These handouts and freebies contributed mightily to our budget deficits and humongous public debt.  (Simple bad management and a taste for the high life accounted for the rest.)

We just can’t afford it anymore.

But the Premier seems to be consumed by putting out the fire o’ the day with a quickie fix.  The Constant Circus lives on!

There is a time when the Premier/Finance Minister will need to roll back some of the pork and waste.  Or will she try to “buy votes” again in the lead up to the next election?

The problems are growing along with the list of short-term patches.  Sooner or later she … or her successor … is going to be forced to elaborate an actual plan to:

• Repair our troubled economy (ie undo many of their hare-brained, half-assed policies)
• Control public sector spending (ie reduce government to fit our economy)
• Plan to pay down the debt

After all these years, I can’t put my finger on a single economic plan or strategy put forward by the PLP and carried through to a successful conclusion.

The Premier has been central to the team that incubated Bermuda’s critical problems.  As nice a gal as we all think she is, it would be to Bermuda’s immense misfortune if she is allowed to dodge accountability for that.

The payroll tax holiday is a job preserving move.

But the 40% hike in airport duty (combined with a steep reduction in allowances) has people freaked.  Is Government that broke?  What new taxes will come next?

In 2010 Q4 local travellers reported $21 million in overseas purchases.  Ignoring the impact of allowances, that would have yielded $5.25 million in duty … or $7.35 million at the new punitive rate.

It’s clear that the tax hike on individuals is paying for the tax holiday for retailers.

Will the tax hike encourage locals to “buy Bermuda” instead of shopping during their holidays … or will it just raise the cost of living here and annoy the voters?

Is the Government so broke that it needs to restrict Bermudians’ freedom for a mere $4.2 million in additional tax revenue?

If the PLP had not squandered so outrageously over the past decade we might have a surplus to cushion our situation … or be able to borrow.  But in the Post-Platinum Era, our credit is maxed out and Government has little room to manoeuvre.

It’s not the global economy, stupid.  It’s ours and you tanked it.

Now, with the rumours of a Christmas election, one wonders why they’d even bother.  After all, the promises of the 2007 Throne Speech were promptly forgotten when Dr. Brown promptly called an election.

Here’s why the House will reconvene:  I suspect that Government needs money through budget supplements and inevitably more debt.

We all know that Bermuda’s economy has vastly contracted.  The open questions are how badly this has affected Government’s tax collections, and how effective Government has been at making its proposed budget cuts.

Maybe they can re-tool that “countdown clock” they had down on Front Street for the Millennium … as a national debt counter. Need a lot more digits though…

• Who sold them this crappy sundial anyway?  It doesn’t seem to tell the time!
• How does one reset a sundial?
• Can’t they afford a clock anymore?

However, the wildcat strikes take their frustrations out on the general public.  And we too are suffering under the perma-neophytes in the Cabinet.

There is an election coming.  Your vote has more lasting impact on the quality of Bermuda’s governance than an emotional walkout.

The propaganda says that “PLP+Labour=All the way”.  However, recent experience shows that often the party always takes precedence over the people.  Systemic problems like we face cannot be fixed in “sweetheart deals”.

My guess is that we are looking at an election before the next budget.  In other words, before they have to reveal just how bad Government finances are and how much they will need to cut AND borrow next year.  Don’t be fooled.

CPA_UK (@CPA_UK)
Hon Terry Lister (#Bermuda) #CPC2011 Tourism not enough, need legal immigration & incoming business for economic growth

CPA_UK (@CPA_UK)
Hon. Mr Lister: Migration is a challenge during high unemployment, but stopping it lowers spending & slows growth. #CPC2011

You may recall that Terry Lister was one of the ministers responsible for implementing  “term limits”.  I am glad to hear that he now understands the damage that this harebrained policy has inflicted on Bermuda’s economy and future prospects.  Here’s Minister Lister from the headier days of 2003:

“Everybody has a six year work permit limit, which can be extended to nine years. For a real, real key man it can be to nine years or beyond. Personally I want it to be the key man to stay nine years and can’t go beyond that, after that it is over.”

The PLP was warned repeatedly and in no uncertain terms by business and by the Opposition that term limits was screwing us.  But they stubbornly stuck to it.

It took 10 years for the uncertainty of term limits to drive out the middle management in our international sector … taking many hundreds of support jobs in the bitter exodus.  Term limits is about as insane a government policy as you can find.  Bermuda trades on the “mind and management” that is located here.  We have few other resources.  It took years to build up that intellectual critical mass … until PLP hostility and poor policy making threw out the welcome mat.

What is Bermuda going to do when Government revenues in 2011-12 come in below expectations?  When, not if.

The 2011-12 budget already predicted a $136 million deficit.   What will Bermuda do if Government’s revenue estimates are way off and the budget “gap” is in the hundreds of millions?

Here’s the track record of differences between past revenue estimates and actuals for previous years:

• 2004/05 – $694m Projected – $783m Actual = 12.8% over
• 2005/06 – $750m Projected – $814m Actual = 8.4% over
• 2006/07 – $835m Projected – $884m Actual = 5.8% over
• 2007/08 – $917m Projected – $929m Actual = 1.3% over
• 2008/09 – $985m Projected – $950m Actual = -3.6% under
• 2009/10 – $969m Projected – $917m Actual = -5.4% under
• 2010/11 – $1,058m Projected – $977m Actual = -7.7% under

During the boom years, they underestimated revenues and the surplus was wasted through excessive spending and lack of discipline. The unexpected money covered up what a bad job they were doing.  By my reckoning, over just a few years expenditures grew by 60% while revenues only grew by 20%.

