David Burt, the Premier and Minister of Finance, today delivered the Budget Statement for 2018-19.
Here are the main highlights:
• “This Budget will ease the burdens for the single mother and the struggling family with a tax cut that will increase their take-home pay,” says Mr Burt in his concluding remarks.
“It will provide hope to the university student that the Government is working to create opportunities for them to return and succeed in the land of their birth.
“And it will provide security for the senior citizen through pension increases and reduced electricity bills.
“It will take all of us out of a comfort zone padded by centuries of frustratingly benign conditions of inequality. Frustrating because they are conditions that provide a carefully crafted veneer of affluence but which mask a society of unrealised potential.”
• $2.5 million has been allocated for the ageing Doppler weather radar system.
• The Ministry of Transport and Regulatory Affairs receives $62.4 million. The ministry has been allocated $3 million for the purchase of eight new buses. Electronic fare collection will be introduced for public transport.
• The Ministry of Public Works receives $74 million, a cut of $1 million. Rental expenditure will be reduced by moving departments from private facilities. The Department of Public Lands and Buildings will concentrate on the refurbishment of the Parliament Building, schools maintenance and major buildings upgrades, office relocations and alterations to Global House.
• The Ministry of Home Affairs receives $22.7 million, a reduction of $896,000. More services will be provided electronically.
• The Ministry of National Security receives a cut of $2.1 million with its new budget of $131.1 million. The reduction has been achieved by lowering the overtime budgets of the uniformed services. The hiring freeze has been lifted to ease burnout and frustration.
• A green paper on reducing drug abuse will be put together.
• The Ministry of Social Development and Sports receives a budget of $86.3 million, a cut of $1 million, after the community education programme is moved to the Ministry of Education.
• Pensions for seniors will be increased by the rate of inflation every year the PLP is in office.
• The Ministry of Finance receives $103.4 million, a decrease of $232,000.
• The legal aid programme will be reformed, introducing the hiring of additional in-house legal counsel to save $1 million annually. Budget funds will be provided for three pupil barristers to help development the next generation of Bermudian lawyers.
• The Official Gazette will be converted to an electronic platform, saving $150,000.
• Cabinet Office will receive an increase of $535,000.
• Bermuda will establish a representative office in Brussels to reduce the expenditure on consultants in Europe.
• The health ministry will receive $1.8 million for previously unfunded programmes. This will enable the reopening of the fourth floor of the Sylvia Richardson Care Facility.
• The Ministry of Health will receive $190 million, an increase of $27.3 million. The $25 million subsidy for hospital care for children, indigents and seniors will be restored. It had been cut by the OBA to fund the America’s Cup, notes Mr Burt to repeated cries of “Shame” from his colleagues.
• The Bermuda Tourism Authority will receive an increase of $1 million, with the condition that it directs more resources to promoting Bermuda overseas.
• The Ministry of Economic Development and Tourism will receive $38 million, an increase of $3 million to support investment in job creating agencies.
• The Department of Workforce Development will receive an additional $225,000 for new initiatives to increase training and apprenticeship programmes.
• The education ministry will receive $140.5 million, an increase of $5.8 million, to cover additional workforce training and the development of key educational programmes. This will support Plan 2022, Bermuda’s Strategic Plan for Public School Education. Increased funds of $1.9 million will support school budgets for both senior schools. Senior school budgets were cut by 13 per cent under the OBA, says Mr Burt. $300,000 will be provided to Bermuda College for need-based funding. The College will also receive funds for gaming industry training, landscape training and overseas practicums for nursing students.
• Debt service costs for 2018-19 are projected at $188.2 million, 1 per cent higher than this year.
• Mobile phone fees and the government authorisation fee on the telecommunications industry will be increased to yield an extra $3.7 million. Fees for the most services provided to residents and businesses will be increased by 5 per cent, to yield $5 to $6 million.
• A new tax on commercial rents will increase land tax rates by 5 per cent to yield an additional $15 million in land taxes.
• Duty on tobacco will increase to reduce the inconsistency between duty rates on cigarettes and tobacco. Duty on wines will be raised by 30 cents per litre.
• Duty will be cut from 5 per cent to zero on eggs, potatoes, cauliflower, broccoli, carrots, turnips, oranges and apples. A portion of the revenues from the new sugar tax will be earmarked for educational programmes to improve health, after it comes into play in March.
• Tax from taxi drivers has proved difficult to collect, yielding $350,000 last year when it should have been $1.2 million. An annual charge of $1,000 will therefore be introduced at the time of registration.
• New entrepreneurs will be exempt from the employer portion of payroll tax in their first year of business.
• The employer portion of payroll tax for disabled employees will be eliminated.
• Payroll tax reform will mean breaks for workers. The lowest employee band will be reduced from 4.75 per cent to 4 per cent, so that a working couple earning $48,000 each receive an increase in their take-home pay of $720.
