Premier warns of cuts to services and a hiring freeze as he delivers the Budget
Cuts to services and a hiring freeze have been announced in the Budget by David Burt, the Premier and Minister of Finance.
However, in a sweetener move, Mr Burt, who took back the finance portfolio following the shock resignation of Curtis Dickinson, said that vehicle licensing fees would be reduced by 10 per cent for all private cars and held out the prospect of tax cuts in the future.
Payroll taxes will also be cut for lower earners.
But there was little detail on how the key tourism sector would be aided back to recover and no mention of Gencom, despite it being believed that a bust-up between the Premier and Mr Dickinson over possible support for the operators of the Fairmont Southampton redevelopment trigged his sudden exit from the Cabinet.
Without saying where the axe on services would fall, Mr Burt told the House of Assembly: “The $945 million of current expenditure for the next fiscal year 2022-23 will still require a significant amount of reductions in services to meet that target.
“The reductions can be seen across the board where grants have been reduced in certain areas, services will have to be limited and hiring will be frozen.”
Mr Burt said civil servants would still receive pay rises.
Holding out the possibility on tax relief, the Premier announced a midyear review in September.
He said: “If our conservative revenue estimates are exceeded and spending remains in line with estimates, we will provide additional tax relief to residents.”
Mr Burt added: “We will return 50 per cent of any additional surplus to the taxpayers of this country.
“This means if the projected deficit for 2021-22 comes in below estimates, 50 per cent of those funds will be used to reduce taxes on fuel imports to reduce the cost of electricity in Bermuda.”
More than $200 million has been taken out of the pensions pot under the final one-time pension withdrawal scheme.
The Premier said: “Over the last two years, the Government has allowed persons to have voluntary access to their pensions in case they are having difficulty making ends meet due to reduced hours or business.
“In 2020, residents could withdraw up to $12,000, and in 2021 they could withdraw up to $6,000. This voluntary withdrawal for up to $6,000 will be extended a final time to provide an additional avenue for relief for those Bermudians who really need it.”
The Premier said: “The Government is determined to restore some measure of hope to the people of Bermuda.
“Additionally, our budget performance has Bermuda’s net debt lower than was forecast just last year, giving this Government the ability to provide relief to hardworking families and support struggling businesses while making investments in Bermuda’s economic recovery.
“The narrative that this Government has not helped its people is simply not true.”
Mr Burt said: “Given the high levels of public debt and continued costs incurred by the Caroline Bay project, debt service and guarantee management costs are estimated to be $132.8 million for this fiscal year – $5.1 million above the original estimate of $127.8 million. This increase above budget is a result of $5 million spent on costs related to the Morgan’s Point/Caroline Bay project.
“The revised estimate of the overall deficit for 2021/22 is $117.4 million, or $7.3 million less than the $124.7 million deficit originally projected.
“As of 31 March 2022, net debt is projected to stand at $3.1 billion, with the Sinking Fund balance to be approximately $231 million, which is sufficient to fund future deficits.“
He said Bermuda’s GDP grew between 3 per cent and 5 per cent in 2021 compared with the previous year.
He said there was a 3.9 per cent decline in employment levels in 2021, dropping from 32,427 filled positions to 31,250.
Referring to the Fairmont Southampton, he criticised the One Bermuda Alliance government’s handling of the Morgan’s Point project and insisted such support would only be given if it could be financially guaranteed.
On earnings, Mr Burt said: “In this Government’s 2020 election platform, we committed to eliminating payroll taxes for earnings under $48,000. We are not able to meet that entire commitment this year but we will get started.
“There are no tax increases in this Budget.”
The Premier said the Government would bring in new laws to give courts the power to postpone the execution of an Order for Possession in appropriate circumstances where payment plans can be established.
He said the Government would meet its aim of achieving a $50 million budget surplus by the fiscal year 2026-27.
Mr Burt said: “During last year’s Budget presentation, the revised deficit for the fiscal year 2020-21 was projected to be $245 million. However, the actual deficit according to the final numbers … show the deficit was $61 million less, coming in at $184 million.”
In a boost to charities, the Premier said: “We will make amendments to the Land Valuation and Tax Act to make it explicit that registered charities who earn a majority of their funds from donations are exempt from land taxes.”
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