Curtis Dickinson’s pre-Budget report makes for depressing reading and shows the enormity of the task before the finance minister as he prepares to present his latest Budget in the next few weeks.

At first glance, there might appear to be some green shoots of growth in the Bermuda economy, but if they are there at all, they look distinctly weedy and vulnerable.

The report — and the finance minister and his predecessor, David Burt, are to be commended for continuing to make the Budget process as transparent as possible — repeats the news that economic growth in 2018 was an anaemic 0.1 per cent in real terms. Growth in the first half of 2019 was markedly stronger at more than 3 per cent, but this is likely to have tapered off in the second half of the year.

There’s more bad news, much of it already known. Tourism air arrivals are down, but so are the number of company registrations, typically a measure of the strength of international business. In fact, both new company registrations are down and so are the total number of registered companies, meaning more companies left Bermuda than came to the island.

Most other indicators are also down, although construction activity was up. However, the number of new projects begun in the first half of 2019 was down on 2018, confirming that the outlook for this sector is gloomy. Another worrying sign of weakness is that the government provision for doubtful and bad debts jumped between 2018 and 2019. Many people cannot pay the taxes the Government already levies.

The one indicator that was up was employment income, and therein lies a quandary. It would be reasonable to expect that a big increase in employment income would wash through the whole economy, but this is not the case. At the very least, it suggests that incomes are being pocketed and not spent, but it is also possible that those people with high levels of disposable income are not investing it in Bermuda, possibly because of lack of confidence.

Earlier this year, the Premier was quick to boast that the Progressive Labour Party had been able to balance the Budget, an accomplishment not seen in Bermuda in many years. That boast always seemed premature, since the Government had budgeted only a surplus — the proof will have to wait until at least next month and probably later in the year when all revenues and expenditures have been recorded. Indeed, the current financial year does not end until March 31.

A Budget surplus is still possible, but looks like it will be certainly smaller than predicted, and it depends largely on payroll tax returns remaining strong.

Debt increases are largely owing to the Government taking on the Caroline Bay debt when it had hoped to avoid any new debt at all. This addition has also reduced any benefit from debt-service renegotiations. And it should also be remembered that the surplus has been achieved largely by an accounting sleight of hand — Mr Dickinson, albeit with some sound reasoning, is no longer contributing to the Sinking Fund, unlike his predecessors.

The report explains the dilemma facing all governments with unsustainable budget deficits: “First, the classical concern: when deficits are high and people are worried about an unsustainable surge in debt, deficit reduction may have a strong, positive, confidence-building effect that offsets the negative shock to the economy. The counter to that is the Keynesian view: when there is a large output gap and demand remains weak, deficit reduction may weaken demand even more.”

In other words, deficit reduction may force an economy to contract, but potential investors may take confidence from the Government’s prudence and over the long term lay the foundations for a strong economy. The opposite approach is to spend more money to strengthen the economy in the short term, even if it means that deficits last longer, with its accompanying costs.

Mr Dickinson and his government are trying to find a middle way, by attempting to stimulate the economy and to encourage diversification as the best means of encouraging employment, while always putting “stability” and the island’s sterling reputation first. The risk is that in trying to follow both courses at the same time, the Government will accomplish neither, which is indeed where Bermuda finds itself now — debt is not shrinking and the economy is, at best, stagnating.

What is conspicuously absent from this report — and perhaps Mr Dickinson will redress this in his actual Budget — are any concrete ideas for moving the Bermuda economy forward. It is almost as if, with the Premier’s big idea for turning Bermuda into a financial technology centre faltering, the Government has no other plans to generate economic growth.

Despite that, and despite an acknowledgement that having been hit by almost $30 million in tax increases in the current year, meaning “there is not likely to be the ability by taxpayers to afford any material increases in 2020-21”, which is an understatement, some taxes and fees will increase again.

Among them are a 13 per cent or $3 per passenger rise in the cruise ship passenger tax, which will not face too many objections from within Bermuda, but might from the cruise lines; increases to international companies fees, which seems risky at a time when company registrations are already falling; and an increase in the fees charged for three to five-year work permits.

In addition, the Government is considering some tax reductions for small companies, and is also considering the lowest payroll tax band, but increasing rates for higher earners.

The increase in work-permit fees raises the inevitable question of relaxation of Bermuda’s immigration laws.

The report opens the door to this when it states that among the risks facing the Bermuda economy are “effects of an ageing population, declining workforce, underfunded public-sector pension funds and escalating healthcare costs”.

It adds: “This remains a certainty, not just a risk, which will result in serious medium and longer-term pressures on public spending and challenges to growth. It will also make it more difficult to deal with a large debt overhang. While demographic trends are, by their nature, slow-moving and may not be immediately visible to the public, this is perhaps the single most serious long-term issue Bermuda faces and one that now needs to be addressed with some urgency.”

This is a tacit admission that Bermuda cannot continue on the unsustainable path of having an ageing population and a shrinking workforce.

There are some who see relaxing immigration as the panacea for all of Bermuda’s ills. This is not the case and this issue remains an historically fraught one for Bermuda. But it is an essential part of the solution because of the demographic crisis. If the economy does not grow, and with it the workforce, Bermuda will be unable to support the most vulnerable.

Having so cogently explained the risks of doing nothing, people would reasonably want the report to have some concrete ideas for dealing with it. Those people will be disappointed. In fact, it does the opposite, proposing that fees charged for three to five-year work permits should be increased which would inevitably result in fewer applications.

Some may rightly point out that the Cayman Islands has much higher work-permit fees than Bermuda and is doing just fine. They would be right, but the higher fees are accepted because once granted, work-permit holders in Cayman have many more rights and opportunities than they do in Bermuda.

That, in part, is why Cayman is growing and Bermuda is not. This Budget report suggests that this scenario will not change anytime soon.