EIU On SAGE: “Political Risks Would Be High”

January 28, 2014

risk generic 3312According to the Economist Intelligence Unit [EIU], the “political risks of attempting to implement the full SAGE recommendations would be high for the OBA.”

The SAGE Report was released in November 2013, and recommended that expense reductions in the first year equal $65 million; in the second year $80 million; in the third year $85 million; and in the fourth year they should equal $90 million.

Raising the retirement age to 68, reducing the House of Assembly from 36 to 30 seats, closing all post offices but three and reducing staff, privatizing some Government departments, and operating KEMH and MAWI from one site were some of the suggestions contained in the SAGE Report.

The SAGE report also suggested the size of the Cabinet be reduced, and the following month Premier Craig Cannonier reduced the size of Cabinet, with Nalton Brangman, Sylvan Richards and Leah Scott all eliminated.

In a recent analysis, the EIU said in order to avoid downgrades to Bermuda’s sovereign risk rating, the “return of the fiscal accounts to some semblance of balance is now an imperative.”

“The OBA has been slow to signal how far it will go in adopting the recommendations. However, the opposition centre-left Progressive Labour Party [PLP] and trades unions are promising to fight any privatisation plans.

“The PLP favours revenue-raising measures over spending reductions. The political risks of attempting to implement the full SAGE recommendations would be high for the OBA, which has only a two-seat majority in the 36-seat lower house.”

The EIU provides country, industry and management analysis for over 180 countries worldwide.

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  1. Statement of the obvious, but ….. | Bermuda Blue | January 28, 2014
  1. jahbless says:

    Both parties need to work together or get out the way and let bermudians you really want change but don’t want to be in politricks make decisions! We need to educate ourselves and maybe we can vote as a people on decisions. Thats what a REAL democracy is.

    • Betty Trump says:

      “The OBA has been slow to signal how far it will go in adopting the recommendations”

      Could be the UBPoba are “afraid” of The political risks of attempting to implement the full SAGE recommendations would be high for the OBA, which has only a two-seat majority in the 36-seat lower house.”

      Lets wait and see how the political chess pieces on the board will move by this UBPoba government. NEXT MOVE….

      Interesting to watch….folks keep your eyes wide open and ears…read, listen, and carefully critically analyzed the information…do not be “intellectually lazy”…think for yourselves.

      Check Mate……

      • Betty Trump says:

        This will be interesting moving forward…the next move on the chess board will tells us much….WAKE UP folks, and keep alert…. it is Bermuda here that we must be focus on….

      • Hmmm says:

        You are constantly telling people how to think, now you turn around and tell people “do not be “intellectually lazy”…think for yourselves.”

        So when anymore news on SAGE comes about, you will stay out of it. Good , you can start to live by your words today.

        Let us see how trust worthy your word is.

        • Betty Trump says:

          Folks must stay alert to this matter, as it will have a huge impact on Bermuda. Since this government has bad record in regards to “Trust Worthiness” a record of failing to hold fast to its promises, it is key that folks think about this in a critical manner and measure each move on the chess board. It might be a critical move that has long-term ramifications that will impact the average man.

          Yes folks be aware of the next move the chess board.

          Enjoying Singapore..checking out the casinos..

  2. Chris Famous says:

    Tick tock

  3. Burnt bulb says:

    You think?

    Real rocket scientists they are.

  4. Onion says:

    The PLP raised taxes (revenue) virtually every year until 2011 when they were forced to back-pedal and roll back the prior year’s tax increase.

    For them to now claim that the OBA should do what they couldn’t do is once again totally disingenuous.

  5. Family Man says:

    We’ve got a $330m hole every year that needs to be funded by friendly creditors. We’re soon going to run out of friendly creditors.

  6. Sandgrownan says:

    Well duh. This from the “no s*** sherlock” school.

  7. Spanish Point Special says:

    I love how the PLP would prefer to raise revenues instead of cutting. Wonderful! Glad that problem has been addressed. The PLP had no idea how to stimulate business and, therefore, employment thus raising total Gov’t revenue. Instead, they thought that they could raise revenue to keep up with their unchecked spending by raising taxes. Payroll taxes went from 12-14% and there were lines at the door to leave. Afterwards the PLP returned the payroll tax to 12% and praised themselves for lowering them. What did we end up with? Same tax rate and less people so LESS REVENUE! I laugh whenever I hear Burt try and talk economics.

