While everybody fussed about the increase in the National Debt ceiling, everybody missed a key fact that, to me, stands out larger than life in Bob’s Budget.
Bob has realistically forecast that he will only get $871.2 million revenue. He also figures that in 2012/13, the FY just five weeks away from ending, the Government will find that it only got $869 million in revenue.
That $869 million for 2012/13 is way down from the $910 million projected in the Seventh Minister’s final Budget.
And $869 million is also way down from the $$880 million that I publicly estimated would be the revenue for 2012/13.
Overall, Government is facing an economy that is now so weak that real revenues are now under $900 million and likely to stay down there for at least the next three or four years.
So it was surprising, very surprising, that Bob chose to be realistic about revenue and forecast $871.2 million for 2013/14; but still elected to spend $1,202.8 million in 2013/14. This was a choice, a deliberate choice, to create a second record-setting deficit of $331 million. That is bad news. Very bad news.
That means that in the next year, Bob will have to borrow $331 million and then have to start paying about eight percent [5.5% Interest + 2.5% Sinking Fund] on that borrow. That means about $27 million a year added to Debt Service Costs in 2014 and beyond.
This year the DSC is forecast at a true $134 million. So next year DSC will go over $160 million a year.
That’s not sustainable.
Another huge but unremarked point is that at $871.2 million revenue, the total anticipated revenue is LESS than the total received in 2006/07. Six years ago.
So in 2013, with all expenses and all other factors six years bigger, and six years higher; Bob is saying that he will use 2006 income to meet 2013 expenses. That’s unreal. Look at these primary facts:
$883m $872m (Down 1%)
General Cost of Living [CPI]
100 120.1 (Up 20.1% by 2012)
Size of Government
5,094 5,621 (Up 10.3%
Government Personnel costs
$501.9m $583.6m (Up 16%)
Debt Service Costs
$18.3m $134.3m (Up 733%)
Personnel + Debt/Revenue
In layman’s real-life terms, a 22 slice loaf of regular imported bread was selling for $4.40 in 2006. In 2013, that same kind of loaf sells for $5.95. That’s a price rise of $1.55 and a 35% increase in the cost of that item. Try living on a 2006 income in 2013.
Putting it all together, Bob Richards has just told the country that he only expects to have a 2006 income; but that he will run the country on 2013 spending patterns, demands, needs, costs, and prices.
He’s no Tinkerbell
Bob has promised the impossible. No one, no one at all, can run an operation on 2013 costs while receiving 2006 revenue. I’ve given you a broad range facts of that support my statement. Bob can only achieve this by importing more ‘monopoly money’ in the form of $331 million in new foreign currency loans.
First reality is that Bob is trying the impossible. In so doing, Bob is waving a magic wand. But Bob ain’t no Tinkerbell.
Second reality is that Bob must lay off the Tinkerbell stuff and come back to the country in July 2013 with an adjusted and real Budget. I think this country is ready for that.
And that’s the only course of action that makes any real sense.