3/3/2010 10:41:00 AM The budget: Reaction You'll feel the pain of this Budget - here's how Gov’t repeats its mistakes — and you pay the price
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Send feedback on the Budget to editor Tony McWilliam at tmcwilliam@bermudasun.bm.
Larry Burchall
Hidden in Friday's Budget Statement are some of the reasons you must pay more payroll tax and higher fees, along with evidence of where Government spending is not sensibly managed.
Essentially, Government makes managerial mistakes but does not correct them. Government just goes on repeating its mistakes. I'll show you one primary mistake and what it has cost you - so far.
The Post Office - government's version of FEDEX or UPS. It is a commercial service and in the past, the Post Office had made either a small profit or small loss - usually less than a $1m difference.
The last time the Post Office made a profit was in 1997 - $38,000.
In this Budget, the Post Office will receive $15,142,000 to pay for its operations. The Post Office projects revenue of $7,255,000 from providing those services.
That means that the Post Office will LOSE $7,887,000. (In 2004, the loss was $2,976,439.) In this coming year, it is planned that the Post Office will actually LOSE money and will spend 67c to deliver each 35c letter.
With the rise of the Internet, email, cellphones, and so on..., throughout the developed world, all Post Offices are delivering fewer services than a decade ago - hence the nickname 'Snail Mail'.
If you review your personal 'snail mail', you'll discover that a lot consists of unsolicited and expensively produced Government brochures and handouts.
Throughout the developed world, all Post Offices have been reducing administrative costs. But not in Bermuda! Between 2004 and 2010, operating the way it has, the Post Office lost the accumulated total of $40,242,000. This year's planned loss will take that total to $48,129,000.
This accumulated loss of $48m is not made up by revenue earned elsewhere in government. Instead, it is part of the "big borrow" that created today's $830,000,000 national debt.
For the Post Office, operating at break-even would help cut the cost of government. Cutting costs means reducing the need for taxes. This lowers the cost of living. If the cost of living reduces, everybody will have more disposable income and will either save more or spend more - and this will help push the economy out of recession.
That's part of what's really going on. And there's more....
You will feel the first impact of that well-disguised 21 per cent increase in payroll tax on April 9. By the end of April, a second increase will kick in because hospital costs and thus health insurance rates will go up in April.
Worse off
In August, a third increase as Social Insurance contributions rise. By Friday, September 1, all the increases will be in place. The total increase will be more than the added 1 per cent. It will be almost 2 per cent.
By September 1, a typical supermarket cashier will be worse off by $2 in every $100 (two per cent). If he/she is taking home $585 a week today, that worker will find himself/herself only taking home $575 a week by September 1. That's $10 less per week.
It does not end there.
That person's employer will find that by September 1, because of the 10.25 per cent tax paid by employers, it will cost the employer an additional $10.04 per week to keep that person on staff. The employee gets $10 less. The employer pays out $10 more. Both numbers go the wrong way. Some employers will be forced to cut staff.
If the supermarket agrees that their cashiers will not take a hit in pay, the supermarket will have to give their cashiers a 1.6 per cent pay increase. If they give that pay increase, the supermarket - as employer - will find its payroll costs rising by 2.6 per cent (to $23.02 per cashier). That 2.6 per cent rise in payroll costs cannot be absorbed. It has to be passed on. Joining up with the increased Foreign Currency Purchase Tax (FCPT), that cost will appear on food shelves.
Impelled by this Budget, Bermuda's economy will suffer a wave of cost increases. Workers will try to stay where they were before this ghastly Budget was imposed on them. Employers/businesses will fight to survive in a cut-throat business world. This payroll tax increase will help cause job losses.
This is a bad Budget. It has taken exactly the wrong measures at the wrong time. These tax increases are imposed primarily because of 'sins of the past'.
From Eugene Cox's $160m in February 2004 to Paula Cox's $830m in February 2010, this five-fold (500 per cent) growth in National Debt reveals those financial sins of the past.
People have been saying that national debt has to be paid off by our children. That's not true! You will start paying on April 9 and you will never stop, and, your children will still pay.
This is a bad Budget put together by a bad financial manager who is part of a bad Cabinet group.
May I suggest that the Govt closes the Post Office to all mail handling except parcels. Instead it provides free internet access to every household in Bermuda, and retains the Central Post Office in Hamilton for parcel posting and collection.
This would mean dramatically quicker delivery of personal mail at much lower cost, and centralised control over the import of any illegal packages.
Peter
Posted: Friday, March 05, 2010
Comment by:
SBT
After hearing this morning's comprehensive response to the Budget from Shadow Finance Minister, Bob Richards, I would be very interested to know from our good friend Laverne how his economic and statistical academic qualifications stack up against those of our Minister of Finance. Laverne has gone to great lengths to point out Larry's lack of qualifications to write articles on the subject, even if she has completely failed to point out one single error in in any of his columns, so I'm sure she will have these facts at her fingertips. Go on Laverne, provide us with an accurate comparison of their respective academic qualifications to handle our country's finances.
