Finance Minister Bob Richards has resolutely defended plans to forge ahead with cost-cutting reforms of the Civil Service, saying that, unless action is taken, Government will soon be broke.

At a packed and often emotionally charged public meeting at Pier 6 in Hamilton last night, Mr Richards insisted that, in order to get people back to work, Government needed to reduce expenditure, cut its deficit and attract more foreign investment.

Outlining recommendations put forward by the independent Spending And Government Efficiency (SAGE) Commission. Mr Richards began his 30 minute presentation to a sometimes hostile audience of more than 500 people by pointing out that the Island faced “some very serious challenges” and that Government’s financial difficulties were not “some abstract thing on Parliament Hill but the personal problem of every man, woman and child”.

“We are here tonight because of the state of public sector finances, otherwise there would be no SAGE Commission and no meeting tonight,” he said.

“Public sector finances are a victim and a cause of a fuel shortage. When the economy has fuel, it soars. When it doesn’t have fuel, it loses altitude. No fuel equals no growth and the fuel is capital from abroad. Every person in this room and every person out there in Bermuda — every cent that we have in our pockets comes from the same place — it comes from abroad, through direct capital investment or foreigners visiting and living in Bermuda.

“So Government is a victim of a fuel shortage but is also a source of a fuel shortage because when Government manages its accounts badly, it affects the amount of money coming into Bermuda. If Government manages its affairs poorly investors will demand a higher return.

“It is essential for Government to manage its affairs properly if it wants to get people back to work.

Mr Richards pointed out that, since 2008, Government expenditure had exceeded revenue — with salaries and debt service accounting for nearly 60 percent of Government expenditure.

“We have to correct this imbalance — themes no free lunches,” he said.

“Before one dollar is spent on wages, we have to pay our debt service. If this debt service grows it will squeeze out other things and if we don’t pay our debt service, the Bermuda Government will be broke.

“The present state of Government finances is totally unsustainable. If we do nothing, one day will come soon when the Bermuda Government will not be able to pay its debts and the people will suffer.

“There is an urgent need to grow the economy to increase Government revenue and also to constrain and reduce Government spending.”

During his presentation, about 30 protesters outside the hall, many of them carrying placards, could be heard chanting: “Save our jobs, save out jobs.”

“Save jobs? We’re trying to do that here,” Mr Richards replied.

But the Minister was often shouted down by audience members during his presentation.

“We do have people who don’t want to listen, they just want to express themselves,” he said. “I know Bermudians are well-known throughout the world for their politeness and as Bermudians, we should live up to our reputation.”

Mr Richards went on to explain that the SAGE Commission had put forward more than 200 recommendations, but that Government had cut that down to just “16 high-level policy decisions”, including the modification of the leadership structure of the Civil Service, reforming human resource policy, strengthening budgetary planning and, perhaps most controversially, setting up an Efficiency and Reform Authority to evaluate privatisation and outsourcing of some Civil Service departments and jobs.

The Minister then spent approximately 90 minutes taking questions from the audience on a range of issues from tax breaks for foreigners to outsourcing Government departments.

Responding to one questioner who suggested that Government could increase tax levies on international businesses, Mr Richards said: “Some people have this notion that if you only increase taxes on the rich, it will solve all our problems. I want to disabuse you of that. Tax increases always cause the economy to decline. We can’t increase taxes.”

He later added: “Opportunities for Bermudians are key and when we have an expanding economy we can make the change from poor to middle class to rich. When we have a retracting economy the rich will still be rich, the middle class will get poorer and the poor will remain poor. We have to have economic growth so that the aspirations of Bermudians can be fulfilled.”

The Minister was frequently asked what had happened to the money Government had “saved” from imposing furlough days on Civil Servants in an effort to reduce its wages bill.

“That money was used as a general reduction of the expenses of Government but we are still short,” Mr Richards replied to one questioner.

“What we have achieved is, last year we had a $330 million deficit and this year it’s going to be $267 million — it has gone to reduce the deficit.”

And the Minister also dismissed claims that outsourcing some Civil Service departments would result in job losses.

“We outsourced Tourism and nobody lost their job, so the assumption that if you outsource, people will lose their jobs is not a correct assumption.”

Mr Richards also said that another SAGE recommendation — that senior civil servants be put on contract — was accepted by Government to make the service more accountable.

“SAGE recommends that the system that we have in Government today doesn’t work properly as far as flow of accountability from top to bottom,” he said.

He also addressed concerns that the soon-to-be established independent Efficiency and Reform Authority could make decisions on privatisation.

“The authority has been put there to have an advisory role,” Mr Richards said. “The authority will not make any decisions, decisions will be made by the Cabinet of Bermuda.”

Many audience members questioned why Government continued to bring in foreign expertise, but Mr Richards countered that Government had reduced the number of consultants on its payroll since winning the December 2012 election.

“We have slashed the number of consultants mightily from the last Government,” he insisted.