Yesterday’s Budget Statement had a valedictory feel to it. While it was David Burt’s last as Premier, barring a major surprise, it was always possible that he might remain as finance minister. If in fact this was Mr Burt’s last on both roles, then he is going out on a high.
No finance minister in Bermuda’s history, and precious few in the world, have been gifted a 40 per cent increase in revenue in a single year. Most would kill for a much smaller rise, especially in the current global economy.
But that is what Mr Burt came to the House of Assembly with yesterday. No wonder he was smiling and seemed almost giddy.
The less charitable will say that this bounty was not of Mr Burt’s creation, but came as a result of the corporate income tax, and they would be right, up to a point.
That should not take away from the accomplishment of getting a consensus from the international business sector on the CIT, which was a major accomplishment requiring tact and diplomacy, but the reality is that the CIT was forced on Bermuda and was not something Bermuda would have conceived of doing unilaterally.
Nonetheless, now that the goose has laid a genuine golden egg, the Government and the broader community need to make sure that international business remains here. As stated in an earlier editorial, while CIT has been generally accepted, it also means that international companies have one less reason to be here.
To that end, Mr Burt has laid down some sensible rules that should give international business and others solace that this remarkable uplift in revenue will be used well.
Essentially, they state that Bermuda will continue to run a balanced current account budget without the benefit of CIT revenues, and that 70 per cent of CIT revenues will only be used for debt service and reduction or long-term investment.
Those are sensible rules. The question is whether Mr Burt’s successors will stick to them once he has stepped off the main stage.
That’s because the pressure to spend more will increase over time and future premiers, who lack Mr Burt’s electoral success and confidence, may feel less able to resist the demands. That is what happened after 2003 when then-Premier Dame Jennifer Smith and her finance minister Eugene Cox left office.
The rest of the Budget is broadly sensible, although there are some caveats and risks ahead.
First, the news that the Government will pay off the whole of the $605 million bond that is coming due in January is welcome news. This will reduce debt service in a meaningful way, and Mr Burt’s rules do indeed mean that when the next bond comes due in 2030, this should be retired as well.
However, it was disappointing not to see a more detailed road map on how the Government plans to retire the debt, beyond a vague declaration that it could be eliminated within a decade.
The tax cuts in the Budget also make sense, especially on the payroll tax side. Everyone will see their payroll tax fall and many businesses will benefit as well, which should encourage jobs growth.
But Mr Burt would have done well to have taken up the Tax Reform Commission’s proposal of a 7 per cent cap on employers’ payroll tax. This would have encouraged more employment and given international companies some comfort as well.
Mr Burt is right to further reduce Customs duty on essential goods and on the tax on fuel for electricity.
For now, it is right that Mr Burt has emphasised the cost of living and has moved to help the less well off. Bermuda is ferociously expensive, not only in terms of the cost of food and rent, but also for health insurance. The number of people who are uninsured or underinsured is scandalous, and the move to assist the poorest among the elderly is the right thing to do, both morally and economically.
Mr Burt’s efforts to fund more house building is right, and the Government should use what levers it has to contain food costs. But it has a bigger problem with healthcare, which it came into government promising to reform and has still not come up with a solution. While some progress has been made in the area, the bill continues to rise.
The Health Ministry now consumes one out of every four dollars spent by Government on its current account, and its budget rose by 15 per cent this year. Much of this was due to a 50 per cent rise in its statutory patient subsidy to the Bermuda Hospitals Board, which rose from $112 million to $168 million.
This is not sustainable. Plans to expand government nursing homes will relieve some of the pressure on beds as will an additional 30 long-term care beds at King Edward VII Memorial Hospital, but none of this will be enough as Bermuda’s population continues to age.
Health systems work when there are enough healthy young people to subsidise the cost of their less healthy elders. There is little sign that Bermuda will see an upsurge in young people, and a growing ageing population is inevitable.
While Mr Burt rightly took credit for bringing Bermuda’s budget into current account surplus even without the assistance of CIT, it is fair to say that when he writes his final valediction in October, he will not be able to say he saw through either of the flagship reforms — healthcare and education — which were promised in 2017.
That is not entirely his fault. The Covid-19 pandemic derailed most government policies and healthcare is an impossibly complex problem. Education reform, however, was simply ill-conceived, as the Government seems to have conceded, even if it has not explicitly admitted it.
Whoever succeeds Mr Burt as Premier will do well to follow his rules. But they will also need to make sure that they keep international business onside, since it now drives both the economy and the Government’s fiscal future.
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