Budget Breakfast grilling may be hard to stomach for new finance minister
Expect a lot of political shots fired during this year’s budget debate, and expect focused questions and observations during the annual Chamber of Commerce Budget Breakfast.
Losing Curtis Dickinson is unfortunate. He won widespread respect as finance minister. Who will now present the annual Budget? The Premier?
Whoever next holds the finance brief will have to explain to Parliament why the country will have to raise the debt ceiling again and why we will need to eventually borrow again to pay the bills in a spiral we may never escape.
Borrowing will become more expensive with interest rates expected to begin to rise as early as next month and with other increases to follow throughout this year.
Some Bermudians say public debt will never leave us. Some are OK with that. Some don’t care.
Some are unaware of how important the debt crisis is to their way of life – how it will impact and impair their children’s way of life and how it has already.
Runaway debt means outside money will always own Bermuda. So much for the idea of ‘independence’.
Rising unemployment, increasing costs of social assistance, rising labour unrest, rising debt and declining retail income and falling Government revenues are all problems.
Tourism is in crisis and was before the pandemic because Bermuda can’t figure out how to attract more air arrivals.
A future finance minister will also have to explain why the country will not be able to balance the budget for years to come – with the sinking fund included.
But it gets worse – especially concerning a key responsibility for the minister and his ministry.
There is quiet concern that Bermuda could be added to the European Union’s grey list of alleged tax havens again, a decision that could be taken by EU ministers as early as next Thursday.
If true, it will be a blow to Bermuda, to the Government, to the ministry and to the next minister.
Could this be part of what is behind Dickinson’s mysterious departure?
The grey list is one step removed from the notorious black list of what the EU has decided are the biggest “tax havens” – which face EU sanctions.
Even grey listing is a public-relations nightmare – the EU has claimed that Bermuda has failed to meet its promises over tax reform.
If we have been grey listed, it could be the second time Bermuda has dropped the ball on the EU sanctions list.
Could we have made the same mistake twice? Or are the Europeans just moving the goalposts again?
The island spent two worrying months on the EU blacklist in 2019, after what the Premier called “a drafting error” in our EU-required economic substance regulations.
We finally got back on the white list a year ago, in January.
The ministry has been busy pushing Bermuda’s agenda on the global tax issue and a new minister will need to catch up fast.
Another looming problem for the next finance minister is the agreed support for Gencom in the redevelopment of the Fairmont Southampton Hotel.
What the government can offer – and what Gencom really needs – is a Government guarantee because it comes down to the comfort level of would-be investors.
Gencom is a private equity fund that does not have its own money to invest. It struggled to find a spare $11 million to pay redundancies.
It has to go to market and find investors who will put about $200 million into a Bermuda project with the confidence of a return. For investors, that confidence may require a Government guarantee.
But the Government has already objected to the former One Bermuda Alliance government’s guarantees over the airport development and the hotel development at Caroline Bay, the former Morgan’s Point.
Can they sell this guarantee to their political supporters, or to business people who have also taken a beating during the slow tourism years and the pandemic? It is not just the common man who has suffered the new Bermuda.
A walk through the emptiness of Washington Mall in Hamilton may reveal the retail sector as an obvious casualty, but there is enough hurt to go around – and still more yet to come.
But the present administration has one thing in its favour the OBA never had – a pandemic.
Countries – not just Bermuda – have been willing to forgive their leaders for things that did not quite go to plan because almost anything can be blamed on the Covid-19 crisis, in many cases justifiably.
But that can only last so long. There is another ten days before legislators get sight of the new Budget.
Shortly after that, there may be some scalping of Chamber of Commerce Budget Breakfast tickets just to see how the new minister defends budget policies from the keen financial minds of the private sector, many parts of which have suffered from the economic downturn.