    • Ryan says:

      THIS! This is what I mean when I talk about economic incompetence from the Opposution. Thanks for putting it so eloquently.

  8. Vote for Me says:

    We need real talk. What happened to all ofthe SAGE discussions and public meetings?

    The budger is due soon and Bermuda will need to know what recommendations from SAGE wil be implemented.

    Is everyone familiar with the Economic Intelligence Unit and what they do?

  9. Lois Frederick says:

    The easy answer to all our problems. Raise revenues. No need to make any difficult decisions. No cutbacks needed. Likely result of this path are continued deficits as the prospect of creating new revenue streams is based on creating whole new areas of business which takes many years to develop and that is if you are lucky. Bermuda has a very limited timeframe to make a change to its spending habits – 5 years. A combined approach of reduced spending and a stimulated freed up, business friendly economy is our only hope.

    If we don’t make those hard choices it is going to get a whole lot less pleasant to be in Bermuda. People are complaining about all the things the OBA has done, when in reality they have hardly even started to do the tough job they were elected to do. Just wait, the first of the earthquakes will be hitting Bermuda on Budget Day in a couple of weeks time. Expect a lot of aftershocks to reverberate through out the island. So it is just easier for the PLP to talk about raising revenues when the required alternative is so much harder to actually do.

    The PLP simply don’t have what it takes to clean up their mess. As the Opposition they have been sidelined by the electorate. The OBA are making a real effort to do what is required to revive Bermuda’s fortunes, rather than making simple platitudes. There is the difference.

    • Toodle-oo says:

      It does seem as though a large percentage of the population (electorate) have evolved into a group unable to understand basic economics and instead think that everything is ‘political’ .

      They don’t even understand the ‘music’ much less have the ability to face up to it. And they do not understand that there will be no quick growing of the economy ,thus tax base , and that the massive debt created by the PLP needs to be fixed NOW !

      When what has to be done is finally done they wont like it so they’ll just vote ‘em out .

      I’m sure that they’d rather have a doctor who silently diagnoses that they have cancer which needs immediate treatment to save them but instead chooses to tell them that they have a mild cold that will soon pass. After all , it will make the doctor popular and well liked in their eyes . smh

    • Jus' Askin' says:

      OBA has borrowed $750mn
      Why was it borrowed, if they truly had a plan?
      Where is being held?
      Who is the interest from it going?
      What is the reason they have not made the public aware of their plans yet?
      How long are they going to take to get things done?
      Hard decisions need to be made now or they will only grow. OBA has proven they really had no plan going in. The ‘under the hood’ line is old. Saving $300mn plus from these SAGE suggestions seems like a joke to me. The OBA needs to put that $750mn to use now and stop sitting on it ;-)

  10. more than enough says:

    where did this group pop up from?
    are they a bermuda based organization?
    if so couldn’t they have done the work that the sage commission did?
    what of the funds spent on sage?
    or do we admit, that this too, was just another case of misappropriation of funds?

    • Reading is Key says:

      The SAGE Commissioners volunteered their time to conduct the study.

      So no-one was paid (which is a massive difference compared to yesteryears) and thus no funds were mis-appropriated as you would like others to believe.

      • What? says:

        Don’t pollute the discussion with facts…

      • more than enough says:

        i don’t think so,
        i believe they were compensated for their time.

        • Reading is Key says:

          Believe what you want.

          But the truth is the truth no matter how you much you want to believe.

          • more than enough says:

            this is why i chose the word believe, completely in context…i do not think they were paid now, the members of sage commission volunteered their time and intellect.
            and this, in light of the circumstance we find ourselves in, is indeed an honorable venture.
            i do believe that costs were incurred, in executing the commissions mandate.
            i also believe that these costs were facilitated by a public, private partnership.
            therefore the funds, and possibly the volunteers time, will go to waste if the recommendations are not heeded. if all the recommendations are discarded by the government, this will then be misappropriation of funds. rendering the whole effort futile.

