BDA: Bermuda’s Financial Reputation In Jeopardy

Today the Bermuda Democratic Alliance [BDA] announced its economic platform at a press conference. Saying that the economy has deteriorated over the last five years, the BDA say the government has been spending more money than it generates, and that their platform will commit to spending less than they generate.

They also state that “Bermuda’s reputation as financially sound and fiscally prudent jurisdiction is in serious jeopardy.”

The full statement follows below:

Today, Bermuda’s economy is in a precarious state.

We’ve watched our economy deteriorate over the past five years.

The current Government continues to spend more than it raises in revenue, plunging the island deeper and deeper into debt.

The numbers clearly tell the story. As of 2009, the Government’s debt stands at $850 million. This is up from $120 million just five years ago.

In real terms, that $850 million represents a $25,000 debt for every taxpayer. That’s $25,000 from each of you to get us out of this economic hole.

This also means that we have incurred more debt in the past five years than in the preceding 395 years combined.

Capital projects like the new cruise ship pier in Dockyard and the courthouse are coming in way over budget.

We are dependent, more than ever, on international business at a time when many of our flagship exempt companies are showing a lack of confidence in our economy, some of them choosing to relocate.

Two thirds of Bermuda’s business leaders expect things to get worse.

The Bermuda Democratic Alliance has identified the following as key contributing factors to Bermuda’s deteriorating economic situation:

• Poor fiscal planning and lack of transparency in Government spending;

• Government spending in excess of revenues has resulted in increased government borrowing, compounding the country’s debt burden to unprecedented levels;

• A lack of diversification of both foreign cash in-flows to our economy, and Government tax revenue; and

• A tax system which is overly burdensome on the lower and middle classes.

We have a plan to steady the ship – to repair Bermuda’s economy and to ensure we can once again flourish on a global scale.

Our plan will assist Bermuda to not only recover from this current economic downturn, but emerge as the international economic center it once was.

The Bermuda Democratic Alliance believes there are four strategic objectives we should employ when managing Bermuda’s economy:

1. Government must make a commitment to achieve a budget surplus over an economic cycle, and work to ensure that current account spending is less than total tax revenues.

2. Government must be transparent and prudent in its spending.

3. Government must, through legislation and policy, facilitate an environment that encourages economic activity, and a further diversification of sources of foreign cash inflows.

4. Government must diversify its sources of tax revenue, and distribute the burden on its citizens more fairly.

We believe we can achieve this through the following initiatives:

Near term Solutions:

• Define a 5 year rolling surplus target, as part of an overall financial strategic plan.

• Increase transparency of government expenses through more detailed and timely public reporting. Expand the influence and powers of the Public Accounts Committee.

• Increase the transparency and effectiveness of the Government tendering system. Increase access to Government projects for small businesses. Ensure that all Departments, Ministries and Quangos use the same procurement system and operate under the same spending procedures.

• Undertake a competitive analysis of other similar jurisdictions, review the work permit process, seeking ways to improve results for Bermuda, Bermudians and Bermuda based companies.

• Consider reverting to a duty system that does not penalize retailers to pay duty until the goods are sold.

• Review payroll tax to stabilize or reduce the cost of living for lower income earners and small businesses.

Longer Term Solutions

• Ongoing effective analysis of the budget and impact on Bermuda’s future financial position.

• Explore potential privatization of some roles/tasks performed by the civil service.

• Promote new industries in an effort to diversify the economy, employment, and government revenue streams. Expand the influence and authority of the Bermuda First Initiative. Explore alternate sources of government revenue and foreign cash inflows.

• Debt issued for future funding needs to be offered to the Bermuda market in Bermuda dollars before being offered to foreign markets in foreign currencies.

• Support development of Hamilton as a dynamic residential and cultural hub enabling continued growth whilst limiting environmental impact on the rest of the Island. Consider a provision of incentives for companies who have workers living
in Hamilton.

The Bermuda Democratic Alliance understands the important role that Government has to play in managing our economy. We believe that the strategies discussed in our economic platform will lay a solid foundation for Bermuda to build a stronger and more fiscally conservative future.

You can view the BDA Economic Platform Presentation below, click on the right hand side to move to next slide:

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