Vexed Bermoothes

Blustery Opinions From Bermuda

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Follywood

February 8th, 2010 · Bermuda Politics

My Premier went to India and all I got was …

What a joke.

It’s funny how the press release in Bermuda says that the Premier has struck a deal for Bermudians to get reduced tuition at the Mumbai film school … but the film school’s release says the Bermuda Government has agreed to sponsor tuition for Bermudians to go there.  Hmmm.

It sheds light on the Minister of Tourism’s grasp of the fundamentals of our tourism sector when he opines:

“I am here to encourage Indian film shoots to happen in Bermuda which will help us to promote tourism in Bermuda through Indian cinema.”

I hope that the PLP leadership is ashamed of this little boondoggle.

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Follow Through

February 5th, 2010 · Economy

Government today announced that, as of May 2009 (nine months ago), unemployment was running at 4.5%.

Funny they should mention that.

The Auditor General’s report this week reminded us that back in 2002 Finance Minister Eugene Cox proposed setting up an Unemployment Insurance Fund for Bermudians, and enabling legislation was passed to the Public Treasury (Administration and Payments) Act.  $1 million dollars was then authorised in the 2003-2004 budget to seed the Fund.

It came up again in the 2005 Throne Speech, and in 2006 Finance Minister Paula Cox said the Fund would be rolled out shortly.

However, according to the Auditor General, “no amounts have ever been paid into the Insurance Fund”.

Follow through has never been the PLP’s strong point.

(By this post I am in not implying that such a scheme would be a good investment for Bermuda, nor that this Government could adequately design nor operate such a scheme.  My confidence is exhausted.)

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Essential Problem

February 4th, 2010 · Economy

Bermuda has racked up $679,000,000 of public debt in just a few years.  Now, FinMin Paula Cox says we need to borrow more.

Here’s the essential problem:

  • The Bermuda Government can’t properly account for the way it overspent its past budgets (which themselves have doubled in size).
  • And they want to borrow more … without the foggiest clue of how they’ll ever pay it back.

Or, let’s be clear, how you and I will pay it back.

We’ll be scratching the ass of $1 billion dollars in debt soon.  The PLP are not acknowledging that it will need to be paid back.  They have no clue how we can ever pay it back.  Even in this era of low interest rates, they are not acknowledging that the annual interest payments alone are more than the budgets of many Government departments.

The way it should happen is this:  Government would downsize both its expectations and its size, institute rigorous budgets and controls, and get a grip on its finances.  Every Bermuda family has to to do it, and so should Government.

The way it will happen is this:  they’ll raise taxes further increasing the outrageous cost of living in Bermuda.

You thought it was a New Bermuda.  Instead it was a Screw Bermuda.

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Pliable

February 3rd, 2010 · Economy

The Minister of Finance published a controversial opinion last week that she should not be held accountable for the Bermuda Government runaway expenditure, deficits, and debt.  She implies that she does not have the support of Cabinet to enforce financial discipline and hides behind “collective responsibility”.  She said:

I can indicate support or objection. However the sponsoring minister(s) knows that I cannot overrule their request unless I have others who join with me to support and uphold my position.

In the media today, past Finance Minister David Saul strikes down this weak defence, pointing out the Bermuda Constitution which says quite clearly:

95 (1) No money shall be withdrawn from the Consolidated Fund except upon the authority of a warrant under the hand of the Minister of Finance …

(2) No warrant shall be issued by the Minister of Finance for the purpose of meeting any expenditure unless— (a) the expenditure has been authorised for the financial year during which the withdrawal is to take place— (i) by an Appropriation law; or (ii) by a supplementary estimate approved by resolution of the House of Assembly …

The Minister has the authority to control expenditures, and the House of Assembly has the responsibility to reject or approve them.   In my opinion, both authorities have not fulfilled their obligations.

Which leads to the question:  “strong and quiet” or “quiet and pliable”?

UPDATE:  Larry Burchall points out in the Bermuda Sun that buried in the Accountant General’s document this week is the note that Bermuda must repay a $200,000,000 loan in June of this year.   Given that the PLP have already raided the Sinking Fund (set up to pay down loans), this means Government must carve out the cash from its budget … or more likely, get another loan to pay off the loan.  No wonder the Premier is off jet-setting to India …

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Accumulated Deficit

February 2nd, 2010 · Bermuda Politics

Bermudians are looking for reasons why the Bermuda Government is so horny to perform its hostile takeover of Bermuda’s municipal corporations.

Well here’s a candidate.

The Auditor General’s scary graph shows the rapid growth in Bermuda’s Accumulated Deficit over the past 6 years.

“The Accumulated Deficit represents the difference between the Consolidated Fund’s total liabilities (what it owes) and its total assets (what it owns). At March 31, 2009, the accumulated deficit stood at $719.9 million, up $102.4 million from March 31, 2008.”

Well, the assets of the municipal corporations are said to be worth in excess of $500,000,000.

A hostile takeover probably would not render an improvement in efficiency or in democracy.  But it would erase a big chunk of that outrageous Accumulated Deficit, at least on paper.

That would be a tricky piece of financial prestidigitation.  But then they’d probably screw that up as well.

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Qualified Auditor Opinion (now with scary graphs!)

