Shadow Finance Minister David Burt says Bermuda must be more aggressive in order to break the “vicious economic cycle”.

In his official Budget reply, delivered in the House of Assembly, Mr Burt said the Island’s economy is broken and the wait-and-see approach of the OBA and previous PLP administration has failed.

“We are stuck in a vicious cycle,” he said. “Businesses feel the pinch so they cut back; they layoff Bermudians and outsource job functions, which causes more persons to be out of work, which leads to more weak spending, which leads to more layoffs. This cycle repeats itself and like compound interest every year it compounds its effect.

“Make no mistake: our economy is broken, and the OBA Government seems to be falling into the same trap as the former PLP government — wait and hope that international business stabilises and we can attract more jobs to our shores. This approach ignores the fact that the trend of outsourcing is ultimately irreversible.

“It is my view that we will be waiting for a very long time, and that our country cannot afford to wait. That is why the PLP has been very aggressive in promoting industries that can diversify our economy.”

Mr Burt said Government’s plan to cut $70 million of current account spending without layoffs or further wage concessions is impossible and questioned the logic of issuing cuts while the economy is in a fragile state.

“The SAGE Commission introduced the theory of the multiplier effect to the general populace, and postulated that for every dollar cut from government spending, the economy loses $1.28,” Mr Burt said. “This means that the Minister’s spending cuts of $70.7 million will remove over $90 million from our GDP during this fiscal year. This means that the Minister will shave 1.7 percent off of GDP growth by his budget actions alone.

“One could be mistaken to think that the Minister of Finance wants to prolong the recession. These aggressive cuts are bad economic policy as our economy has still not recovered.

“The Minister bragged that he was going to be more aggressive than the SAGE Commission recommended, but surely the Minister must realise that to create additional headwinds with the economy in its fragile state will not help us achieve escape velocity and return to economic growth.

“It seems that no area was spared from cuts. For the second consecutive year Bermudians will see scholarship funding slashed, education and training cut, the Bermuda College hit with reductions, police and Customs will feel the pinch, and the Tourism Authority will have less resources to execute the National Tourism Plan.

“It seems that the Government has no priorities except aggressive spending reductions, no matter the consequences on our people and damage that it will do to our economy.”

He said it was surprising to hear Finance Minister Bob Richards criticise the 60/40 rule, Belco and banks in his Budget Speech last week, saying the comments suggested the OBA was “at a war with itself and with its core values”.

“Three cornerstones of the ‘House that Jack Built’, a trinity of UBP/OBA economics in a few short sentences were reduced to rubble and made enemies of the people and progress,” Mr Burt said.

“That was the most historic portion of the Minister’s statement and was a revelation that the OBA is at war with itself and with its core values. The unfortunate thing for Bermuda and her people is that as groundbreaking as the Minister’s statements are, they ring hollow because they lack any commitment to breaking the cycle which the Minister and his Government have suddenly discovered as unjust.

“60/40 didn’t become an economic burden in 2013. The banks didn’t start squeezing this economy in 2013. And Belco didn’t get expensive starting in 2013 either. So the Minister’s inclusion of these pillars of an economy that he and his current party and its forefather, the UBP, have traditionally defended on some sort of warm-up hit list is ironic and again, rings exceedingly hollow.

“Where was the Minister’s outrage towards the banks and Belco when he sat on this side of the House? Where was his leadership and voice at that time?”

He also argued that privatisation is not a panacea for the Government’s budget challenges.

“Privatisation creates the real risk that the government’s assets will be sold on the cheap, transferring more wealth to the ‘haves’, while the workers and taxpayers lose out,” he said.

Mr Burt said the PLP would have reduced spending by just $40 million, dedicating the other $30 million into areas including education, energy, workforce development, the Police Service and Child and Family Services (see sidebar).

And he stressed the need to diversify the Island’s economy, reiterating suggestions that Bermuda look at online gaming, develop the “blue economy” and regulate and tax cannabis.

“Any discussion of options for additional revenue should include the regulation of cannabis,” he said. “The state of Colorado is expected to earn $134 million in direct taxation from its newly regulated cannabis industry. They are spending that money on school construction, law enforcement, public health, and substance abuse prevention.

“Though we are much smaller than Colorado, there is no doubt than any additional tax revenue from a local regulated cannabis industry would be welcome.

“I am not promoting the consumption or abuse of cannabis; however I think we can all agree that a responsible cannabis consumer is no worse than a responsible citizen who enjoys a glass of wine or a cocktail at home. What I am promoting is a sensible and pragmatic approach, which has been successfully implemented in other jurisdictions, that can assist us in generating additional revenue.”