Opposition Leader On Economy, Debt & More

September 13, 2022 | 19 Comments

“Where is this Government’s long-term plan to get us back on the road to recovery,” Opposition Leader Cole Simons said, adding that “we all look forward to receiving the Government’s long overdue plan to manage the reduction of our debt moving forward.”

Mr. Simons said, “It is now mid-September, and on July 15th, 2022, the Premier made a statement to the House of Assembly regarding an economic Relief Package to ease the burden on Bermuda’s working families.

“In that statement he approved $15 million dollars for payroll tax rebates, school supply support, an increase in the food allowance budget for the Department of Financial Assistance and LED light bulbs, that these initiatives would be in place now and that the funds would come from the positive variance of the Bermuda budget and its performance to date. These are common measures as countries such as the U.K. and the U.S. are also making similar allocations.

“What is troubling is that they appear to be one-off concessions, which are not sustainable. They are very, very, temporary measures.

“What will happen after the $15 million dollars has been spent? How will these families maintain themselves as they will be in the same situation? Are they to expect additional support, and if so, from what source?

“The Premier and Finance Minister is also not addressing Bermuda’s national debt which continues to spiral out of control and Bermuda’s economy that is not close to being robust. Where is this Government’s long-term plan to get us back on the road to recovery as we expect the country to be in this economic malaise for the next year to 18 months, at the very least?

“The One Bermuda Alliance takes the view that if the national debt is reduced, those reduced debt servicing costs can be applied to provide long-term sustainable support programmes for the hard-working men and women of this country.

“We all look forward to receiving the Government’s long overdue plan to manage the reduction of our debt moving forward.”

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Comments (19)

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  1. Jus' Askin' says:

    OBA, again with no plans of their own

    Airport deal has cost us monies out of pocket
    that monies could’ve been used to reduce the debt as well as assist people in need ;-)

    • sandgrownan says:

      Hard to make plans when the well is dry.

      But keep spreading the myth. Only 5/10 for effort though, you forgot Morgan’s Point.

    • saud says:

      Once again…the PLP has no plan and no idea what to do in Bermuda.

      The Hospital deal is costing us multiple millions per year….and all Bermuda does is ship everyone to Boston…to line ‘someone’s’ pockets.
      Bermuda has loudly and proudly proclaimed that we are Homophobic, Racist and Xenophobic.
      Airlines are cancelling, cruise lines are cancelling….and you’re happy with that. LMFAO…you love playing the victim card….did you run out of race cards?

    • Unknown800k says:

      Are you referring to the cruise ships by passing us, the 1.2m to the gr8 doc or the 800k to the great unknown entertainer. Or port royal Berkeley dockyard court building. Sugar tax TA form do you need more info.

    • Toodle-oo says:

      Overlooking the hospital deal , as usual .

    • Triangle Drifter says:

      If the PLP had not run up a debt presently costing over $500,000 per day to service we could have had that airport built & paid for long before the first aircraft rolled up to the gate.

  2. kevin says:

    you must be waiting for a miracle ..this bunch in charge dont know …never did know and we are here expecting them lead us out of the $billions in debt and raising costs , fix the education system , revive tourism , reduce spending , reduce crime , fix simple things like the roads….not a snowballs chance in hell
    thats what 30-6 gets you

  3. watching says:

    Yet again a column from the OBA which has no suggestions, no solutions.
    They will never get the confidence of the electorate with only criticisms.
    This must be why Mr. Simons leadership seems to be in jeopardy.

  4. John Maynard Keynes … says:

    Before Covid-19 struck Bermuda looked like this:

    Gross Domestic Product at current prices $ 7.5 billion (2019)
    Government Debt $ 2.6 billion (2019)
    Government Debt as a % of GDP: 34.66
    Population: 62,000

    The principal drivers of the economy were
    International Business: 23.8%
    Financial and Insurance activities: 15%
    Real Estate activities: 14%

    Tourism’s direct contribution to GDP was around 5.3% according to the latest Tourism Satellite Account statistics (2018)

    It is extremely difficult to project the magnitude of the impact of the Covid-19 quarantine measures on the Bermuda economy, but just as the USA has seen depression like numbers of unemployed, it is reasonable to assume a similar or worse outcome, even with Government providing support for the most needy.