  11. Unbelievebale says:

    Why don’t you lot actually do some work on your own and do a search on the EIU.

    So much hyperbole that’s completely unnecessary.

  12. Show Me the Money says:

    I am pretty sure that the SAGE Commission explicitly stated that it would be foolish to implement all recommendations at the same time.

    I doubt that someone of the caliber of Min. Richards would be foolish enough to enact all recommendations at the same time.

    While it is nice that the Opposition believes they can simply clap their hands and raise revenue, it is a pipe dream at best. For instance between 2004 and 2012 the former Government raised Government expenditure by 74% from $721mn to $1.25bn while only being able to raise revenue by a much smaller 29% or $200 million to $914 million. This resulted in BDA’s deficit increasing from $15mn to $343mn or 2,286%. So why now does the same Party responsible for the above all of a sudden have all the revenue raising answers?

    I would honestly like to see the Opposition’s revenue raising ideas. And yes I know what they have stated they would do, but I want to see the projections of both expected revenue to be gleaned from these industries as well as how many people are expected to be employed in these new sectors. It is easy to say I am going to do this and do that and all our problems will be alleviated, but how long and how much will it take to get the new industry working and how much additional revenue is it expected to generate?

    For instance in terms of the sea bed mining suggestion, can the Opposition please provide a timeline for actually having this industry up and running? It will take research, geological surveys (under the ocean btw), environmental impact studies and the crafting and implementation of legislation and regulation, the issuance of RFPs to potential miners etc.

    All this takes a significant amount of time, effort and of course $$$. So what do we do in the meantime? Do we keep running $300mn deficits and continue to add to our ever ballooning debt and hope that we produce the necessary revenue ten years down the road? Again it is simple and simple minded to simply state we will raise revenue, without cutting expenditures, with no actual plan how to achieve this monumental task. Does the PLP honestly believe that the current level of Government expenditure is sustainable and they see no need to tighten our belts?

    PS: As Bermudians do not possess the current skills or equipment necessary for sea bed mining, I assume you all will have no issue with foreign firms and their workers coming down to BDA to extract our natural resources. Right?

  13. more than enough says:

    help bermuda grow ourselves out of financial dispair-legalize marijuana.

    • Hmmm says:

      Please explain how this would work, where the revenue would come from, how much revenue, the cost of the regulation and controls over its distribution, production and tax collection.

      • Betty Dump says:

        So… the alcohol industry doesn’t work? The alcohol industry doesn’t have to factor in cost of regulation and controls? Are there no laws governing distribution, production and tax collection? Your comment makes no sense. The legalized marijuana industry would be no different than the legalized alcohol industry. Government would earn substantial revenue from marijuana tax, like it does with the alcohol industry.

        • more than enough says:

          furthermore,the saving of the money spent on fighting the herb,
          will be substantial.
          police and judges will free themselves from wasting time on this unnecessary oppression
          jobs would ultimately be created, catering to both the medical and recreational uses of marijuana.this in turn, would create an additional revenue stream, through taxation. ie payroll tax.
          also, any form of herb or products associated with the use, sale, distribution, cultivation, compounding, research, education, etc..that are imported, will be taxed..providing more money for the govenment. strengthening our economy,even further.retail sales, in many areas will receive, a much needed injection of activity.resulting in more taxation benefits.
          and let us not forget, our dying tourism industry? one of the crumbling pillars of our economy. surely, they are in dire need of help.i know marijuana tourism, medical or otherwise,can help here also.ultimately bringing a constant flow of the, ever sought after, foriegn $$$!
          i do not agree, with the taxation of the herb itself, unless imported.

          • Hmmm says:

            Huh, what money fighting it? Local police.

            If it were legalized , there would still be black market sellers, selling it cheap without paying taxes, there would still be crime. The gangs are suddenly going to roll over as they are priced out of the market?

            If anything, the costs in Bermuda would increase significantly.

        • Hmmm says:

          That doesn’t even begin to answer my question. Chalk and cheese. You can’t be that naive …

          • more than enough says:

            your pen name is apt..
            you do not have a clue.

  14. more than enough says:

    despair-that is.

