WE CANNOT TURN AWAY FROM THE FUTURE.

Mr. Speaker, this is the thread running through the Progressive Labour Party Budget Reply. 1994 is a crossroads year and offers tremendous potential for growth and expansion for this Island. However, Mr. Speaker, we in the Progressive Labour Party, who sit on this side of the House -- as the alternate Government in waiting -- believe that there must be growth with equity. Mr. Speaker, we are dedicated to seeing in our society and in our economy that expansion will be balanced with a renewed, stepped-up commitment to remedying the social ills and needs that have for far too long been neglected by the United Bermuda Party's brand of trickle-down economics.

Mr. Speaker, the PLP approach is not to turn on the tap and just hope that it wets the land that needs it most. The Progressive Labour Party would use a sprinkler system to ensure the benefits are spread evenly throughout society.

We have a vision and a direction. A vision and a direction that will see Bermuda taking active steps to prepare itself for the challenges of the future. A vision Mr. Speaker, that will see us take the necessary steps to train and to re-tool our work force, and to bring in changes so that ALL of Bermuda can benefit -- and not just a small segment of the community.

This 1994 5 Budget is a budget which hurts the interests of the average Bermudian.

That is the second thread which is a recurring theme in this 1994 5 Budget: that Mr., Mrs. and Ms Average Bermuda will bear the heaviest tax burdens in this Budget.

It was not enough that they were the ones who bore the brunt of the recession.

Now they are being forced to bear the burden of the new taxes that are supposed to put the Country back on its feet. The Finance Minister has passed on to employees the entire burden of paying the increased one percent of the hospital levy. We note also that there is a five percent increase in all Government fees. This will make the cost of necessary documents, like passports, birth certificates and building permits, etc., to name but a few, more expensive for everyone.

In this Budget, those Bermudians who through industry and hard work have saved up to buy their own homes will not find their efforts rewarded.

Then there are the sin taxes, on cigarettes and alcohol. It is curious that other vices were not penalised in like measure. After all there has been no increase in the tax on gambling. So some have escaped relatively unscathed.

The narrowing of the tax bands may sound like a bonanza, but its effects are not that beneficial overall. The returning resident may move through the Customs queues speedier, but in fact their wallets may be very much lighter, since with only two customs bands and both at the higher rates -- 221 percent and 331 percent it could prove costlier if the goods you brought in were previously dutiable at lower rates. Children's clothes purchased overseas and returned as accompanying baggage will now attract the higher rate of 221 percent instead of the lower rate of ten percent.

The five percent increase in the car licensing fees also impacts on the wallets of those who can least afford it. Gone are the days when a car was a luxury. Today a car is a necessity and the increase in licensing fees will be felt. It seems harsh to lumber people with this increase, especially when they are still reeling from the continuing effects of the recession, and trying to regain some control over their financial planning. We do not feel we are being overly generous, particularly when you have one of the two major banks which have made huge profits complaining about an $250,000 increase in the bank licensing fees.

POLITICAL LEADERSHIP Mr. Speaker, PLP leadership, is now more important than ever as the politics of consensus within the UBP has so obviously begun to fray. Mr. Speaker, the seams are unravelling as the Party that allegedly claimed to be a Party of consensus, find they cannot even discuss the topic of Independence coolly and rationally without alienating their own followers. Certainly, Mr. Speaker, it bodes ill about their future capacity to lead and to offer direction at the national level, if at the slightest hint of a diversity of opinion, they degenerate into the politics of recrimination.

Mr. Speaker, we cannot turn away from the future.

NEW BEGINNING The run-up to the recent General Election signalled a call for change with the PLP's "New Beginning'' team dedicated to effecting fundamental changes in the socio-economic processes of our country. A PLP Government would have policies that will empower the people -- policies to address the structural inequalities in our society, such as unfair competition and, the prevalent "old boys'' network with its interlocking system of multi-layered conflicts of interest and other impediments to the free market place.

Mr. Speaker, we advocate policies which promote strong family values and strong family units so that we can build a society that works hand-in-hand to serve the best interests of the broad spectrum of the Bermudian people. Our fundamental tenet is to act to protect the rights of all vigorously, without fear or favour.

Mr. Speaker, the Progressive Labour Party has the political will for such a New Beginning. Our economic policy will have two main thrusts: 1.A foundation for orderly long-term economic growth, and 2.Short and long-term investment in educating and training our people for greater productivity in business so as to provide leadership, and to develop constructive action plans that will facilitate the redirection of our resources both existing and new, so that Bermudians can be the beneficiaries of the wealth of their country.

Mr. Speaker, all of this will not be easy, but to ignore this opportunity to chart new beginnings when we find ourselves at a new crossroads, would not only be a dereliction of duty but could irreparably harm our country's long-term prospects, by strengthening those negative influences that presently consume our limited resources and occupy time we can ill afford.

Mr. Speaker, such negligence extends far beyond last week's Budget blunder of the Hon. Finance Minister (the tariff increase on aluminum building products) or even his political blunder of last year when he termed the Bermuda Fire & Marine scandal a "yawn'' to the international players in high finance. Mr.

