Governor John Rankin

Governor John Rankin stated today that healthcare reform will even up the playing field when it comes to social insurance and put stakeholders on notice that the CEO who makes $4,000 a day, who pays the same rate as the worker who makes $4,000 will be eradicated.

Delivering the Progressive Labour Party government’s second Speech From The Throne, under the big tent outside the Cabinet Building this morning, he said tax reform in Bermuda will be based on people’s ability to pay. 

The legislative agenda for the new parliamentary session also includes plans to deliver legislation on what constitutes a livable wage, definitive plans to reduce the cost of energy, with legislation pending to create more competition for banks when it comes to mortgages.

On plans to end the fixed-rate for social insurance based on a percentage of income, Governor Rankin said: “During this session, the historic and unfair system that sees a CEO making $4,000 a day pay the same amount in contributions as a worker making $4,000 a month will be modernised.

“Bermuda’s social insurance system will be changed from a fixed-rate contribution to one based on a percentage of income; a change that was made in the UK forty-two years ago will finally happen in Bermuda this year.

“This change will increase the take-home pay of low-income workers, while ensuring that our pensions fund is sustainable for the future.”

More “substantive reforms will be announced in February’s Budget Statement”. But he said: “Immediate action is required.”

On mortgages, Governor Rankin added: “Bermuda’s banks have reaped immense profits over decades by imposing US interest rate increases on Bermuda’s mortgages and, in so doing, securing, in some cases, a 24 percent return on equity; a return four times the European Union average. The effect of this practice has been to drain hard-working families of disposable income that could be saved, invested or otherwise put into the economy. Declining retail sales can in part, be traced back to the fact that over the last year many families that have mortgages have seen their monthly payments increased, and so they are forced to spend more paying the bank than eating out or shopping.

“The Government is determined to provide relief to hard-working families through a series of measures, including, but not limited to, engaging alternative financing regimes, guarantees to reduce mortgage costs and repayments and, where required, legislation.

“Not all local banks have increased mortgage rates, and our tax system should not prevent families from taking advantage of lower rates at a competing bank. To boost competition between existing banks, stamp duty on any mortgage refinancing will be eliminated for amounts under $750,000, allowing Bermudians to move their mortgages to a bank that may charge a lower rate without having to pay taxes on that transaction.”

On healthcare costs he said: An ageing population, a more sedentary lifestyle and the undue increase in the incidence of chronic, non-communicable diseases have all added to the unsustainable cost of health care in Bermuda.

“These factors, taken with inefficiencies in healthcare delivery, make addressing healthcare costs an imperative,” said Governor Rankin.

“The Government will change the way we pay for healthcare and make it more affordable by expanding access to coverage at better rates.

“Bermuda’s cost of living is negatively impacted by the high cost of health insurance. This affects families, seniors, entrepreneurs and even international businesses.

“Bermuda’s International insurance industry was built on the principle of reducing the costs of coverage by pooling risk. If more risks are in the same pool, then costs for everyone are lower.

“Bermuda’s entrenched, vested interests have prevented achieving locally what Bermuda has done for the rest of the world.

“The needs of Bermudians must finally take precedence over insurers’ profits. Therefore, upon conclusion of the necessary consultation, the Ministry of Health will advance a national health plan that will put all persons in Bermuda into either one or two health insurance pools, which will reduce the cost of health insurance. This fundamental reform will be the subject of legislation during this session.

We’ll have more in subsequent reports.