Vexed Bermoothes

Minister Paula Cox is now reading her budget statement, now grandiosely elevated to the National Budget:

• Bermuda Government 2009-10 Budget
  
• Bermuda National Economic Report 2008 (for historical interest as the data is really 2007)
  

For comparison:

• Bermuda Government 2008-9 Budget
• Bermuda National Economic Report 2007 (published with 2008 budget, data is is really 2006)
  
• Bermuda Government 2007-8 Budget

Economic outlook for 2009 is “cloudy” with the GDP expected to decline by 1 to 1.5 percent but hoping for some recovery in 2010.  (The IMF estimates that global GDP will still grow by .5 percent in 2009, although most “advanced economies” are in the same negative territory as Bermuda).

She calls the budget a “recovery plan, Bermuda-style.”  Did she giggle?

$1.1 billion budget – essentially same as last year.  But I think they are being very optimistic as they have not reduced their revenue expectations much from 2008.  (In fact, the Minister estimates that 2008 revenue will be only $16 million below estimates.  Not only is that unlikely, but I anticipate things will worsen in 2009.  It’s quite a turnaround from past years where Government dramatically underestimated its revenues by up to $50 million a year).

There is no real evidence of cost cutting (in fact the efficiency-seeking Management Services department will be shut down … and get this … internal audit will transfer to the Cabinet Office). They claim that Ministries cut their 2009 budgets – but that is deceptive as they are comparing against last year’s budget, and virtually all of them actually overspent their budgets.  Thus, the cuts are just a mirage.

They pledge not seek to increase major taxes, and say they will seek to limit debt except for capital projects and guarantees for public-private partnerships … but then at the end of the speech propose to double the debt ceiling to $1 billion.

They also propose to pay interest on the debt from sinking fund “during the recession” and to postpone annual contribution to the sinking fund.  (The sinking fund is set in law to pay down the principle on our debt each year, in addition to the interest payments).  Indeed the 2009/2010 expenditure does not include a provision for these costs in the Department of Finance budget. 2008/2009 revised estimate of interest on long debt was $20 million and contribution to the sinking fund was $9 million.  Given the lack of control over costs – this is a recipe for big hairy trouble.

This creates a massive unknown in the budget.  It raises the costs considerably but indefinably and then pushes all responsibility into the future.  It is anti-budget.  I assume they are praying for some economic windfall to bail them out, err, casinos anyone?  Mortgage your children.

Come back later when I’ve had a chance to digest this.  There are some good projects in the budget (for example, retailers have been begging for many years for the flex in payment of customs duties) – but no bold moves – no real stimulus – no focus on efficiency – it doesn’t seem to be a change from “business as usual”.  In fact, it doesn’t even seem to acknowledge reality.

Over the past 5 years, the PLP Government budget has doubled from around $500 million to $1.1 billion annually.  On top of that, our national debt has grown from around $250 million to a projected $640 million this year – and they are leaving the door open to raise that all the way to a billion.  Sustainable?  Responsible?

My vote:  Thumbs down.