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Bill removes guarantees from public debt until due date

An act which redefined public debt passed in the House of Assembly yesterday despite opposition.

The Government Loans Amendment Act 2011 removes guarantees from public debt until they are due and payable. Premier Paula Cox said the new definition would more accurately represent public debts, Shadow Finance Minister Bob Richards argued that the amendment is an attempt by the Government to increase the amount of debt the Government can amass.

“It clearly represents a shifting of the goalposts in the middle of the game,” Mr Richards said. “If the debt hadn't been skyrocketing, we wouldn't be looking to change the definition.”

Until last year, the statutory limit on public debt had a ceiling of $1 billion, but that limit was raised by 25 percent to $1.25 billion, increasing the amount of money Government can borrow.

By excluding guarantees from the figure charged against the debt ceiling, the Government will be able to borrow more without having to again increase the ceiling.

The Premier argued that guarantees, such as those for the upkeep of the hospital once the new building is completed, should not affect the public debt until payments have to be made.

“As the first payment on the contract is not due until 2014, it has no impact on the debt ceiling at this time,” she said.

She denied that Government was trying to mask or hide debt, saying: “If there is one thing people say about me, it's that I am a straight shooter.”

But Mr Richards responded that if she was being sincere, she would have lowered the debt ceiling to match the amount moved from the public debt. “This is an attempt to get more borrowing power without raising the ceiling,” he said.

Grant Gibbons said that while the Premier was confident that not all of the guarantees, such as the $200 million Butterfield Bank preference share issue, would ever be called in, Government should still be prepared if things go wrong.

“It probably was a good bet, but it still was a bet,” Mr Gibbons said. “Is it risk free? No, it's not. There is still a chance that it could go wrong. There is no such thing as risk free. That is why the guarantees should stay in the public debt.”

In a vote, the amendment passed with a vote of 16 to eleven with Government MP's unanimously supporting the bill.

Useful website: www.gov.bm

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Published March 03, 2011 at 9:16 am (Updated March 03, 2011 at 9:15 am)

Bill removes guarantees from public debt until due date

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