Speaker, so much for "national pride'', let alone respect for our own international standing! In fact, Mr. Speaker, I can now reveal yet another error in the Minister's own Budget Statement -- the incorrect listing of Manpower by Department in units of thousands.

We must be concerned about stewardship, performance measures and accountability. Even if the Government spent $6 million last year on the Social Assistance Programme one has to ask, was that money efficiently spent? Where are the performance measures? US, UK, AND CANADIAN BASE CLOSURES Mr. Speaker, the pending US Naval Base closure, the withdrawal of the Canadians and the announced departure of the British, must prompt a serious assessment of how we are to generate foreign currency to replace these anticipated losses. The Finance Minister says in his Budget Statement that $2 million has been allocated for the bases and that there is a need to discuss what should be done about the bases, but fails to outline the UBP Government's plans. He missed an ideal opportunity to use the 1994 5 Budget as a springbroad for outlining Government's plans to replace the loss of revenue.

One would have expected the UBP Government to come to the House at this time with a list of possible uses for which the base land could be used -- even if in skeletal form.

The people of Bermuda had the right to expect that the UBP Government would in their Budget Statement present a financial package of constructive suggestions and solutions to deal with the economic vacuum created by the departure of our overseas friends, especially with its consequent loss to our revenue. The UBP Government have blundered yet again and let the people down. They do not seem to have learned any lessons from the fiasco with their "Blueprint''.

Our ethos is that we cannot turn away from the future . With that in mind, we can suggest some possible uses for the base lands. One option is to model the property on an economic free trade zone such as has been developed in other jurisdictions. A freeport, by its location and size, could offer great advantages to buyers and sellers alike, side by side with our airport and air freight facilities.

In other jurisdictions, free trade zones have been created by Government decree as autonomous institutions. The land set aside as a self-contained area within which goods can be imported, stored, modified, processed, assembled, re-packed and re-exported without being subjected to local customs duties. We should consider using the base lands in this way. This sort of operation offers unlimited opportunities even while parts of the remaining areas of the base lands can be used for addressing social and recreational needs of Bermudians.

Certainly, contributory factors to the success of such a free trade zone for Bermuda would be our role as an international financial centre and our proximity to the Eastern Seaboard and the North American market.

This is not an issue which should be unthinkingly dismissed. Rather, it is properly an issue that benefits from a Commission of Inquiry -- unlike Independence.

Mr. Speaker, also worthy of consideration is the usage of base lands as the lynchpin for a thriving telecommunications and information industry in Bermuda.

WE CANNOT TURN AWAY FROM THE FUTURE.

TELECOMMUNICATIONS Bermuda has an excellent local infrastructure. It is geographically well-situated and a well-chosen site for the establishment of an international telecommunications gateway. The PLP is cognizant of the fact that we are living in an age where technology is developing at such a rapid rate.

Unfortunately the UBP Government is unable to get appropriate regulations in place within a reasonable time to cover new technology.

The present rules and regulations governing telecommunications are inadequate to carry Bermuda into the 21st century.

The further development of our telecommunications infrastructure will assist in creating higher quality job opportunities for Bermudians. It will also increase the attractiveness of Bermuda for the international business sector.

A cottage industry in areas such as software development, computer-assisted stock trading, computer-based information services and database management services could be an offshoot of investment in this industry, and a possible use of the base lands.

An improved telecommunications system could attract and encourage emerging second-tier carriers from many countries around the world, as well as telecommunications and information based companies to set up operations in Bermuda. The pending Bermuda Financial Centre project should, with appropriate training programmes, offer a range of employment opportunities for Bermudians.

There will be a correspondingly greater need for a sophisticated global telecommunications network.

CURRENT ECONOMIC CLIMATE The Hon. Finance Minister, in his Budget statement, asserts his government's grave concern that 10,100 work permits held by guest workers were reduced to 5,400 during the past four years, a period during which Bermuda suffered the effects of the recession. We also recognise that some businesses have used the downsizing to effect economies of scale to make their businesses more efficient.

Mr. Speaker, what the Honourable Minister fails to appreciate that during this same period it was Bermudians who suffered most from the effects of the recession. He should be focusing on announcing measures to empower the people so they will be better positioned for the future. Get your priorities straight, Sir! Instead of mourning the decline in the number of guest workers, be pleased that Bermudians were able to fill some of these jobs. Focus on the positive. After all, let us not forget that it is in those areas of economic activity where Bermudians work in the greatest numbers, and the recession had the most impact.

Mr. Speaker, the House must not be misled, the decrease in work permits does not always correlate with the numbers of foreign workers. In fact, Mr.

Speaker, I note that a number of work permit holders held more than one job.

This is confirmed by the fact that the number of valid work permits held by non-Bermudians has fallen by 4,600 between 1989-93 whilst the number of non-Bermudians in the work-force has only fallen by 1,080.