    The implications for Bermuda’s budget deficit are well appreciated but the policy prescriptions that result, are not so clear.
    The Government has raised the debt limit for this year to $2.9 billion versus a current deficit of $2.68 billion. I suspect that additional borrowing and expenditure will have to be significantly higher than this limit implies in order to stabilize the economy. Trying to put a precise number on this is futile. Just as in the USA, whatever it takes is the right number.

    This is somewhat controversial in that I understand the Government is trying to find ways to cut capital expenditures, fearing that failure to do so will adversely impact the country’s credit rating. In this regard I think it is inevitable in the short term that credit downgrades will occur in many, if not most of the world’s countries.

    If this is indeed the case, Bermuda has to get out front by borrowing, on a long-term basis, as much as it can to offset the downside risks to the economy. This will give the Government breathing room to develop a long-term strategy for generating a future income stream that is less concentrated on the financial sector. The rationale for this is quite clear. Interest rates are at long term cyclical lows. There is an outside chance that the US will adopt a negative interest rate strategy which President Trump advocates. However, the European and Japanese experience of negative rates has substantially weakened their banks, which are still an essential transmission mechanism for their economies. With the Federal Reserve not wanting to pursue a negative interest rate policy I believe that borrowing as much as possible for as long as possible is the correct strategy to employ.

    On the basis that the Government can secure more funding than it needs in the very short term it would make sense to expand capital expenditures in areas that can generate significant employment and revenue rather than focus on cost cutting. When the economy is in recovery mode these capital commitments can be scaled back. There is little doubt that a recovery in tourism will be limited this year.

    The reinsurance industry has been under pressure and I understand that one company has cut salaries by 20-25 per cent while others are working to cut expenses in a variety of ways. This will put a significant dent in Island wide expenditures in the short term, making the next 9 months extremely difficult to negotiate economically.

    However, expectations are for a firmer reinsurance market to appear next year, based on rising premiums, and this could lead to more capital being attracted to the industry, a welcome respite from the needed consolidations of the more recent past.

    The big problem here is that jobs in the financial sector are significantly fewer than in tourism. Reinsurance for example currently employs around 1500 people while tourism at the last count had roughly 3200 jobs directly employed and 550 indirectly employed before the virus hit.

    With little hope of an early recovery in tourism there will be a subnormal resumption of economic activity, at least until 2021. This is why a well thought out capital expenditure program from the Government is essential for stabilization. This needs to focus on maximizing employment in the short term.

    Medium to Long Term

    The need to diversify the base of Bermuda’s economy has been recognized for many years. Finding new areas where Bermuda can find a favorable niche to exploit has been much more difficult to achieve. Fin Tech has been one area this Government has explored, with varied results. In a global world it is difficult to gain advantage over players with vast amounts of capital they can employ where they choose, on a cost base that benefits them. This makes it imperative that Bermuda focus on attracting companies with a total package of benefits to them as well as to us.

    Bermuda Needs

    The biggest requirement for Bermuda is population growth and an infrastructure to support it. Bermuda’s population has been in decline since 2005, and its population is ageing. This puts additional strain on the economy requiring more of its resources devoted to health care than other productive uses, spread across a smaller work force.

    Setting up an infrastructure that provides a first-class education to support population growth would logically follow.

    Ideally, Bermuda wants to attract people in their late twenties or early thirties with career potential in the sectors the country decides to focus on for its own growth. The tech sector is clearly where potential growth lies, with software development and artificial intelligence prime areas.

    I realize that there are issues dividing Bermuda about the extent to which Bermuda needs to open its borders to expand in a way that benefits Bermudians, but I feel that a smaller share of a growing pie is better than a big share of a shrinking pie.

    Attracting Overseas Business

    One way of redressing this situation is for Bermuda to get help from the companies it attracts in the form of support for its educational and infrastructure needs. It should be emphasized that Bermuda is an attractive destination in terms of taxation, climate, and infrastructure. Thought could be given at some point to setting up a tech town to accommodate technology companies. This could be linked in time to a Tech University. The idea would be similar to what Silicon Valley became over the last 30 years. It would be expected that Bermudians would get a free education and opportunities to benefit from being at the cutting edge of technology. At the same time Bermuda could achieve its goal of expanding the population base to support this infrastructure.
    The ancillary benefits of having a population of let us say 90,000 dispersed across the Island are clear. There would be opportunities of all kinds in the service sector; restaurants, real estate, legal services etc, with a youthful population providing the base for future families to live in Bermuda rather than emigrate to secure their future.

