Cox: Recovery Budget Tough, But Fair
Late yesterday, Minister Paula Cox responded to what's become an annual tradition going back several decades: budget bashing. Minister Cox:
Government welcomes the views of the community on the National Budget 2010-2011. Government accepts that this budget was tough but it is also fair.
To date I cannot recall any PLP Budget or Budget Reply that was not criticised by the business sector. It is usually a coordinated response from various sectors so nothing unique this year.
Also just like Auditors-General can be equal opportunity critics of whomever is the Government in power,so too is business. The more things change the more they stay the same. I cite below a quoted comment from a report in respect of the former UBP Government
"Bermuda has long sold the cooperative relationship between Government and private industry as a fundamental reason for our success. But the unilateral announcement by the Premier on independence, the context of the 1995 Budget and Government's subsequent handling of International Business concerns in those areas have demonstrated that the partnership is not always in place."
"Many decisions are made by Government without consultation and, more often than not, are seen to be politically expedient rather than soundly-based fiscal policies. Government thinks it listened but I am not sure it hears. It does not hear, for example, when we explain that rather than extending taxation, it should lower its spending."
Budget bashing is nothing new. But, the truth is, the Recovery Budget is designed to ensure that priorities like public safety, education and social programmes don't face dramatic cuts. Minister Cox:
No one likes paying any increases in taxes and even when the PLP Budgets have had a lower level of increases there have been complaints. It is par for the course. I was under no illusions as to the reaction.
I note for instance that the UK Chancellor was roundly criticised when he delivered a Budget - not because he introduced increases but because he deferred the pain of introducing taxes or more stringent measures when the UK has huge budget deficits. The criticism was that the Chancellor was putting his Party interests ahead of national interest by not taking more punitive fiscal measures.
Ireland is getting kudos from financial markets for taking some harsh economic measures but their populace is far less impressed. In Ireland teachers and police have had their gross salaries slashed by as much as 15 %. Doing the right thing has made life more difficult for Ireland's citizens, especially for its public servants and there is the risk of increased strikes. The lower salaries of the Irish means there is less money in the pockets of consumers and is said to be potentially damping consumer spending which fuels about 50% of the economy. So though internationally Ireland is seen to being proactive the reality is on the ground the people are suffering. We did not take such drastic steps to cut public sector staff but some jurisdictions have done exactly that. Tax increases will never be viewed favourably but they are a matter of necessity in these difficult economic times. There are always other options, cutting the level of public services, increasing debt at higher and more unsustainable levels and cutting staff and other Government spending. There are always risks and costs to actions and inaction. It is said that the debate over the extent to which the public sector should shoulder the burden has occupied Ireland's radio waves and dinner tables for months.
One young Irishman commented :"Everybody needs to get real, referring to public sector workers who have threatened work actions. because they are not getting the salary increases they wanted.
For me personally, I have to look at the macro level and rely on the residual goodwill which still exists notwithstanding the noise and angst and know that the people and business know from my track record and their prior experience that I do not act in an arbitrary, capricious and ill-considered manner . If anything I have sought to shield Bermuda's tax-payers from harsh tax increases over the years. So even if the people and businesses would have preferred a different outcome there is enough trust and goodwill that despite the ire common sense will prevail and the crucial conversations will continue as always. That is part of negotiation, balance and maturity in strategic relationships. We are all in it together and we are in it for the long haul. The payroll tax was also an equal opportunity tax- all of us will feel the pinch and all sectors- not one group exclusively. The aim of us all is to keep the good ship Bermuda afloat and to see she and her people survive the choppy waters and we will. The best policies are also those where everyone shoulders the burden and there is a levelling of the playing-field.
The Budget seeks to sustain the level and quality of services that the community demands and this comes with a price tag. “Vulnerable sectors of the economy have been given measures of relief and as the economy transitions to the path to recovery, there will be an opportunity to review tax yields and adjust the fiscal burden as appropriate. “However, it is important to keep things in perspective. The government travel budget has been a political football during the last several years. The facts are that the travel budget is $6 million in a modern day budget of $ 1 thousand million or 0.6 per cent of the overall current programme budget. “Bermuda competes in a complex and sophisticated global arena and travel is a necessary component of conducting government business. “Similarly, if Bermuda’s successes are to be sustained then it is important to have the benefit of expertise that is not available in our small indigenous population. If we are to compete effectively with the best in the rest of the world and prevail, there are occasions when expertise from outside Bermuda will assist. The budget for overseas consultants is about $27 million in 2010-2011 or some 2.7 per cent of the operational budget. For the results and outcomes anticipated, this expenditure constitutes value for money. “Ministry of Finance noted in the National Budget Statement that there will be enhancements to the procurement process for capital projects such that the new regime will align with international best practice. The enhanced governance measures will include disclosure requirements, stricter reporting regimes and improved change order management. “Similar enhancement will be introduced for operational programme costs. “The tax increases were necessary and the burden was shared across the community for the long term benefit of all stakeholders.”
I would anticipate that next year in the National Budget we can have more of a re-balancing.
The Recovery Budget made tough choices. In the midst of a recession, we chose to preserve a strong social safety net and make sure that government continues to work for people.
The "Great Lie" being advanced by the opposition is that all we need to do is cut Ministerial travel and foreign consultants and all our problems will be solved. Don't believe them. The vast majority of Bermuda's budget is spent on things like public safety, education, social programmes and the ministries and departments that ensure a strong and stable government.
