Opinion

No growth in regime of tax and spend

  • Nick Kempe

The Government had a number of choices by which it could balance the 2019-20 Budget — mainly raise taxes or reduce spending. The Progressive Labour Party bristles at the “tax and spend” moniker, but that is exactly what it has done since it came to power in July 2017.

If you ignore the sinking fund contribution, as the PLP has done this year, the One Bermuda Alliance handed over a government in 2017-18 that was only $8 million away from a balanced budget. Why has it taken two years and $60 million in increased taxes since then to close an $8 million government deficit?

Well, as the PLP is a tax-and-spend party, we should look at where all the new taxes are going.

Behind all the fancy rhetoric in the Budget Statement about efficiency (17 mentions) and reform (33 mentions), the Government is budgeting to spend the exact same amount every year for the next three years. No savings are expected to be found anywhere. Or, any savings will be consumed by increased spending. Of course, government revenue, mainly through taxes, is budgeted to go up every year: tax and spend.

Employees: the finance minister made the claim that he would be unable to reduce government spending without letting people go. What he failed to mention was that the PLP has increased the number of civil servants by 318 in the two years since the election. It would seem that the only growth plan the PLP has is to hire more government employees.

Personnel costs: salaries, wages, employer overheads and other personnel costs have increased by $36.7 million since the election. Of course, thanks to the OBA’s corrective actions to reduce the deficit, including the temporary compromise of furlough days, the Government is now in a financial position to give civil servants a 2.5 per cent pay raise. This pay raise, however, amounts to approximately only $9 million, so the other $27.7 million in increased personnel costs in two years is attributable to the additional 318 new hires.

Consultants: the OBA handed over a government with a yearly consultancy spend of $12.7 million. This year the PLP is budgeting for $15.9 million in consultants, an increase of $3.2 million in two years. For reference, the PLP handed over a government spending $35 million on consultants in 2012-13. If spending discipline is not followed across the board, it can quickly get out of control.

Travel: the OBA handed over a government with a yearly travel spend of $2 million. This year the PLP is budgeting for $3.4 million in travel, an increase of $1.4 million in two years. For reference, the PLP handed over a government spending $5.3 million on travel in 2012-13. The patterns across these increased cost lines are clear proof of the spend, spend, spend philosophy of the PLP.

The increased spend on new employee personnel costs, consultants and travel is equal to $32.3 million. If these three line items alone were held to the levels at the time of the election, the $39 million in increased taxes could have been avoided entirely and we would still have a balanced budget by skipping the sinking fund obligation.

Without the PLP spend, there would be no need for the PLP tax.

Or, without the unnecessary PLP spend on just these three items and keeping the existing tax increases, we would actually be able to dedicate $65 million a year on average to the sinking fund or early retirement of debt over the next three years.

Bermudians at least would know that the Government was sharing the sacrifice and that the additional taxes were being used to tackle the debt that will otherwise force higher taxes for many years to come.

This budget was characterised by a departure from fiscal discipline, has no stimulus for the economy and simply ignores the debt problem for the next three years.

Nick Kempe is the Shadow Minister of Finance and the Opposition Senate Leader