In my opinion that billi000,000,000n dollar debt didn’t come from capital projects or “the global recession”:  it came from lousy fiscal management under Ewart Brown and Paula Cox.

Now, every nickel of deficit translates to more debt.  The costs of the PLP Government are a noose around the Bermuda economy’s neck.

I expect that they will grasp at radical straws to try and save the situation … not having learned the law of unintended consequences that has turned so many PLP kneejerks into tearjerks.

And here lies an interesting thought.

The Government’s policies have led to a significant exodus of high-paid expatriate residents (term limits) and a cooling of residential real estate sales (restrictions on Bermudians with foreign-born spouses).  This has led to both a decline in rents as well as the sale value of Bermuda real estate … estimated by some to be high as 30-40% in both cases.

The Bermuda Government collects an annual land tax that is based on a notional number called ARV (“annual rental value”):

This represents the annual rental value of the property if let unfurnished on the open-market … This means that the normal market forces of demand and supply are to be taken into account … Basically, it is an estimate of the rental value of all properties (whether rented or owner-occupied) that assumes a standard set of hypothetical terms as the basis for each assessment but using actual market evidence as the source for all assessed levels of value. As part of this process of standardisation each property is also assumed to be in good repair having regard to its age, character and the locality it is situated in.

Well, actual market evidence is that there has been a long-term devaluation in the value of Bermuda real estate.  When will they adjust our ARVs and corresponding tax assessments downward accordingly?

After all, as the real estate market ballooned in recent years, ARVs were hiked.  Now that the trend has reversed, surely it’s time to rebalance ARVs downwards?  Hmm?

It isn’t. It’s based on the taxes your community is willing to support.

In their delusion, they doubled the size of the lowest productivity part of our economy. And sought to match the wages of the more productive sectors. And paid for it with debt. And on top of that they started to give away services!

There was no option but for it to end in tears.

Global recession my ass! Bermuda’s current pain is caused by the fact that the PLP thought pop & sizzle outweighed the laws of economics. As a political force they still can ride their past momentum for a while. But as a Government they have failed. Stick a fork in em. They’re done.

This is not a budgetary problem, it’s a management and labour relations problem.

The current BIU agreement allows the following sick leave based on period of continuous employment:

• 3 months to 4 years: 5 weeks full pay
• 4 years to 8 years: 6 weeks full pay
• 8 years to 12 years: 8 weeks full pay
• 12 years to 16 years: 12 weeks full pay
• Over 16 years: 14 weeks full pay

Plus, employees can accumulate up to 100 days of unused sick leave for use in any year.  A doctor’s certificate is only required after the second day of sickness.  Pretty generous.

The Union is rightfully asking Government for concessions in the current “tight” pay negotiations.  In good faith, they really need to work with Government to rein in the practice of taking sick days as impromptu vacation days.

The Bermuda Government has very poor efficiency of production relative to its staffing levels:  these loose practices relating to work attendance are presumably a contributing factor.

Maybe a little of both, but I believe the real reason for the anaemic economy is that Bermuda’s population has shrunk … and that the local economy has shrunk correspondingly.

• The decline in population has one culprit:  the PLP.  Term limits and other policies that are hostile to business have caused many well paid jobs to be moved to other locations like Nova Scotia, Dublin, Switzerland, and even the US.   Note:  it’s not the “global recession”:  the majority of these jobs have been moved elsewhere, not cut.  Every person who is driven out of Bermuda takes money out of the economy.
• The usual moans about Bermuda retailers don’t seem to be the cause.  The decreases are to be seen across the board, from retailers to grocers, from telecoms to landlords.

A smaller population has many trickle downs, one of which is that there is less money to trickle down through the economy.  On the plus side, there’s less traffic and rents have come down.  On the negative side, the declines in retail are likely to last a long while, and will inevitably lead to lower revenue for Government.

The PLP is cutting costs by cutting services here and there  … but they are not really going to the heart of the matter, which is that Government is overstaffed, spends beyond our means, and is grossly inefficient.  Their “spur of the moment” decision making has harmed Bermuda’s economy and out of political pride they are slow to correct their known errors.

The dial has indeed been reset, just not in the way that Premier Cox describes.

At the time, they said it was necessary to improve democracy in Bermuda.

Now, however, they say the move was necessary “to ensure only Government has the power to tax its citizens“.

Indeed.  Government promptly took away the Corporation’s previous power to levy wharfage fees on goods crossing its docks.  Instead, Government levies the fees and gives the Corporation a “stipend” more or less equivalent to what they earned before.

And then they raised the wharfage fee from 1.1% to 1.25% of the value of imported goods.

In other words … “increased democracy” just cost you 15 cents extra in tax on every $100 of goods imported into Bermuda.  Doesn’t sound like much … but given that pretty much everything here is imported, it’s another of the many “little wedges” driving up the cost of living.

But don’t worry, the Premier says:

“This isn’t about the money. Really it’s about the fact we had a principle at stake.”

Really.