Video: Finance Minister Press Conference

[Updated] Minister of Finance Curtis Dickinson will be holding a press conference this morning [Dec 20] to discuss Ministry of Finance matters and we will stream it live, so the video below should start at around 11.30am.

Update: Some of the key points from the Minister’s remarks are below

• Current expenditures for fiscal 2021/22, excluding debt service of $127.5 million, are now projected to increase by $41.4 million, which will revise total current expenditures to $944.4 million. This increase represents unbudgeted additional expenditures of $56.4 million, which is partially offset by $15.0 million in identified cost savings.
• It is imperative that the budget deficit target of $124.7 million, for fiscal 2021/22 is not exceeded, given the current high level of public debt.
• To ensure the deficit target is not breached, as noted above, expenditure levels have been adjusted to reflect $15.0 million in savings through work done by the Ministry of Finance, in conjunction with Cabinet and other Ministries.
• The majority of these savings will result from vacant positions throughout the Government, which have yet to be recruited. Steps are also being taken to ensure that overtime is further managed and limited to use in essential matters only.
• Capital expenditure, which was originally estimated at $92.9 million, will be reduced by $25.0 million to $67.9 million.
• It is anticipated that the pre-budget report will be presented in early January.

Update: The live broadcast has concluded and the 17-minute replay is below

Update 1.05pm: Minister Dickinson’s remarks:

Thank you to the members of the Press who have joined today for my final press conference of 2021. I thought it would be an opportune time, during this season of giving and sharing, to give a further update on some key fiscal and economic matters. However, before I commence my main remarks, I would like to express my sincere appreciation once again to all of our front line and dedicated community workers, who have played a critical role in helping to deal with the challenges related to COVID-19 that we have once again had to be faced with in this year.

This pandemic has had an impact on all of us, but once again the people of Bermuda have demonstrated their resilience and fortitude, as they have worked together and with the Government of Bermuda to assist persons in the community in health and financial matters, in particular.

As I highlighted in my recent Ministerial statements presented in the House of Assembly, there have been a number of fiscal and economic challenges that the Government and Bermuda have had to address during the fiscal year to date.

In relation to external matters, significant time has been spent, working with industry partners and others, on actions related to the OECD Global Tax initiative. The Ministry team has been closely involved in the discussions with the various working groups of the OECD to ensure that Bermuda’s interests are appropriately represented.

We remain committed to progressing this matter, with appropriate collaboration and communication with industry and other stakeholders, to ensure an outcome that is beneficial to all relevant parties. In addition, considerable work has been done to ensure that the Economic Substance framework has been appropriately and effectively implemented.

We have undergone a number of assessments this year in areas related to these global tax initiatives, and we continue to work closely with the OECD and the EU to progress these matters and to demonstrate our commitment to a high level of compliance.

The agencies of the National Anti-Money Laundering Committee have focused this year on progressing Anti-Money Laundering/Anti-Terrorism [“AML/ATF”] matters, in preparation for our May 2022 follow-up review on the actions taken in response to the recommendations contained in the 2020 AML/ATF Mutual Evaluation report. They have also worked on updating Bermuda’s Money Laundering National Risk Assessment, and the final report on this is expected to be published early in 2022.

In relation to AML matters, it should also be highlighted that Bermuda has recently taken up the baton to Chair the Caribbean Financial Action Task Force [CFATF]. This body, whose members include most of the countries in the Caribbean, is responsible for, among other things, working with its members to improve compliance with international AML/ATF requirements, including through the mutual evaluation program.

The work being done in addressing all of these international initiatives is critical to the economy of Bermuda, given its relevance to Bermuda’s reputation as a substantial economic center with industry of global importance. By preserving our quality reputation, we can continue to retain and attract quality international business, which is a substantial contributor to government’s revenues, providing valuable income that can be used to fund social services and other key government initiatives.

In addition, the knock-on effect of spending, by this sector, in other areas of the economy positively impacts all of us. Overall, this sector of the economy has proved to be a source of stability and support during the challenges caused by the pandemic and as a result, which will be highlighted later, some areas of government revenue have remained strong or shown slight improvement.

On December 10th, the last day of Parliament for the first session, I presented a ministerial statement providing the Mid-Year performance assessment, and information on the revised revenue and expenditures for this fiscal year. In my statement I was able to provide an update on key economic statistics, which showed increases over 2020 levels in certain significant areas, such as employment income, imports, visitor spending, construction activity and retail sales, for the first three quarters of calendar 2021.