Posted: Friday, March 05, 2010
Comment by:
Josseline Philip
Let’s hope that the urgency of the situation will give people an electric shock to wake up from that lethargic sleep. Some people’s loyalties have been bought and this will never change. Question, why should politicians- who do not produce anything, why should their salaries be so high? We need to find another way to organise our communities and stop thinking only of profit making and playing with people’s money at the stock exchange and think of service. We need to stop the vanity fair of emptiness and fake values and swap to real human values to put the human at the CENTRE of actions. We need to stop admiring the wrong leaders, the WISH-TO-BE cream of the crop [...] too busy seeing their faces in the papers, rather than being at their desks working hard to produce the best possible opportunities for the people and for their countries. Instead of loving the people, they love themselves! How then can they work for the betterment of people? [...] How can we pretend to live in democracies and think ourselves better off than the people of Niger whose army have just perpetrated a ‘coup d’etat’? Josseline
Posted: Thursday, March 04, 2010
Comment by:
Newyorker
Larry: I take your point. I still don't think that the average Bermudian "gets it", and Brown knows this. His political brilliance is that he knows the mindset of enough people to get elected, and he also knows the mindset of enough people who have no interest or understanding of the national debt. There are also plenty of LaVerne's out there telling folks that the former Auditor General, you, and a bunch of mischief-making, UBP-supporting bloggers are just trying to bring down the PLP.
I wish you good luck in getting the message across.
Posted: Thursday, March 04, 2010
Comment by:
Scott
..but we know its definitely NOT a wonder why Laverne yet again shows how Larry is wrong..because she just can't.
Posted: Thursday, March 04, 2010
Comment by:
Thank you, Larry
Ms Furbert, again it is a shame that you choose to personally attack Mr Burchall rather than his message. But more important, the Minister of Finance may have had all the best advice in the world, but if this advice is not heeded, either by her or by the other members of Cabinet, then it is worthless. Her continued assertions that she is but a cog in the wheel certainly indicate that she gets overruled by the other members of Cabinet. Further, her budget, which includes many things that are directly opposite to recommendations made by Craig Simmons, who is an expert in economics, also suggests that cogent economic advice, if it was tendered, was ignored. The numbers speak for themselves. And I, for one, thank Mr Burchall for his efforts to collate and publish these figures.
Posted: Thursday, March 04, 2010
Comment by:
thascrazytalk
LaVerne, first of all, thanks for reminding us that Mr Burchall served his country as an army officer. Surprisingly, you seem to be critical of that; actually, it is something that deserves credit, not your sarcasm. Moving on to the main point of your comment, er, there isn't one. Can you pick out a few things in Mr Burchall's article constitute are 'mis-information'? Come on, enlighten us uninformed people who aren't as clever as you. Let us know where Mr Burchall has gone wrong. Prediction: we won't hear any more comments from from LaVerne on this article.
Posted: Thursday, March 04, 2010
Comment by:
Here we go again...
LaVerne: I expect no one has bothered to respond to your pathetic attempt to brandish another one of Larry Burchall’s opinion pieces as “anti-PLP” slander because most people believe you don’t deserve the time of day. For the most part, I too, am one of those people, however you’ve irked me just enough recently to question your opinion. You are once again personally attacking him by essentially saying that because he’s not an economist or a statistician, he’s under-qualified to add numbers together. I hate to be the one to break it to you sweetie, but adding numbers together isn’t exactly rocket science and most educated people are able to put two and two together to get four. The problem is our government spends more than it earns, which most people will be able to tell you only results in a massive problem: DEBT. But I’m no economist or statistician either, so you’ll probably tell me I’m wrong. If Larry is miss-informing of us as you so believe, please enlighten us as to what the truth is. If you believe he’s so full of it, then here’s your chance to tell us what’s really going on. Go on, I dare you.
Posted: Thursday, March 04, 2010
Comment by:
Tell us if you can
Ms. Furbert, please show us where Larry is wrong.
Has the Post Office turned a profit since the PLP took office? Has the debt not grown by 500% since Eugene Cox was Finance Minister? Will workers be better off as a result of this budget? Will we not have to foot the bill starting April 9th?
Spell it out Sister Furbert. What part of Larry’s message is misinformation? Or are you attacking the messenger again because the message is right on target?
Posted: Thursday, March 04, 2010
Comment by:
sandgrownan
Laverne - there you go again, attacking the messenger not the message. How does it feel to know that the PLP have landed the country with a debt from which it may never recover? How does it feel to know that Minister Cox is unwilling or unable to control the excesses of her fellow Ministers and those on the gravy train? How does it feel to know the average Joe to have to have cough up more to pay for the largesse? How many will be made redundant because already struggling business simply can't afford it?
The PLP in Government, particularly under the stewardship of Ewart Brown and Paula Cox, have squandered our children's future. What a waste. What failure.
