Published Feb 22, 2013 at 1:00 pm
(Updated Feb 22, 2013 at 1:09 pm)
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Finance Minister ET (Bob) Richards arriving at th the House of Assembly to deliver the OBA?s first budget statement. Photo David Skinner
Finance Minister Bob Richards today announced plans to raise the debt ceiling to $2.5 billion ? up from $1.45 billion ? as he painted a grim picture of Bermuda?s finances with his first Budget Statement.
Mr Richards projected a ?staggering? $331 million operating deficit for the coming fiscal year, but pledged the One Bermuda Alliance would introduce a new attitude of sensible spending to bring spiralling debt under control.
The Minister also warned public sector workers face reductions in staff compensation as part of a ?shared sacrifice?, with negotiations with unions set to commence.
Sin taxes will be increased and some seniors will have to pay for their vehicle licences, while the cost of bus passes goes up.
Further tax yields will come from a number of changes, including increasing land tax for ARV bands higher than $90,000.
However, tax incentives will be introduced for non-Bermudians buying property, and those who hire Bermudians, while tax breaks remain in place in the hotel and retail sector.
Mr Richards opened his hour-long speech by telling the House of Assembly the Island has a daunting economic challenge ahead in the coming months and years.
Retail has suffered shop closures, layoffs and pay cutbacks, he said, while tourism has seen fewer air arrivals and international business has lost jobs to competing jurisdictions.
?The human toll that these trends have inflicted is unprecedented,? said the Minister.
?Although up-to-date, accurate statistics are not available ? a result of the Island never having experienced mass unemployment until now ? we know that thousands of Bermudians are unemployed and that more are underemployed, earning less than before.
?There is evidence that hundreds of mortgages are in arrears, meaning that many people live in fear of losing their homes.
?The distress these negative economic forces inflict on individuals and families every day is intense and unrelenting. It is that pain that this Government?s plans and actions ultimately aim to relieve.?
Mr Richards said it would take time to reverse trends and trajectories locked in place by the former Progressive Labour Party Government, which he said accounted for the projected deficit for 2013/14 of $331 million.
?This is a staggering amount that is the result of weak projected revenues and a spending momentum that will take time to change, like a great ship that is slow to answer the helm,? he said.
He criticised the PLP?s approach of raising the debt ceiling on an annual basis, which he said gives the impression there is no debt management plan in place.
This year?s hike of nearly $1 billion will allow the OBA to work on a long-term strategy, he said, stressing that it authorises the limit of Government borrowing, and does not prescribe the actual amount of borrowing.
He warned Bermuda currently has a worst-case scenario of a public debt hitting $4 billion in five years, up from about $1.5 billion now, with debt service projected to balloon even further than the $134,000 projected in 2013/14.
On public sector staff, he said: ?Government will formally commence negotiations with the relevant unions regarding reduction in staff compensation.
?The overarching principle, insofar as cost reduction is concerned for this Government, is that of shared sacrifice.?
Cabinet has already cut its own compensation, and others must ?share the burden?, he said.
Taxes will go up on cigarettes and alcohol, although Mr Richards did not mention specifics other than to say the additional revenue will be about $2 million.
Meanwhile seniors in classes E, F, G and H will no longer get the benefit of an exemption from vehicle licences, following complaints the system is being abused by their family members.
A breakdown of highlights:
* Government projects an overall operating deficit and public sector borrowing requirement of $331 million for 2013/14 ? a ?staggering amount that is the result of weak projected revenues and a spending momentum that will take time to change?.
* Anecdotal evidence suggests 2012 was a fourth consecutive recession year.
* Project figures for 2013/14:
Total revenues: $871,199,000
Total current expenditures: $983,883,000
Debt service: $134,300,000
Current account deficit: ($246,984,000)
Capital expenditure: $84,609,000
Overall deficit: ($331,593,000)
* The total revenue figure is four percent lower than the original estimate for 2012/13.
* Customs yield duty has decreased by $25 million
* Payroll tax concessions extended for hotel, restaurant and retail sectors
* Worst-case scenario ? Bermuda?s public debt will reach $4 billion in five years., with debt service of $300 million annually.
* Best-case scenario ? debt rises to just over $2 billion and then declining.
* Debt ceiling will be raised to $2.5 billion, from $1.45 billion.
* Government to begin negotiations with the unions to reduce compensation for public sector staff.
* A two-year payroll tax holiday for Bermudian hiring.
* Licence fee for non-Bermudians purchasing property will drop from 25 percent to 8 percent for 18 months, rising to 12.5 percent thereafter. For condos, it drops from 10 percent to 6 percent, rising to 8 percent after 18 months. For PRC holders, it drops to 4 percent, rising to 6 percent after 18 months.
* Duty on cigarettes, tobacco and beer, wine and spirits will be raised to bring Government an extra $2 million.
* ARV bands higher than $90,000 with be adjusted to increase land tax yield by $3.4 million.
* Seniors in classes E, F, G and H will no longer be exempt from vehicle licences, with a 3 percent increase in all vehicle licence fees. This will yield an extra $2.2 million.
* The cost of bus passes will be raised to yield $500,000.
* Corporate Service Tax Rate will rise from 4 percent to 6 percent, raising $1.5 million.
* Additional funding will be given to police for extra manpower.
* $30,000 goes to the Police Complaints Authority for an investigator.
* Career Pathways programme at Bermuda College will be expanded to help Bermudians into jobs currently held by non-Bermudians.
* Primary care services will be provided for those without insurance, who lost out when the Indigent Clinic closed.
Source: http://www.royalgazette.com/article/20130222/NEWS01/702229907&source=RSS
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