    Infrastructure

    The inevitable recession Bermuda has to confront provides the opportunity to accelerate planned infrastructure spending. This will provide a direct stimulus to the economy at the time it is most needed. In my view full implementation of an integrated energy policy would be the best use of funds. Much has been written about this, but I am not sure that the Government has reached a decisive conclusion on how best to proceed. It is clear, however, that now is the time such an initiative should be undertaken. There is an opportunity for Bermuda to be at the leading edge in implementing policies that are not only fuel efficient but environmentally friendly. I defer to the experts in this field to determine the best course of action.

    Real Estate

    This is an important sector of the economy impacted on several levels since the financial crisis of 2008/2009. A declining population, alongside high transaction charges, overarching bureaucracy and relatively expensive financing options for purchasers of property meant that pre Covid-19 the overall market was stagnant.

    Consolidation in the reinsurance industry and a relatively soft retail sector constrained the commercial real estate market. Home sales were also adversely impacted by delays in securing licenses for overseas purchasers, swingeing license fees and substantial stamp duties. One other factor rarely mentioned, but also important, is the relatively high fee structure of the Real Estate agents themselves. There is quite simply no liquidity in the market.
    Offsetting the pile on effect of Covid-19 on this situation requires flexibility on all sides. Government should review its regulation of purchases by nonresidents, reduce the length of time to approve licenses and take steps in the short term to reduce fees. Brokers should be encouraged to cut their transaction fees and the Banks should be cognizant of the negative impact of charging relatively high interest rates on loans when the cost of money is comparatively low.

    While there need to be strong protections in place for lower income families, a sensible reliquification of the property market would follow an easing of restrictions and a reduction in overall transaction costs. This clearly requires all parties, Government, Banks and Real Estate Brokers to cooperate if a successful resolution is to be achieved. The devil is always in the details, but it is vital that all sides recognize their mutual interests are actually aligned.

    Submitted to Ministry of Finance – Spring 2020

  5. hmm says:

    When will he realize he’s being used for the color of his skin just as Jarrion will be!

  6. me says:

    both of you played kic tha can ….. cole your team was just as good as this current party, professional can kickers!

  7. Ringmaster says:

    The PLP will never pay down the debt. If there is a happy surplus it will be used to pay Civil Servants, or repair pot holes in the roads. Bermuda’s debt is fixed, it can only get worse under the PLP. This is going the Jamaica way, in 1976 a JA$ was .95 to the US$. Today it’s 150 to the US$.

    • Joel Ferenz says:

      What’s Jamaica got to do with Bermuda? How are they remotely comparable?

      As a British colony, Jamaica was always incredibly poor. In 1961 when the British finally left Jamaica, its GDP $429 per person. Bermuda’s GDP per person was five times higher than Jamaica’s in 1961.

      Jamaica is a cash crop and resort tourism economy. Having a high-value currency would be suicidal. It would make Jamaica’s cash crops and tourism products much more expensive than its competitors in Dominican Republic or Cuba.

      It is very true that Jamaica went through some pretty bad times, especially during the 1970s, due to corruption and bad political and economic policies. Bermuda, which has had 95% self-government since the 1968 constitution, has never gone through anything remotely as chaotic as that.

      Jamaica and Bermuda have absolutely nothing to do with each other. If you are making that comparison, you need to ask yourself what makes you think they have anything in common and whether that reflects reality, or is just an assumption you made.

  8. ROBERT STEWART says:

    Both sides of the house have no viable policies to correct the financial fiasco we are experiencing. Spending is so easy, repayment of debt so difficult.

  9. Fisherman says:

    PLP has turned the corner to bringing Bermuda on course to losing our pride as a great tourist gem, education is on the line and more. BLM is no longer a protest by hundreds, it is more funerals attended by hundreds..murders being carried out by young and adult men. Ask them why such a crime and publish their responses. Greatest conviction is to take someones life and to look into the eyes of their gchildren

    • saud says:

      This has always been their stated goal. To destroy Bermuda, and then collect the spoils of war. Unfortunately for them, they didn’t realize that this takes a few generations to accomplish.

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