February 14, 2014

Dear Sir,

On Page 10 of The Royal Gazette edition of February 12, 2014 had a short article from reporter Jonathan Bell entitled “Unions remain against privatisation of civil service”.

I think most of us in Bermuda understand the Union’s position, but I also think the majority of us don’t agree with their position either.

In the article, Bermuda Trade Union Congress head Alan Wilkinson states that the Island’s unions “understand the challenges facing the Government’s cash-strapped pension scheme — but remain opposed to outsourcing or privatising for downsizing Bermuda’s civil service.”

This comment touches on 2 separate issues facing Bermuda, namely the Public Sector pensions, and the multiyear deficits that Bermuda has faced for the past 6+ years. Both are very worrying and reform is certainly needed to fix the problems. I think the SAGE commission’s report and recommendations can go a long way to sorting out the mess, provided they are adopted by both the Government and Unions.

Tackling the Public Sector Pension Challenges first in this letter, I get the impression that Mr. Wilkinson is speaking out of both sides of his mouth. How can he say in one breath that he “understands the challenges of Government’s cash-strapped pensions”, while at the end of the article he states that the “BTUC was pleased to hear that the Government will not be considering moving from a Defined Benefit Pension Plan to a Defined Contribution Plan.”

This shocked me.

It is well recorded that the deficits in the Public Pension Schemes (Bermuda Government Employees and the Ministers & MPs plans) are huge.

The Funding ratios are well below 50% and the Bermuda taxpayer is on the hook for making up any shortfall. If indeed the OBA has agreed to not changing the pension system to Defined Contribution I will certainly be asking them to explain how these deficits won’t be passed on for future generations to pay?

The world has been fast moving to Defined Contribution Plans from Defined Benefit Plans, and Bermuda must do the same. It is just plain wrong to saddle this debt obligation onto future generations and both the Unions and the Government know this. It appears from the article at least, that neither the Unions nor the Government appear to have the “guts” to make the right decision to ultimately fix this problem. What a pity!

The second challenge the Island faces is our growing annual deficit.

When the OBA arrived our debt was around $1.5 billion, and now it is estimated to be around $2.4 billion as the Minister of Finance raised additional monies recently to keep us flush for a couple of years. Most of us know how we arrived at this mess — overspending on Govt contracts, growing the civil service, raising salaries to MPs and Ministers, poor policy decisions, slowing economy, etc, etc.

In simple terms, Government has outgrown the pace at which it can afford to pay itself, so it has to borrow to pay salaries and keep programs running. The Island’s balance sheet is being destroyed by an overweight public sector defined by physical numbers and the size of their salaries and benefits, and yet, Mr. Wilkinson thinks this is OK because he and his union are against privatisation and outsourcing.

I’d be curious knowing how Mr. Wilkinson intends to fix our balance sheet and plug the deficit hole. In my humble opinion it cannot be done without downsizing the civil service and reducing some public services to ease the cost burden.

For those who think revenue increases via higher taxes will plug the hole, just remember the ramifications of the previous Finance Minister’s attempt to raise the payroll tax to 16% on our international business sector. Jobs took flight and the policy was quickly reversed.

I can understand the Union’s apprehension to reducing its membership. For one, fewer fees will be collected and the Union Executive may well find that they have to reform at the top and reduce their lot.

Instead of resisting the inevitable, the union ought to embrace the opportunity to get their membership participating in the private sector via the privatisation, outsourcing and mutualisation initiatives that Government is considering. They should also focus their efforts on job and career retraining programs for their membership rather than erecting walls and taking a protectionist position.

If the unions don’t plan their way through this mess and cooperate with the Government of the day, they will find the walls they’ve built will soon collapse in on them and their membership.

After all, foundations built on debt are never stable.

Allan D. Marshall JP