Video: BDA’s Fahy Responds to Budget

February 18, 2011

[Updated] Bermuda Democratic Alliance financial affairs spokesperson Michael Fahy spoke with us today [Feb 18] after the Premier and Minister of Finance Paula Cox delivered the 2011/12 budget.

He praised the Premier for the payroll tax rollbacks, saying “The BDA is very pleased to hear about the reducation in payroll tax,” saying  “they think its a good start to actually put some stimulus into the economy.” Mr Fahy said the “devil is in the detail,” and asked if the revenue expectation of $940 million dollars is too high, and said their initial impression is that it is, but that will have to be seen in coming weeks.

In a statement issued before the budget, Mr Fahy said: “We are of the view that this is the toughest budget ever for the Minister of Finance.”

Update 5:41pm: Full statement from Mr Fahy:

We welcome the news from the Premier that payroll tax will be rolled back, reducing the cost of employing workers in Bermuda. We also welcome the allocation to small business to undertake a variety of small projects. Both of these issues have been pressed repeatedly by the BDA as a way to stimulate the economy and assist small business. We do however have immediate concerns. As preliminary comments only we do not think this budget goes far enough in dealing with the economic realities that Bermuda faces and it does not deal decisively with growing debt levels. This appears to have the hallmarks of an election budget. The words expressed in the budget simply don’t match what appears in the budget itself.

As we predicted the Government has tried to blame our economic woes on the economic strife in other jurisdictions, without Government recognising that their own fiscal imprudence and mismanagement has brought us to where we are today. Our failure to address concerns of International Business regarding work permit policies, payroll tax increases last year and other complexity taxes has also not assisted. Whilst some of Bermuda’s woes can be blamed on market conditions outside Bermuda, the problems are largely due to the Government’s failings in respect of capital project overruns, overspending, lack of saving for a rainy day and frankly thinking differently about how to protect and grow International Business. Promises to prevent overruns have already been made, so the announcement to this effect is simply repetitive and designed to make people think that this is a new initiative. The announcement relating to how these projects will be managed are shocking. Why? Well we have to ask why was this not done before?

We are at a loss as to how the Government expects to raise the projected revenue of $940 million. We do not believe that there will be the projected turn around in the re/insurance sector to justify the projections. Urging us to pull together is simply not enough. We hope we are wrong and the Premier is right but indicators across the Bermuda market are diametrically opposed to the optimistic outlook expressed by the Premier. Given that the budget deficit is some $80 million more for 2010/2011 then was projected, we simply do not believe the Premier’s projections for the coming fiscal year. As it is she is projecting running at a significant deficit this year with very optimistic revenue projections. The Premier is aware there is a revenue shortfall so cutting expenditure further would have helped tremendously.

We also would have expected to see more than a hiring freeze, which was already announced, in the public sector. We believe that whilst the decision would have been unpopular to cut some hours in the civil service, that would have been the more fiscally responsible solution to tackle our debt. We believe that the failure to do this is unrealistic and is simply setting up Bermuda to fail. Unfortunately there is far too much emphasis on hopes rather than realities. Revenues are decreasing and remain lower than expenses, so borrowing will increase. This is unsustainable.

In addition, the use of what can only be really termed as creative accounting as regards the removal of the $200m guarantee to Bank of Butterfield from debt figures to allow the Government to stay within the debt ceiling is disingenuous and artificial at best. This removal in fact hides the true debt position. The week long delay in the presentation of the budget is all the more bizarre given the failure by the Premier to deal with the debt problem decisively. All is not well and this budget is not fiscally prudent or responsible. Certainly the reduction in payroll tax is welcome, but there is not really the kind of expenditure reduction that would be expected given our circumstances. Given that we are attempting to stimulate small business we wonder why, for example the BSBDC budget has been cut. In short, the budget lacks creativity at a time when innovative solutions are needed. There is no suggestion of, for example, flexi work schedules, no privatizing of some Government functions with guaranteed jobs for all workers being affected or any other innovative plan for that matters. The devil is in the detail so we hope that more will be flushed out in the debate and our MP’s look forward to making more positive proposals to the Government on what we can do to stimulate growth and save money.

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  1. Bottom Line says:

    This budget was not re-setting any “dials”. It was the same o’l thing wrapped in better paper. The PLP are slowly bankrupting Bermuda. But like the alcoholic, the PLP and their supporters are in denial. By the time they recognize this disease which is chronic within govt it may be too late. I’m not sure if any new govt will be interested in fixing things then. Folks with half a brain or more will just leave. The PLP needs to check into rehab before things get beyond the point of no return.