Fiscal Responsibility Panel Annual Assessment
The Bermuda Fiscal Responsibility Panel 2019 annual assessment has been completed.
A Government spokesperson said, “The fifth annual assessment by the Bermuda Fiscal Responsibility Panel has been completed.
“The report can be found on the Ministry of Finance section of the Bermuda Government portal and will be laid before the legislature when Parliament returns in the New Year.
“Established in 2015, the Panel was created to increase transparency and international credibility – an international, independent committee to review, monitor, assess and publicly report on the fiscal progress of the Government.
“The Panel provides Bermuda’s Parliament, the Minister of Finance and the Financial Policy Council with an annually published assessment of the island’s fiscal strategy, focusing on progress in meeting the Government’s medium term objectives for public spending, taxation, borrowing and debt reduction.
“The Fiscal Responsibility Panel is comprised of three leading international experts in public policy, finance and financial stability. Jonathan Portes is now the Chair of the Panel, David Peretz having retired. Mr. Portes is the Principal Research Fellow at the UK National Institute of Economic and Social Research, whose expertise covers a wide range of economic policy issues, including fiscal policy, labour markets and immigration, poverty, and international economic and financial issues.
“Also on the Panel is Peter Heller, retired Deputy Director of the Fiscal Affairs Department of the International Monetary Fund, who has written extensively on public finance issues, pensions and health care, and long-term demographic challenges. Marian Bell has been appointed as its newest member. Ms. Bell is a British consultant economist, and was a member of the Bank of England’s Monetary Policy Committee from June 2002 to June 2005.
“The Panel had meetings with Government Ministers, officials, various institutions and individuals during the course of its discussions in Bermuda during the period December 2 – 6, 2019. During these discussions the Panel heard views about Bermuda’s economic prospects [and risks to those prospects] and challenges, in the short, medium and longer term. While the Panel consulted many individuals and organisations it should be noted that they are an independent panel and the judgments and recommendations made are their own.”
The full Fiscal Responsibility Panel annual assessment follows below [PDF here]:
“Given the fiscal position, and the limited progress of the Government in acting on our previous recommendations, we are concerned that Bermuda will have little fiscal or macroeconomic policy space to address any crystallisation of these risks.”
The “the limited progress of the Government in acting on our previous recommendations” is worrisome. That the “the key concern for policy action remains domestic: the island’s shrinking workforce and ageing population will put ever-increasing pressure on both taxes and spending” is not news. We all know this, or at least we have all been told this. Some may refuse to accept it for personal reasons.
In one sentence the independent panel of experts has confirmed what I have been saying for some time, which is this. “On tax reform, we regard 2019 as a year of missed opportunity, not just because of the further delay in meeting the target for budget balance, but because of the absence of significant tax reform along the lines of that proposed by the Tax Reform Commission or this Panel, as well as the de facto easing of the government’s fiscal targets facilitated by the suspension of contributions to the Sinking Fund.”
I will conclude now with this comment from the Panel.
“Financing conditions in international markets can change quickly, either because of a loss of confidence in the Government’s fiscal strategy, or as a result of unrelated market developments. Nor, in our view, should the Government take comfort in the relatively sanguine attitude of the ratings agencies, which are generally a lagging indicator – that is, by the time they raise the alarm, it is already
too late.”