FRIDAY, FEB. 24:
Against the backdrop of rising unemployment, moderately rising inflation (although rising oil prices could cause that to accelerate) an increase in loan defaults, growing national debt, a buoyant cruise industry but weak air arrivals, and a generally weak economy, both locally and internationally, Premier and Finance Minister, the Hon. Paula Cox, presented her 2012/13 budget.
In her preamble, Premier Cox restated her theme that the budget is about people and how we must “build one another together,” a phrase borrowed from Nelson Mandela. As such, Ms. Cox indicated a continuance of building relationships between government and communities and a commitment to creating jobs. She continued that this year’s budget would demonstrate a new growth path and a new way of doing things. Its emphasis would be on promoting “a culture of enterprise, leadership, and self-reliance.”
And as if to address those who may have felt that the Government had not done enough to ease the negative impacts of the recession, the Premier stated that tax concessions and rollbacks in the last budget cost $98 million, adding to the national debt, but claimed that these efforts preserved thousands of jobs. She was quick, however, not to raise hopes for a turnaround in 2012 but expressed that things could turnaround in 2013, pointing to positive signs in the US economy.
In total, estimates for revenues in 2012/13 are $909.6 million, 3% lower than the previous year, largely due to less than anticipated revenues from the Payroll Tax.
What’s in it for me!
As indicated in her pre-Budget statement last December, the Premier extended payroll tax concessions for hotels, restaurants, and the retail sectors.
And while there was a mention of help with start-up funding through the Bermuda Economic Development Corporation for small businesses, good news for those who are unemployed but who may wish to start their own businesses, no other tax concessions for small businesses were provided and nor was the whole island made an economic zone.
With regard to those unemployed, the Government is pressing on with its One-Stop Career Centre. It will provide job seekers with the resources they need to prepare for the workplace including training and education, in addition to employment opportunities. Government will also be brining in a US-based Job Corp management company to assist ‘at risk’ youth, complementing the Mirrors program. Moreover, there will be a Career Pathways program introduced in the schools in September to prepare students to work in local businesses.
Continuing with the theme of building relationships, community organisation Sandy’s 360, whom the Premier felt was doing just that, was rewarded with a $2 million grant.
And while the Premier had hinted at rollbacks for seniors, she played her hand compassionately.
Only those whose homes were above the Annual Rental Value (ARV) of $50,000 would pay Land Tax, meaning homes valued over $1 million.
And she attempted to recover some of the estimated $4 million lost through the alleged practice of household members registering their cars in seniors’ names by restricting the exemption to smaller cars (classes A, B, C, and D).
Speaking of homes, Premier Cox is removing the Stamp Duty on mortgages so that mortgage holders can seek completive rates with other lenders without incurring additional expense. This may result in lower interest rates.
With regard to the so-called ‘sin’ taxes on cigarettes and tobacco, duty will be raised to bring in another million dollars in revenue.
All other government fees will be raised by 3 per cent, just higher than the 2.7 per cent rate of inflation for 2011, with the exception of bus and ferry fares, which would remain the same.
This seems to also mean that school children and seniors will continue to use these services free of charge.
Perhaps the biggest positive news for the man or woman in the street was the announcement that duty on goods purchased while travelling overseas was going to be scaled back to 25 per cent (from 35 per cent), and that the per person allowance was to double from $100 to $200. No information was given about whether the allowance would be per trip or not.
As promised, however, the duty on personal goods imported was raised to match the 25% for those travelling. Retailers are unlikely to be happy with the former concession to consumers but should reap some consolation from the latter.
And perhaps the only downside to this budget was the raising of the debt ceiling to $1.45 billion from the current $1.25 billion. In relation to Gross Domestic Product (GDP), the debt ratio will rise to 24 per cent, an all-time high for Bermuda but low compared to other countries.
The Premier gave her assurances that the debt was manageable and that it would be paid off over time.
The anticipated $172 million shortfall in the current budget was expected to paid off in part by the issuance of government bonds.
Even before the budget was delivered, some had labelled it as an ‘election budget.’ Certainly the average consumer was not as hard it as many had expected.
In fact, it could be argued that they got off relatively lightly. But considering that local and international economies remain week, realistically the consumer could not have been expected to dig deeper.
Last year I gave the Finance Minister an incomplete grade due to what was missing rather than what was included.
I give this Budget an A- overall, as the Premier seems to have made the best out of difficult circumstances. And for those who know me, this grade was hard earned!