Shadow Finance Minister: Tax & Spend Budget, But No Growth Plan

The Government had a number of choices by which it could balance this year’s budget, mainly raise taxes or reduce spending. The PLP bristles at the “tax and spend” moniker, but that is exactly what they have done since they became the Government in 2017.

If you ignore the Sinking Fund contribution (as the PLP have done this year), the OBA handed over a Government in 2017/18 that was only $8M away from a balanced budget. Why has it taken two years and $60M in increased taxes since the OBA handed over the economy to close an $8M Government deficit? Well, as the PLP is a tax and spend Party, we should look at where all the new taxes are going.

Behind all the fancy rhetoric in the Budget Statement about efficiency (17 mentions) and reform (33 mentions), the Government is budgeting to spend the exact same amount every year for the next three years. No savings are expected to be found anywhere. Or, any savings will be consumed by increased spending. Of course, Government revenue mainly through taxes are budgeted to go up every year: tax and spend.

Employees. The Finance Minister made the claim that he would be unable to reduce Government spending without letting people go. What he failed to mention was that the PLP have increased the number of Civil Servants by 318 in the two years since the election. It would seem that the only growth plan the PLP has is to hire more Government employees.

Personnel Costs. Salaries, Wages, Employer Overheads and Other Personnel Costs have increased by $36.7M since the election. Of course, thanks to the OBA’s corrective actions to reduce the deficit (including the temporary compromise of furlough days), Government is now in a financial position to give civil servants a 2.5% pay raise. This pay raise, however, only amounts to approximately $9M, so the other $27.7M in increased Personnel Costs in two years is attributable to the additional 318 new hires.

Consultants. The OBA handed over the Government with a yearly consultant spend of $12.7M. This year the PLP is budgeting for $15.9M in consultants, an increase of $3.2M in two years. For reference, the PLP handed over a Government spending $35M on consultants in 2012/13. If spending discipline is not followed across the board it can quickly get out of control.

Travel. The OBA handed over the Government with a yearly travel spend of $2.0M. This year the PLP is budgeting for $3.4M in travel, an increase of $1.4M in two years. For reference, the PLP handed over a Government spending $5.3M on travel in 2012/13. The patterns across these increased cost lines are clear proof of the spend, spend, spend philosophy of the PLP.

The increased spend on new employee Personnel Costs, Consultants and Travel is equal to $32.3M. If these three line items alone were held to the levels at the time of the election, the $39M in increased taxes could have been avoided entirely and we’d still have a balanced budget by skipping the Sinking Fund obligation. Without the PLP spend, there would be no need for the PLP tax.

Or, without the unnecessary PLP spend on just these three items and keeping the existing tax increases, we would actually be able to dedicate $65M/yr on average to the sinking fund or early retirement of debt over the next three years. Bermudians would at least know that Government was sharing the sacrifice and that the additional taxes were being used to tackle the debt that will otherwise force higher taxes for many years to come.

This budget was characterised by a departure from fiscal discipline, has no stimulus for the economy and simply ignores the debt problem for the next three years.