• Revenue estimates from 2018-19 are $1.09 billion, $47.5 million up from this year, thanks in part to the implementation of a biennial review of government fees, professional services tax on accounting and law firms, increasing fees on mobile phones, taxing commercial rents and cracking down on abuse of payroll tax.
• “This year will be the last year in which our debt will increase,” says Mr Burt to applause from MPs. The debt ceiling will not be raised from $2.5 billion, and the Ministry of Finance will exercise prudent management of funds.
• The Budget for 2018-19 will show a 0.2 per cent increase in total expenditure of $2.5 million. Revenues are forecast to rise by 4.6 per cent to $47.5 million. The current account balance, before debt service charges, is budgeted to be a surplus of $160.7 million. The current account balance, after debt service, including the Sinking Fund contribution, is budgeted at a deficit of $27.5 million. The overall deficit is budgeted at $89.7 million, a drop of $44.9 million or 33.4 per cent compared with 2017-18 estimates.
• Government will draw $85 million on its loan facility, representing new borrowing. On March 31, gross public debt will stand at $2.57 billion and net debt at $2.42 billion. This is $50 million lower than the OBA’s forecasted net debt of $2.47 billion. The Sinking Fund balance is projected to be approximately $148.8 million at the end of the fiscal year.
• The PLP exceeded all of the current year’s budget targets, says Mr Burt. It is expected the PLP will not exceed the original expenditure budget approved by the OBA. The revised estimate of the overall deficit is $119.2 million, $15.2 million less than projected, and $62.8 million less than the actual 2016-17 deficit, a decrease of 35 per cent. Noting the cheers from the House, Mr Burt says: “Everyone is getting excited at these wonderful results.”
• Mr Burt notes a previous Progressive Labour Party pledge for Government to use its purchasing power to promote equality of opportunity with regard to disability, gender and race. Government will reserve 20 per cent of capital spending for companies that meet the empowerment criteria, he says.
• Mr Burt speaks on the importance of moving aggressively on technology. The first technology incubator space will be operational by July. Discussions have already begun on developing the world’s first global risk management digital market in Bermuda. Bermuda is developing a legal framework and regulatory regime over blockchain-based technology which is strict but does not stifle innovation.
• The old restrictions on the height of buildings in Hamilton will be consigned to the history books, in an attempt to stimulate demand for property and jump-start the construction industry.
• The 60:40 rule will be reformed so that Bermudians will only require 40 per cent Bermudian ownership. The existing rule is “the ultimate in protectionism” says Mr Burt. He adds: “In 2018, this vestige of our oligarchic past must be ended. We must welcome investment from non-traditional quarters and not shy away from the competition it may create.”
This plan will create opposition from both sides of the political spectrum, concedes Mr Burt, who says some will argue it is not consistent with putting Bermudians first. He argues it will provide more opportunities for Bermudians to become wealth-generating owners and not just employees.
• The Ministry of Finance will soon begin consultations on expanding the types of bank that can operate in Bermuda.
• He points to the need for investment within the Bermuda economy. The Registrar of Companies has begun consultation with the legal sector on allowing global law firms to have a presence in Bermuda.
• “This Government was elected to level the playing field, expand opportunity and create a fairer and more just Bermuda,” says Mr Burt. He pledges to ensure the have-nots will have access to capital to build businesses and freedom to compete with the haves.
• Many Bermudians are resistant to foreign investment as they have not experienced its benefits, says Mr Burt. But he adds that foreign investment is “not the enemy; it is required to sustain our economy and our way of life”.
• We cannot reject international business and expect Bermuda to prosper, warns the Premier.
• The GDP growth estimate for 2017 is lowered by 0.75 per cent for 2017. Mr Burt says: “This shows the urgency of the need to stimulate our economy and invest in long-term politics that will diversify the Bermuda economy and invest in long-term policies that will diversify the Bermuda economy and create sustained economic growth, which will increase jobs and opportunity at all levels for Bermudian society.”
• The One Bermuda Alliance government’s attempt to “cut its way out of recession” resulted in mouldy schools, unreliable public services, crumbling infrastructure, a stagnant economy and increasing economic inequality, claims the Premier.
• Headline inflation rate remains stable, at 1.9 per cent according to the December 2017 Consumer Price Index.
• Tourism, retail sales and construction projects all increased in 2017, says the Premier. The airport project and St Regis hotel projects are worth more than $500 million.
• Employment income grew by $77.2 million to $2.58 billion in the first three quarters of 2017, an increase of 3.1 per cent. The official unemployment rate remained at 7 per cent.
• He describes a 0.1 per cent increase in jobs, to 33,521, as “disappointing given the hopes that the America’s Cup would stimulate the economy and employment”.
• Mr Burt lists risks to Bermuda’s economy, including tax reform in the United States, the European Union’s list of non-co-operative tax jurisdictions, the Caribbean Financial Action Task Force assessment of Bermuda’s anti-money laundering efforts, and the ageing population.
• Mr Burt speaks of the desperate need for economic diversification, vowing that the Budget will lay the economic foundation needed to change “the economic status quo that has failed so many”.