WEDNESDAY, JUNE 20: “Solutions will come from first understanding the nature and extent of the problem devoid of the banality of politics and then acting to advance the interests of people. It is easy to look at Bermuda through narrowly focused eyes but it will not necessarily advance our understanding. We are not another world — we are part of this world.”
— Walton Brown in The Royal Gazette, 14 June 2012.
The statement that solutions will come out of understanding is right.
However, understanding or even evidence of understanding is what is so sorely lacking in many of this Government’s responses and reactions to Bermuda problems, especially Bermuda’s social and economic problems.
For instance, Bermuda has a real estate problem. Until 2008, real estate values and demand for housing were rising. Since 2008, demand for housing has levelled off and fallen.
The fall in demand is driven by a reduction — still underway — in Bermuda’s resident population. Bermuda’s resident population was falling — it is still falling – because there is a steady trickle-out of guest workers and a less visible sneaking out of Bermudians.
Four years of national trickle-sneak has resulted in an absolute national reduction in the national demand for residential accommodation.
The Government response after four years of falling demand? Build 78 new housing units at Grand Atlantic and promise another 100 at WEDCO.
Government’s housing response has been defended by a cohort of defenders whose assigned task seems to be to defend all Government actions. But the law of supply and demand isn’t bothered by their defence.
Eternally and absolutely, the law of supply and demand just goes on working.
Government’s ill-advised house-building effort will quickly prove to be a prime factor in worsening Bermuda’s already bad residential real estate problem.
Walton Brown, an intelligent and well-educated man, got it absolutely right when he wrote: “Solutions will come from first understanding the nature and extent of the problem…” Pity that no one in his party-of-choice is listening to his suggestion that they should first seek to understand the problem.
On another note, when commenting on National Debt, Walton admits that Government borrowed hugely but he suggests it was all spent on capital items. Here, Walton is being really, really naughty.
The facts? On March 31, 2004 net National Debt was at its low of $119,500,962. On March 31, 2011 net Debt hit $1,001,981,762. In those seven years, Government borrowed $882,480,800 in ‘cash’ borrowings*. In the same time, Government’s total recorded spending on capital acquisitions and capital development was $503,313,836.
So between 2004 and 2011, $503m or 57 per cent of cash borrowings did go on ‘capital’ spending. This means that $379m or 43 per cent had to go on ‘current’ spending. That’s straightforward Middle School arithmetic.
However, in May 2011, another $200m was taken up. The seventh Minister for Finance also says that at least another $200m will be taken up in this year. That’s $400m in new borrowing.
Of that $400m, the Budget statements for 2011/12 and 2012/13 indicate that only $141m was planned to go into capital spending.
Put it all together for June 2012. $882m is the ‘cash’ borrowed between 2004 and 2011. $400m ‘cash’ will be borrowed by March 31, 2013. So that’s a total $1,282m in ‘cash’ borrowings. Of that, $503m + $141m can be accounted for as actual or planned capital spending for a total $644m.
Middle school arithmetic? 50 per cent on capital and 50 per cent on current spending.
In just twelve months, that’s a significant regression from March 31, 2011 as even more borrowed funds flow into current expenditure.
In fact, of the $400m of new borrowings, $259m (65 per cent) will go into current expenditure.
Time passes. More and more borrowing. More and more of that borrowing going into current. The classic ‘in-over-your-head’ debt situation.
Walton Brown’s assertion that Government spent it all on capital infrastructure is not true. Barely half of all Government borrowing went or will go on capital acquisition or capital development.
Ex-Senator (PLP) and current PLP candidate and ‘political commentator’ Walton Brown has not presented solid facts on National Debt.
He is playing with words while describing numbers.
*Figures are as provided by the Auditor-General in annual Reports. These are the reports that are ‘tabled’ In the House of Assembly as ‘reports to the people’. The figures quoted are from the Auditor-General’s annual Financial Statements of the Consolidated Fund (01 Apr 2003 to 31 Mar 2011).