Ministry of Debt

It was packed with emotion – too much sometimes as Finance Minister Bob Richards was either stopped from talking or had to remind the audience that Bermudians were renowned worldwide for their politeness.

It did not do much good as the chanting of ‘enough, enough, enough’ or ‘save our jobs’, plus the occasional placard waving march around Pier 6 still went on. The placards looked extremely well made, by the way, and all very similar ….. mmmm

Whatever. (I love and loathe that word)……

I watched the Bernews video of SAGE Town Hall meeting as I could not attend the meeting due to illness. However, the video was still very instructive.

Bob was good, apart from a couple of awful gaffes – pretending the mix up over the $35 million social insurance story was manufactured by the RG and how he tried to engender sympathy saying as a Minister he had taken a ten percent pay cut.

I was quite impressed with his performance although his constant playing with a XXX gave the game away a bit, he was clearly nervous, and he cannot be blamed. I would not like to have faced an audience like that, it takes guts.

However what he said was too often lost on the emotion and it clearly shows that the Government still has an awful lot to do in order to educate the population as to the severity of the Island’s position.

The debt stands at just over $161 million. That is by far the largest Ministry, it is the Ministry of Debt. And as Bob pointed out, before a cent is spent on anything else, the debt has to be serviced first.

We default and we go broke. The Island goes bankrupt and the repercussions of that are too awful to even contemplate.

And we are still racking up debt. We are, as Bob pointed out borrowing money to pay the debt. We are still spending more than we earn to the tune of $267 million.

If Bermuda was an Island blessed with resources that made our dependence on basically one stream of income unnecessary that would be OK, but we are not. We are a service industry island. It means we cannot afford to get into such debt. We do not have the economic base to deal with it.

Contrary to popular opinion, I am not an OBA supporter, nor am I a PLP supporter, but it has to be said that the OBA has inherited this position. It has been left with the tough calls that the PLP did not take…

government spending

You can see from the above graphic how spending started to outstrip revenue and for how long. There was only one solution and that was to borrow. A PLP Finance Minister’s (now forever known as The Cog) directive to reduce expenditure by 10 per cent per department fell on largely deaf ears.

Other than Col. Burch, the largesse continued. (Yes you will berate me, PLP supporters by saying you got a new dock at Dockyard, a new TCD, new ferries etc – but the dock was over budget, TCD was over budget, and we cannot afford to maintain the ferries. Then there’s the $500 million unaccounted for …. another story there altogether.)

It was becoming clear that a recession was looming, but we carried on spending, the debt started to spiral and for the first time, the Bermuda Government issued bonds as a means of raising money.

Now reality bites. The wallets are looking thin, the traditional Bermudian politeness has taken a back seat. People are feeling the pinch.

But I for one cannot see another option other than to scale back on spending, to take the really tough decisions that greatly impact people’s lives. Government cannot engage in quantitative easing – where will it get the money from?

As I said before, Bermuda does not have the broad economic base to sustain the debt. We default and you can be sure that IB will flee this Island quicker than you can blink. It will be Banana Republic time ….

And the situation cannot be turned around in the 18 months the OBA has been in power – that has to be appreciated. The situation that was inherited was dire. Spiralling debt, falling income, falling house prices, people leaving the Island in their thousands…..

I fear that the opposition of the BPSU and BIU to privatization or mutualisation of some Government services in a bid to trim the wage and salary cost that accounts for 43 percent of Government spending will inevitably lead to industrial unrest.

I am fearful, that as tensions and emotions rise, there could even be civil unrest.

It is going to get a lot worse before it gets better, but the alternative is that it just keeps on getting worse ….

18 thoughts on “Ministry of Debt

Add yours

  1. j, i know ur relatively new to the island but the oligarchs/ubp/bda/oba have used these sky is falling economic terrorism threats since my grandfather was a boy – read a history book

    1. First came here in 1995 when the UBP was in power, John Swan and then David Saul were premiers …. regardless … I can do simple maths and I can tell when the numbers do not stack up … I have a half decent working knowledge of economics (A level). I know when the numbers do not stack up ….

      1. in the 1920s the bda govt had 1 school for black kids – some of the teachers were budding garveyites – the govt forced them to reign or the govt would cut all funding for the school – economic threats are a way of life in bda – has been for a looooonnngg time – here – a real journo –

      2. in the 1920s the bda govt had 1 school for black kids – some of the teachers were budding garveyites – the govt forced them to resign or the govt would cut all funding for the school – economic threats are a way of life in bda – has been for a looooonnngg time – here – a real journo –

      3. I always used to think that Bermuda was used to weathering storms and coming through the other side. I think this is different – things are not in Bermuda;s control anymore, they lie outside our sphere of influence. I just do not share your optimism, tho for alls sake I hope i am wrong

  2. If you are concerned about industrial or even civil unrest, then the blame falls on both the capital strike that we saw in the run up to the 2012 election and the lack of consultation, transparency, and arrogance of the OBA Government, not to mention the litany of broken promises and the trust deficit stemming from Jet Gate.

    The blame for the current situation lies with squarely with the OBA and the collective oligarchy, not the workers organisations who are acting purely defensively against a bosses offensive.

    Now, to be clear, I’m pretty sure that had the PLP been elected we’d likely see similar defensive actions in as much as I suspect the PLP would also be forced to make some unpopular choices, although I imagine they would be more sensitive to the consequences.

    But don’t blame the workers. The class war was started by the bosses, and this particular hot moment of the war is also initiated by the bosses.

    1. I was trying to make a point that I don’t think the OBA has an option but to take the course it has chosen to take. I’m not really trying to defend, more explain why I think it has no option (as a one man business and home owner austerity/cuts etc worries me as much as the next man).
      The PLP may be more sensitive to the consequences but I feel they would have prevaricated too long and thus done the Island more harm.
      If this was in the UK I would be more minded to agree with you but in Bermuda, where the economic base is so small, where the options are so limited, I just feel that for the sake of the country there is no option but to take action that reduces the debt asap.

  3. Jeremy, please can you update above for clarity.The $161M referenced is, I believe, debt service cost (ie, interest payments) , rather than debt. Also, could you cite the source of the graph? I believe it is from last year’s Budget which included several GDP scenarios with projections. Thank you.

    1. Jess, the 161 is the debt payment annually as it stands now. The source of the graph is Larry Burchall, a well known commentator here who has a real grasp of this kind of tbing

      1. Jeremy, respectfully, the above says, “The debt stands at just over $161 million.” It should read “This year’s debt service cost is $161 million.” The difference between the “debt” and the “debt service cost” is roughly $1.6 billion.

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