14 Dec 2017

Opposition Response To The Government First Half Fiscal Year Performance

 

It is with considerable satisfaction that the Opposition provides comments on recently released reports on Bermuda’s economy in 2017  and the Government's performance in the first half of the fiscal year 2017/18. 

Since the PLP became the government in July 2017, both of these reports, in fact speak to the efforts and impact of policies established by the OBA Government on Bermuda and the economy.   Therefore, they represent the last reports on the performance of the OBA government.  These reports reflect the good stewardship of the OBA and the progress being made toward balancing the budget.  Revenue is up, current expenditure is down,  there has been a reduction in the total deficit and we are on track to balance the budget in 2018/2019.

In the future these reports can be used to evaluate both the Government's performance and the state of the economy.

The half-year report shows some excellent results for Bermuda with total revenues, for the six month ending September 2017, of $31.2 million or 6.3% above September 2016. So significant is the   2017 revenue growth resulting from the higher collection of Payroll Taxes and Customs Duty, that the Government release actually states that  the strength of their receipts  “ increases the chances of meeting the total revenue target of $1.042 billion for the current fiscal year." 

Government's Report on the Bermuda Economy 2017: Updated Economic Review published at the same time as the 2017/18 First Half Fiscal Year Performance speaks to the impact of the OBA's fiscal prudence.  The report noted increases in:  visitors, visitor spending, value of new construction and employment income.

The Summary Economic Indicators: Updated Economic Review 2017  confirm the previously anticipated tourism and America's Cup results.  The 10% increase in Air arrivals to September 2017 plus the 8.4% increase in cruise passengers resulted in a 9% increase in visitor arrivals compared to last year.  But more importantly total visitor spending in the first 9 months rose by $55.3 million or 21.9%. We should attribute much of the $307 million spent to visitors coming to Bermuda to be part of the America's Cup experience. 

Construction projects that the OBA signed off on are now producing for Bermuda.  The Economic Review indicates that the total value of new construction projects started for the first six months in 2017  increased 600% over the $67.8 million recorded for the same period in 2016.  “In the second quarter the Airport Redevelopment and St. Regis projects began that are worth over $500 million in total”.  These projects are now more than " shovels in the ground";  new contracts continue to be  awarded which are resulting in jobs for Bermudians. 

It is significant that a developer has recently stated that the Bermuda's new airport was a  “game changer" in the decision to buy a hotel property. 

When you couple this with the fact that current expenditures, excluding debt service, for the same period ending September 2017 are $6.4 million lower than in September 2016, the OBA has made a lot of progress toward managing Bermuda's debt.

 The confirmation that Government recorded a  $57.6 million current account surplus excluding debt service for the first 6 months of the year is validation of the projection made by the  OBA  February 2017 Budget Statement that "at end of the 2018/19 fiscal year the Current Account is projected to record its fourth straight annual surplus before debt service."   This projection  was partly  based upon the substantial progress that had been identified in February 2017  Budget Statement that "Tourism, an industry once given up for dead, is being restored through the formation and success of the Bermuda Tourism Authority , new Hotel development and the America's Cup".   

Other positive factors noted in the review such as employment income increased by 3.1% and retail sales up 3.2% all reflect the growth that the OBA projected.

Findings of both of these reports results show the good stewardship of the OBA for the last 4 Years.

 The OBA planned that at the end of the 2018/19 fiscal year that the Current Account Surplus would cover interest charges and capital expenditure and we would have a balanced budget.  Progress toward a balanced budget was achieved by controlling costs; this includes the reduction of the civil service and simultaneous salary freezes.  Those approaches, were not unique to Bermuda. They promoted efforts to “live within our means”.  Budget discipline measures are never easy because governments must prioritize what is deemed important to the country and make hard choices to reduce the size of the budget and manage the debt while trying to find ways to increase its revenue.  We are so close to digging ourselves out of this financial hole if we can stay the course.  Bermuda should not have to borrow on a yearly basis to make ends meet or pay higher rates for loans for important projects or reduce our support for social programmes to service our debt.  We should be able to identify what we want to achieve over a period of time, make a plan and have some confidence that we will not be mortgaging our future in order to achieve that plan. There is some evidence that the PLP government will not continue the budget discipline measures used by the OBA to reduce spending.  The question then becomes what will the government put in its place in order to maintain the momentum, that the OBA has achieved, to get us unto a better financial footing.  

The reason why the effect on the 2017/2018 budget is so important is because the planned savings in this year was to put Bermuda within reach to produce a Balanced Budget in 2018/ 2019.   The OBA promised a balanced budget in its February 2017 Budget Speech. The rating agencies are expecting Bermuda to achieve this.  If as a country we fail to balance the budget we will pay higher rates of interest when we next borrow money

As the Government wrestles to deliver on its promises to the electorate it will have to balance what Bermuda can afford. If the promised efforts to grow Bermuda's economy are successful it will relieve the pressure on cost containment and fiscal control.  We are at least encouraged that the PLP Platform promised to balance Bermuda's Budget by 2019.      

 The role of the OBA as the opposition party is to raise and advocate for matters of national importance and the balanced budget is one of these issues.  The OBA will look at the upcoming budget through this lens because we cannot allow the PLP government to ignore the critical importance and impact of a balanced budget not only in the present but for the future economic health of Bermuda. 

 


 
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