Richards calls budget ‘an extravagant attempt to make things look better than they really are’
Shadow Finance Minister Bob Richards has taken aim at Government’s budgeting ability, and criticised the Finance Ministry for not promoting economic stability and growth as required by its mission stated objectives.
He said a payroll tax hike two years ago had forced some businesses to go out of business and had driven others overseas.
And tax harmonisation amounted to a policy flip-flop.
Mr Richards said that an unstable environment was the result of such actions by Government and inhibited entrepreneurial activity.
Instead of economic growth, Government had presided over growth in the national debt, social anxiety, uncertainty and hopelessness, he said.
“It’s the type of growth we certainly could do without.”
Mr Richards also criticised Government’s budget management abilities, saying its estimates had consistently been off the mark.
“The budget is deliberately unreasonable because its deliberately political,” he said.
“It’s an extravagant attempt to make things look better than they really are.”
Government, he said, was now borrowing money to put into the sinking fund “which is there to repay debt”.
He predicted that the new debt ceiling of $1.45 billion would be reached “pretty darn quick”.
Mr Richards said the fact that supplementaries were brought to the House for approval “year after year after year” indicated that the budget process is flawed.
He said the Ministry of Finance is supposed to monitor spending and hold departments accountable for overspends but had not been doing so.
“It seems the sheriff has no bullets in his six-gun and everybody seems to know it. Therefore no one obeys this sheriff.”
Mr Richards said that Government had failed to borrow at the best rates when it issued the last bond on the international markets.
And on Government’s current plan to float a local bond offering, he predicted that the administration will offer the bond public funds, including the pension funds.
But he warned that that would be a conflict of interest as Government would be borrowing from entities it administers.
“There is a clear conflict of interest here,” he said.
“There is no way the investment of Public Funds’ money in Bermuda Government bonds can be an arms length transaction impossible. It is totally incestuous.”
But he said that Government’s intention to offer the bonds to the public funds was clear from its decision to divert pension contributions for current account spending.
“Borrowing from Public Funds is the logical next step,” he said.
He warned that the plan to divert money from the Public Service Superannuation Fund is wrong.
“The civil servants pension is an important compact between the Government and its workers, and that compact has to be honoured.”
Turning to performance measures, Mr Richards noted that the variance between budgeted spending and actual is 1.7 percent as compared to 1.3 percent the year before.
And he noted that the percentage of Ministries coming in below budget had “markedly deteriorated” from 73 percent to just 50 percent.
“This to me is amazing from a Government that has vowed to cut costs.”
And he warned that a small increase in interest rates could lead to skyrocketing debt service costs.
Mr Richards said that the ratio of debt service costs to revenue was a more appropriate measure than debt to GDP ratio favoured by the Premier.
The current debt service to revenue ratio is 13 percent up from two percent in 1998 and, 1.5 percent in 2004 when Ms Cox became the Finance Minister.
What this means, he said, is that the Government only has the actual use of $0.87 of every dollar it raises.
“This is how debt hobbles Government’s ability to help Bermudians in need.”
And he dismissed Government’s assertion that the debt was used to build hard assets and provide an economic backstop.
From 1998 until the coming fiscal year, the national debt had increased 900 percent while financial assistance had increased only 269 percent.
And debt service had increased 807 percent three times the expenditure on financial assistance. Debt had increased three and a half times over hospital spending, he said.
“These numbers show that increases in spending in helping agencies was nowhere near overall increases in debt or debt service. Therefore the facts do not support the Minister’s statement.”
Turning to the Finance Minister’s argument that the debt was spent on hard assets, Mr Richards said that the amounts spent on Berkeley, the new Court building, the airport, Dockyard, Port Royal, Sylvia Richardson, Harbourside, and the Lambe Foggo clinic only amounted to $440 million of the $1.2 billion debt.
“Where did the other $792 million go?” he asked.
“The facts do not support the arguments that this debt was raised helping our people and building hard assets.”
Mr Richards countered Government’s argument that heavy debt was an inevitable consequence of helping vulnerable groups and vital public building programmes.
Debt increase has far outstripped spending on such projects, the Shadow Minister told the House.
“The more likely scenario is that this huge bloating Government, this expanding balloon, is what has used up all this money. Plus a huge contribution of hideous waste,” he said.
He said hard assets are no use when debt needs to be repaid, saying only liquid cash can answer that need.
And he warned payment of interest on debt has to be the number one priority, above paying Government salaries, building projects and running the hospital.
By dipping into the Sinking Fund to make interest payments on debt, Government has demonstrated it’s got severe cash problems, said Mr Richards.
He likened Government’s overspending on projects to a family that bought a big house before realising further down the line they couldn’t afford it.
“We don’t expect that kind of conduct from Government,” he said.
Mr Richards concluded by saying he doesn’t like to repeatedly criticise Government, but the One Bermuda Alliance believes Bermuda needs to make significant changes to the way it approaches financial matters.
When Families Minister Glenn Blakeney heckled this suggestion, Mr Richards responded: “That gentleman must be deaf and blind. We have laid out our plan.”
Charlie Swan, who was elected as a United Bermuda Party MP, stood with about a minute of the debate remaining; enough time to say he had some questions, but not enough time to say what they were.
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