Budget on track to meet forecast, Premier says
Government revenue is on track to meet forecasts, and a deficit in line with estimates is expected, the Premier told the House of Assembly yesterday.
David Burt, who is also the Minister of Finance, delivered a midyear financial update that included revisions on the 2022-23 financial year. It showed a rise in government revenue and a big drop in the forecast budget deficit.
“This government continues to demonstrate sound fiscal prudence and the ability to be good stewards of the public purse,” Mr Burt told the House.
“Though the Opposition may focus on a few missteps, I remind the public that no government gets it 100 per cent right 100 per cent of the time.
“But we have delivered relief to Bermudians challenged with the highest global inflation seen in 40 years through tax and duty cuts, we have made investments in affordable housing and critical infrastructure, we have maintained our credit ratings, today we are repaying $50 million in debt, thus reducing our gross national debt for the first time in almost 20 years. Yes, things are moving in the right direction.”
Pearman: In respect of your statement about the $50 million that is being paid, when is the $50 million being paid, now due under the relevant loan note?
Premier: The $50 million is due today and funds were transferred to Butterfield Bank yesterday to ensure that they did not charge the Government any extra interests in saying that the payments may have been delayed. So the funds have been transferred and the funds consisted of $51.2 million, $50 million on the principal and $1.2 million on the half-year interest as interest on the $50 million is payable twice a year.
Therefore, as stated in the statement, our annual interest expense will now reduce by $2.4 million and gross debt will fall for the first time in over 20 years.
Pearman: If it is due today. The Government is in fact complying with the contractual obligation. Yes?
Premier: I think the learned member would know the answer to that question. I am trying to understand what his point is. Maybe he will get to it in the follow-up.
Pearman: I have been asked to clarify why I asked that question. The Government has portrayed this as if they were getting ahead of the game, but in fact they are doing what they are obliged to do, correct?
Premier: As we see again, they cannot help themselves. I can assure you if the Government of Bermuda had to refinance this debt and did not have the funds because there were no money in the bank, they would be making a whole pile of noise.
But they can’t even bring themselves to say, ‘job well done’. The fact is that unlike the record of the One Bermuda Alliance, who said that they were going to borrow $800 million, which would last their entire term of office, and then went back to the bank to borrow more money three years later because they could not control the spending, this government has taken a different path, ensuring that we have the funds in place and are progressing towards a balanced Budget.
May I remind the honourable member that if it was not for the pandemic and their failed Morgan’s Point project, which has cost the Government more than $200 million, the Budget would have been well balanced and we would have had far lower interest-rate payments than we do now, so the honourable member may wish to try and say, ‘oh, the Government isn’t doing anything’, the fact is that if we did not make this payment, if we had to roll over this debt, they would have been saying, ‘they aren’t doing it’. They cannot have it both ways, but they try to do it every time.
Pearman: It appears I struck a nerve today. I didn’t say the Government wasn’t doing anything. I said the Government is doing what it is obliged to do.
This $50 million is coming out of the sinking fund, and in fact what happened is that the Government borrowed more than was needed last time and set aside the $50 million being paid now, and so do you agree that the net debt, which is gross debt less the sinking fund, will be left unchanged by this action?
Premier: That was mentioned in my statement.
Pearman: The fact that it was mentioned in your statement, do you agree that net debt is unchanged?
Speaker: I would want to think that the statement that the members, ministers bring here are statements that they are in agreement with. It is their statement, their statement that they have drafted and brought to the House.
Pearman: Thank you for clarifying that net debt has not actually been reduced. Thank you, Mr Speaker.
MPs heard that total revenue for the financial year 2022-23 is projected to be $1.113 billion, $35.2 million above the original estimate.
Current account expenditure is expected to be $950.3 million, $5.2 million above the 2022-23 original estimate, and capital account expenditures are projected to be $68.2 million, $4.8 million less than originally budgeted.
Mr Burt said: “I’m pleased to announce that the 2022-23 budget deficit is now expected to be $46.9 million, $23.1 million below the 2022-23 original estimate and $30.4 million below the 2022-23 revised estimate of $77.4 million.
“The projected deficit also represents a $13.1 million reduction compared to the previous fiscal year.”
The reduction, the Premier said, was achieved despite losing $30 million in revenue from the aircraft register because of the war between Russia and Ukraine as well as $15 million in unbudgeted Covid expenses and a $15 million grant to the Bermuda Hospitals Board.
Looking at 2023-24, Mr Burt said the Government’s midyear assessment indicated that total revenue was projected at $1.16 billion — on track with the original budgeted figure.
“The revenue figure represents continued economic recovery, evidenced by expected increases in tourism-related revenues, payroll tax and land tax,” the Premier said.
Total current account expenditure is revised to be $984.5 million, $11.9 million above the original estimate owing to a further $16.4 million grant to the Bermuda Hospitals Board.
Interest and guarantee management costs are projected to be $130.4 million, which is on track with the original budgeted figure.
Capital account expenditures are projected to be $85 million, or $11 million less than the original estimate.
“This anticipated underspend in capital account expenditures is mainly due to the availability of construction resources and continuing supply-chain delays,” the Premier told MPs.
The revised budget deficit for 2023-24 is $44.4 million, $0.9 million more than the original budgeted figure.
Mr Burt added: “This projected deficit is relatively on track with the original estimates despite unbudgeted costs associated with the funding boost for the hospital and a negotiated increase in salaries and wages for public officers.
“Keeping the deficit in line with estimates despite these additional unbudgeted expenses is a laudable achievement.”
As of September, the sinking fund balance was $199.2 million, and the aim of the Ministry of Finance is to maintain a minimum balance of $100 million.
Mr Burt said that the Government had pledged to collect $7.5 million in back taxes in this financial year, but already the Office of the Tax Commissioner had collected $15.7 million owing to the implementation of a new debt management system.
In his statement, the Premier said that during preliminary discussions with key stakeholder groups, some policy initiatives were included in the pre-Budget report for consideration and feedback.
Mr Burt said: “I’d like to emphasise that none of the mentioned proposals included in the pre-Budget report are policy positions of the Government. They are simply options put forth for consideration, and the Government is inviting the public to be a part of that process by making recommendations for changes in tax policy and spending priorities.”
The initiatives include:
• Amendments to the existing new-hire relief that is set to expire this year
• Consideration of increasing boat-licensing fees for large pleasure craft
• Consideration of a further reduction of employer payroll tax for the hospitality industry
• Consideration of a reduction of immigration fees for work permit applications
• Consideration of a reduction of land tax
• Consideration of expanding the list of items subject to customs duty relief
“As we have stated on many occasions, this government is committed to taking care of its people while ensuring its fiscal and economic policies contribute to sustained growth and stability,” the Premier added.
“Our track record has been positively assessed by independent reviewers, our deficits are narrowing, our debt is being repaid, back taxes are being collected and we remain committed to a path that will ensure a bright future for generations to come.”
• To read the Premier’s statement in full and to read the pre-Budget report, see Related Media.
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