Key to these improvements were the measures taken to keep Bermuda open for business in 2021, after severe disruptions in 2020 to combat the spread of COVID-19. Although these figures are generally below the 2019 pre COVID-19 levels, it does demonstrate that the economy is moving in the right direction.

The original revenue budget estimate for 2021/22 was $998.9 million. Having completed a further review of the November performance, the revised estimate for 2021/22 revenue is $1.015 billion, an increase by $16.3 million. As noted in that Ministerial statement, key factors contributing to the revenue estimates include increases in customs duty, stamp duty and civil aviation receipts. Not surprisingly, there have been decreases in passenger and transportation infrastructure taxes due to the impact of COVID-19 on the tourism sector. However, payroll taxes are still forecast to be on budget, given, in particular, the previously mentioned resilience in the international business sector.

In relation to expenditures, the original current account expenditure for 2021/22 was forecast to be $903 million. Having carefully assessed expenditure to date as well as upcoming critical commitments, current expenditures for fiscal 2021/22, excluding debt service of $127.5 million, are now projected to increase by $41.4 million, which will revise total current expenditures to $944.4 million. This increase represents unbudgeted additional expenditures of $56.4 million, which is partially offset by $15.0 million in identified cost savings. The additional expenditures relate primarily to the impact of ongoing COVID-19 related challenges, as well as legacy issues such as the airport revenue guarantee and Morgan’s Point. The Government had budgeted some spending on temporary Unemployment Benefits, but because of the continuing pressures from COVID-19, more funding has been allocated to provide critical support to impacted individuals. There has also been recognition, in determining the estimates, of the ongoing need for further relief in other areas including financial assistance, and payroll tax and custom duty relief to provide additional help to individuals and businesses. Additional support has also been required for the Hospital.

I have continuously highlighted, throughout this year, that it is imperative that the budget deficit target of $124.7 million, for fiscal 2021/22 is not exceeded, given the current high level of public debt. It is important that I reiterate what I have stated on a number of occasions, namely that a breach of the deficit target should be seen as a serious issue, as it could have a potentially negative impact on the cost of refinancing government debt in the future, and on Bermuda’s credit rating. The importance of continued prudent and disciplined fiscal and economic management and adherence to fiscal targets has been reinforced in recent rating agency reports and in guidance provided by the Fiscal Responsibility Panel and the Financial Policy Council, following their recent deliberations.

To ensure the deficit target is not breached, as noted above, expenditure levels have been adjusted to reflect $15.0 million in savings through work done by the Ministry of Finance, in conjunction with Cabinet and other Ministries.

The majority of these savings will result from vacant positions throughout the Government, which have yet to be recruited. Steps are also being taken to ensure that overtime is further managed and limited to use in essential matters only. Capital expenditure, which was originally estimated at $92.9 million, will be reduced by $25.0 million to $67.9 million. This new level is in line with the actuals in 2019/20 and 2020/21, and appropriately reflects work to date and what is anticipated, as progress in this regard has been impacted by resource shortages related to the COVID-19 pandemic. These actions, along with the expected increases in revenue, will allow for the required additional expenditures, without compromising achievement of the deficit target.

It is anticipated that the pre-budget report will be presented in early January. This will provide insight into how the Government is proposing to address some longstanding challenges; work on which must be progressed.

These include tax reform, pension reform, infrastructure upgrades and health reforms including the underfunding of the GEHI plan. The budget for 2022/23 will also have to address climate related matters; the continued fiscal constraints relating to the high level of debt; the likely ongoing realities of COVID; and continued challenges resulting from external tax and other relevant initiatives. Finding appropriate solutions will not be easy, but Bermuda has continually demonstrated that we can work together in times of challenge, to protect and preserve this beautiful island, that is our home.

In closing, I would like to thank my Cabinet colleagues, the Ministry of Finance team and all of the employees in the public service who have played a positive role in the progress made to date, in relation to fiscal and economic matters.

I am grateful for the support and collaboration that we continue to receive from our private sector partners. Last, but certainly not least, I would like to express my sincere appreciation to you, the people of Bermuda, who have continued to demonstrate your strength in times of adversity, courage in the face of continuing unknowns and support in navigating the ongoing fiscal and economic challenges.

During this special season, I would like to wish each of you a safe and enjoyable holiday.

Thank you.

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