, the Government wishes to “increase public awareness of the Government's fiscal and budget policy objectives”. And second, the Pre-Budget Report is intended to “establish a benchmark for evaluating the conduct of fiscal and budget policy”.
With regards to the first purpose, educating and keeping the public informed is a worthwhile objective that every democratic government commits to achieve. The Pre-Budget Report offers the public an opportunity to comment on the fiscal options that the Government is considering implementing. It cannot be overstated that without looking at the cost of options and impact on our debt, it is difficult to provide informed feedback.
Our future debt will grow and the economic safekeeping of Bermuda families will be jeopardised if we do not manage and provide better control over our healthcare costs and the size of government. We must not let the debt problem get so out of control that it cannot be effectively managed by reducing expenditure and increasing revenue. The capacity of Bermuda families to shoulder more debt is coming to an end. Focus must be on job and investment growth, not debt growth.
In the Throne Speech on September 8, 2017, Mr Burt promised new initiatives, all of which have financial implications. To have a balanced budget, which then starts to reduce the debt and help working Bermudians, the Premier in his capacity as finance minister will have to construct a budget to take into account several variables. The Premier must factor in the impact of expenses for initiatives as well as any delays in the growth of the contemplated revenues, while adjusting for changes in the global markets in which Bermuda operates. The recent US tax changes implemented by Donald Trump cannot be ignored.
When considering options, Bermuda wants to be assured that the Government will be fiscally prudent and mindful of the interests of everyday Bermudians. People need to be informed on how these options will be managed to affect our debt reduction.
As the Premier has indicated, the second purpose of the Pre-Budget Report is to “establish a benchmark for evaluating the conduct of fiscal and budget policy”. It is assumed that this approach indicates a commitment to fiscal responsibility and to use this information to improve our economic position, while meeting the needs of the people. It is also assumed that this will include, at a minimum, an enhancement of the midyear review. The midyear review must include commentary on whether the budget is predicted to be achieved and any corrective action that must be taken to adjust for revenue shortfalls or overspending.
At each step of the way, there needs to be some assurance that we do not start a trend that takes us backward to increasing debt and job losses. If revenue does not grow as the Government intended, expenditure, which is government-influenced, must be reduced accordingly to protect the needs of the people.
It is normal to talk about revenue-generating options, but Bermuda's debt woes have been attributed generally to overspending, which makes it so important for Bermudians to have a clear understanding of the cost of the spending choices.
The Bermuda Economy 2017: Updated Review stated that at the six-month point, the overall current expenditure, excluding debt service, was tracking at $3.6 million over budget estimates. It is possible that this was related to the removal of the salary freeze and the discontinuation of the voluntary retirement scheme.
The Pre-Budget Report indicates that the Government's revised current account expenditure, excluding debt service, is expected to fall between $914 million and $932 million, which is said to be in line with the original estimate of $923.5 million provided in the 2017-18 Budget. This confirms that the spending discipline carried out by the OBA government provided the base to achieve this, so perhaps there is no reason to be concerned.
However, given this, it is mind-boggling that the finance minister brought forward a supplementary so soon after taking office. Being fiscally responsible, this is usually done after making adjustments to offset any cost overruns, and once it is confirmed that expenditure will actually result in overspending. One explanation is that the finance minister has done this to provide the Government with a cushion.
The sooner we reduce our current account deficit and get our debt problem under control, the sooner we will reap the benefits of debt reduction — faster economic growth, enhanced employment opportunities, faster wage growth. We will have more flexibility to spend our money the way we want: to address Bermuda's priorities, and to meet the needs of all our people in the near term and for the future.
The new government has incorporated the use of various committees in its policy and decision-making. Delays in establishing or obtaining reports from these committees will negatively affect the timing of decision-making and thus strategy implementation. It is clear that the start-up of programmes and policy initiatives must be achieved in a timely manner if they are to have the desired result. Given the importance of the Tax Reform Committee, it is critical that work on tax reform starts without delay.
The Pre-Budget Report is presented by the Government as an indication of its desire to be more transparent and accountable. As the Opposition party, the role of the OBA is to speak up on behalf of all the people of Bermuda. The Government has asked to be held accountable and the Opposition will ensure that it is held to account.
The OBA expects the PLP government to deliver on the programmes that are important to the wellbeing of the people of Bermuda — and for the Government to demonstrate for the people how it intends to lead us out of debt, to reduce the financial burden on our children, and not spend now with a promise to address the issue later, which will only take us back to an all-too-familiar, precarious financial position.
We will support policy options that lead to growth in the economy, increase employment and address social issues. However, we believe that it is time to change how we measure success from “on time and on budget” to include “programme objectives met”.
Only then can the public know that monies are well spent on their behalf.
• Jeanne Atherden is the Leader of the Opposition, the Shadow Minister of Finance and the MP for Pembroke West (Constituency 19)