February 2nd, 2010 · Bermuda Politics, Economy

Auditor General Heather Jacobs Matthews today released the Bermuda Government’s 2008/09 Consolidated Fund financial statements and her report on them.

It includes the stench of damnation of a Qualified Audit Opinion.  Not pretty.  Gee, it seems that Larry Dennis may have been correct in his past criticisms.  Imagine that.

“The trend speaks to financial challenges going forward,” Mrs. Jacobs Matthews told the Bermuda Sun. “These challenges include a weakening cash position as evidenced by a substantial bank overdraft, expenditures significantly outstripping revenues, increasing long-term debt and, by extension, a growing deficit and public debt.”

The following chart says it all.  Paula Cox became Finance Minister in 2004 and Deputy Premier in 2006.  Dr. Ewart Brown became Premier in 2006.  They own this situation.  The out-of-control deficit and debt caused by the utter mismatch between revenues and expenditures occurred under their combined watch.  From prosperity to toilet in 6 short years.

Credit: Bermuda Sun

In addition, the Auditor General announced that her office is conducting Special Audits of the new cruise pier at Dockyard and the TCD testing centre.  That’s likely to provide more depressing insights.

Don’t talk to me about Prudent, Platinum, or Gold Standard! In my opinion, there is very little sign of accountability or restraint here.  Governments must be measured by performance … not by spin-laden press releases or celeb-touting photo opps.

In my opinion, this Government is not performing.  Not by a long shot.  It is failing, and taking Bermuda’s future down with it.

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Obamian Threat

February 2nd, 2010 · Business, Economy

President Obama has a friend in Bermuda.

But, this revived move to stifle the island’s insurance industry shows, once again, that Bermuda does not have a friend in Obama.

Hey, thank goodness for those Uighurs.

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Too Many Drugs

February 1st, 2010 · Bermuda Politics

David Burch aka Colonel Cranky.  Sometimes he drives ya nuts.  Sometimes ya gotta love him.

At last someone in Government speaks clearly:  Bermuda, ya smoke too much weed! Too many drugs!

Apparently up to 90% of applicants to the Prison, Fire and Bus services are ineligible, most because they fail the drug test.

Of course, our Government MPs are too important to lead by example and take drugs tests themselves.  Put your money where your mouth is.

(90%, wow, that’s pathetic.  What do they teach in Bermuda schools?  Reading, Writing, and Rizlas?)

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Manoeuvrability

January 31st, 2010 · Economy

The Budget will be delayed by 10 days to February 26 with Finance Minister Paula Cox today explaining that Government “wanted to give ourselves more manoeuvrability”.

Huh?  Now that’s a strange explanation.

I read in this in four possible ways:

  • Everyone would still be hung over on the 16th from Ewart’s celeb-stalking Valentine’s Love Festival; or
  • The books are so out of whack they need more time to dream up the budget; or
  • They need to strike some deals before the budget is announced and it becomes known exactly how bad things are; or
  • They want to delay it as long a possible so that there will be pressure for the community to accept anything with the April 1 deadline looming (when Government technically would have to shut down for lack of an approved budget).

I am unimpressed by “National Budgets” that can’t be delivered on time. Sounds like politics are interfering yet again in good stewardship and management.

I assume that Minister Cox is also embarrassed as she chose to make the announcement late on a Friday evening, hoping it would fall between the cracks.

Every time you think it’s bad, it gets worse!  Mom, can we go home now, this circus sucks!  Too many clowns.

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GDP Shell Game

January 29th, 2010 · Business, Economy

Some late night ramblings on Bermuda’s economic situation:

Finance Minister Paula Cox again this week tried to reassure Bermuda that our growing deficits and national debt are not so bad when measured against national GDP.  This is a flawed comparison and she knows it.

Here’s why.  GDP is the market value of all final goods and services made within the borders of a country in a year.  In most big countries, this number is comprised of a massively diverse array of industries and underlying companies, making the number relatively stable and largely reflective of their economies.

This is not strictly the case of Bermuda.  In Bermuda, our GDP includes the international sector whose global operations are attributed to Bermuda but are not necessarily intertwined with our economy.  This leads to some “skewing effects” not seen in other countries:

  • The international sector accounts directly for 48% of Bermuda’s GDP and indirectly for another 20% of our total GDP.
  • Their success in the boom years led to our fast growth in GDP.  For example, in 2007 the international sector accounted for nearly 60% of the growth in our GDP.

What goes up fast, can come down fast.  The international sector in Bermuda really consists of a small number of companies.  Change in their fortunes, or their departure, could lead to a sudden and substantial deflation of our GDP.  In my opinion, both scenarios are credible due to the external forces facing Bermuda, as well as the PLP’s poor relations with the business sector (which sometimes verges on outright mismanagement).

And then all of a sudden our rosy “fiscal deficit as a percentage of GDP” and “national debt as a percentage of GDP” would go from looking normal to being catastrophic.  The cost of our (fast growing) debt would skyrocket, while our means to support it would be crippled.

Our Government really should be paying better attention to the business sector.  It’s paying for all their pretensions.

Note:  remember that when we discuss our national debt of $679,000,000 we are conveniently “putting aside” Government’s unfunded pension liabilities.  By some credible estimates, these future liabilities are already in the BILLIONS, a problem exacerbated by the doubling of the size of the civil service over the past few years.

Prudent?  Gold Standard?  I don’t think so.

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