  15. bluebird says:

    We have (69) government departments,tourism has gone.Just tell each department to “CUT” by 10% each year out of there own budgets.Let each Department do it then you will see some changes.
    10% cut each year until the budget is balanced
    But that still leaves us $2.324(B)illion dollars in DEBT.So just continue to cut 10% until that is cleared also.
    Or increase “REVENUE” by Taxisation and kill the economy completely.

    • Deja Vu says:

      The PLPbiu tried that…..they just kept exceeding their allotted budgets, but then again, we don’t have Ministers who ignore the wishes of the Finance Minister’s advise anyone, do we.

  16. Alvin Williams says:

    The old UBP government balance it’s budget on the back of the ordinary working Bermudian while at the same time invested as little as it could in
    Bermuda’s infrastructure and of course the development of social programs were a no no. Already this government is chafing at the prospect of a rising social assistance cost which is in lock step with Bermuda’s unemployment rate which this government has fail to halt despite it’s confident boast before the election that it will stop the unemployment bleeding for Bermudians and create two thousand jobs? We no longer the statement;’ We will stop the bleeding’. No the shock will come when the OBA government falls back on it’s political father’s mantra the former UBP. Balance the budget on the backs of the ordinary working Bermudian and dismantle the only stable area of Bermudian employment; the government workers.

    • Sandy Bottom says:

      The PLP balanced the budget too, when Eugene Cox was finance minister. Was that “on the back of ordinary Bermudians” as well, or did he have another way of doing it?

      And who is going to pay the debt back? The debt will affect every ordinary Bermudian for decades. The Cox/ Brown debt will be a millstone around our necks for decades.

    • Bermail says:

      Where was your outrage when the PLP, in their last budget, cut the funding to Mirrors, Salvation Army, Sunshine League, reduce the eligibility threshold for the Daycare Allowance and eliminated the free BDA College tuition that they promised?

      Where was your outrage when the PLP raised payroll and foreign currency purchase tax during the middle of a recession making BDA that much more expensive for the ordinary Bermudian?

      Why do you all of a sudden care about the backs of ordinary Bermudians?

      You are simply a racist fraud.

    • Ringmaster says:

      “stable area of Bermudian employment”! You clearly do not understand the real world, nor did/does the PLP. Bermuda is currently borrowing $300million a year to keep this “stable employment”. This makes no sense and cannot continue. What is ironic is that the very people the PLP says it helped are the very people who will be suffering the most when the borrowing stops.

  17. Valirie Marcia Akinstall says:

    Did the Government commission this think tank to make an indepth analysis? Or, they just decided to analysis Bermuda for an economic purpose? Are they a credit rating agency? A part of what economic international agency or linked specially to what organisation?

    Have they visited Bermuda and spoken directly with the Unions and the leader of the Opposition for direct feedback? Or is their (EIU’s) slant of the PLP …”the opposition centre-left Progressive Labour Party [PLP]?”

    And did they speak with the Unions before publishing their report? To qualify this comment?”…and trades unions are promising to fight any privatisation plans.”

    When you place an international perspection in the global markets there should be an accurate reflection of all parties, not an intelligent guess based upon your interpretation of the data, recommendations and press releases.

    London, England

  18. 32n64w says:

    No worries; totally understand.

  19. Valirie Marcia Akinstall says:

    This economic think tank falls within the structure of The Economist magazine, owned and published by Time-Warner?

    They have taken the data from the government departments relevant to their research and incorporated the SAGE recommendations, but where did they get their perspective on Bermuda’s political ideologies, the intent of the unions, to formulation where Bermuda is heading, or likely to be heading?

    EIU’s reports on 180 countries must be extensively read, and decisions made based upon their analysis, but have they come to Bermuda to interview any political figures and/or spoken directly with industry leaders? Have they had telephone conversations with the relevant individuals or face to face meetings? If no, then how was their political perspective formulated?

    For example, do they know that SAGE never invited the unions to participate and/or have greater access in the process of its findings.

    EIU’s report is read widely by the international economic communities, so they should be held more accountable for their political perspective in which they paint their economic landscape of a country, as many internationally, will use the final report to misinterpret the picture of labour in Bermuda.

    One of the key factor’s of what moves many companies and/or institutional investors to invest in a country is how stable is that country’s labour force.

    London, England