Mr. Speaker, we note that Bermudians are employed in greater numbers in the following labour intensive industries: construction, hotels and restaurants, wholesale and retail, transport, storage, and communications.

Table 1 below shows the number of jobs held by Bermudians by economic activity and the number of jobs lost.

TABLE 1 BERMUDIAN EMPLOYMENT BY ECONOMIC ACTIVITY Activity 1993 1991 Chg Chg Community, social, 4,357 3,871 486 13 & personal services Restaurants & 4,333 4,105 228 6 hotels Retail trade 3,631 3,768 (137) (4) Public admin & 3,250 3,787 (537) (14) defence Transport, storage 2,214 2,265 (51) (2) & communications Financial insts. 1,836 1,804 32 2 Construction 1,507 1,814 (307) (17) Real estate & 1,430 1,204 226 19 business services International bodies 1,313 1,223 90 7 All others 2,615 2,865 (250) (8) 26,486 26,706 (220) (1) Source: The Manpower Survey Mr. Speaker, the tragedy is that we see in this Budget no real efforts or initiatives taken by the UBP Government to address this sad state of affairs.

Instead, the Finance Minister paints this gloomy picture of the foreigners who have left. Instead of seizing on this unscheduled departure as an opportunity to use Bermudians more profitably and productively in their own home country, he seems to suggest that the Immigration department open the floodgates for a new wave of non-Bermudian workers to come in and carry on in the old way -- business as usual. Indeed the UBP's own Chairman of its Task Force on Employment, Mr. David Lines, publicly called for "a new wave'' of immigrants to end the recession. Enough is enough. Those that are here and who need to be here to make our economy run more efficiently, we welcome.

Mr. Speaker, we have said as much in our discussions with the leaders in the international business community. However, there are still other workers who are here that are little more than opportunists. They come out on a holiday.

They like what they see and they find a part-time job temporarily, and then they manoeuvre it so they get to extend their stay indefinitely.

You know Mr. Speaker, we on this side of the House do not so much blame them as we blame the Government and the machinery of Government which allows what used to be a small number of persons to be able to slip through the cracks to snowball into these vastly increased numbers of persons, who have come to Bermuda and improved their lot, often at the expense of the Bermudian.

WE CANNOT TURN AWAY FROM THE FUTURE MONETARY POLICY The renewed debate on Foreign Exchange Controls (FEC), affords the opportunity to look critically at the decision making processes of the United Bermuda Party Cabinet.

It would seem that the government out of political expediency restricted our monetary and fiscal autonomy when they agreed to membership in the Organisation for Economic Cooperation and Development (OECD). The condition of membership in the OECD is that member-states promote policies designed among other things, to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accordance with international obligations.

Economically Bermuda is a small country which, in our view, cannot afford the luxury of a totally open economy without first preserving some semblance of control. Since Bermuda imports virtually everything, it is already subject to the inflationary elements of the exporter countries, as well as the volatility of interest and exchange rates in those markets.

We in the PLP, want to see growth with equity here in Bermuda, which requires that there is a system of fairness permeating throughout our fiscal and monetary policy. We must first eliminate the structural impediments, inequalities and other barriers to free competition which are so entrenched within our own domestic economy. It makes little or no sense to aspire to membership in the OECD with all this entails, if we are unwilling to address and to remove those same policies within our own existing system. One would have hoped that the Finance Minister would have used this Budget Statement as a launching pad to attain some real OECD objectives, starting with the conscious re-examination of our own system.

The Budget Statement introduced the removal of the interest rate ceiling. We note that this is at a time when international interest rates are at a historic all-time low, and so the only direction we would reasonably expect them to move in is upward. We seem to be inviting a situation in which our current ceiling, now becomes our floor. This, Mr. Speaker, will have a detrimental effect on Bermuda mortgage holders if we do not, as is practiced in some other jurisdictions, have legislation in place to cap mortgage rates.

We hope that the borrowing public will benefit from any fall in interest rates. We are convinced Mr. Speaker, that when US interest rates trend upwards as they are sure to do, local rates will follow. Thus, Mr. Speaker, Bermuda's membership in the OECD will have important future ramifications for our Island.

Mr. Speaker, we in the PLP reiterate our call for greater independence of the Bermuda Monetary Authority, free of Government influence and control. We believe that the Bermuda Monetary Authority should be the central institution charged with the setting of domestic monetary policy as opposed to the present system wherein these policies are set by the banks.

FOREIGN EXCHANGE CONTROLS The relaxation of Foreign Exchange Controls, with the threat of further easing before the end of the current session, can be considered a danger to the Bermuda economy.

At the present moment every family is allowed to export $50,000 a year.

The 1991 census indicated that two percent of the Bermuda population had a family income in excess of $144,000. In order to be limited by the $50,000 ceiling, a family must earn in excess of $150,000 as they need to live in Bermuda, and pay their bills. This being the case, the percentage of people limited by the $50,000 is probably much less than two percent, so who is limited by the foreign exchange restrictions? Continued on page 5