Bob must put the sword to chronic overspending

OMG! In text language, that’s what I thought when I first glimpsed the Financial Statements for 2011/12, which is the last full year of the Seventh Minister for Finance.

The OMG was in response to the fact that spending was way over the $1,079,519,328 appropriated in the Appropriations Act 2011 which was the outcome of the February 2011 Budget Debate. Spending for 2011/12 is reported as $1,245,741,006.  That’s a huge $166 million in excess of the amount that the Seventh Minister said would be spent and that Parliament agreed to spend.

But that was alongside a revenue shortfall of $26 million. The Seventh Minister figured she’d get $940 million in revenue, but in a declining economy the Seventh Minister only actually received $914 million.

That $166 million unplanned overspend plus the $139 million planned overspend combined with the $26 million revenue shortfall. The three amounts add up to $331 million. That meant there was a $331 million gap, a thirty six per cent gap, between Revenue and Spending. That’s a huge miscalculation. 

Imagine any person, household, or corporation that makes that sort of giant miscalculation. What’s more, it does that kind of thing nine years running. OMG!

Who was running the shop? Who was watching the till? Who was in charge?

Under Section 95 of Bermuda’s Constitutional Order, 1968 – one person and one person alone – is responsible for the actual control of every penny that Government can and does spend. That person is the Minister of Finance. That Minister must sign off on all spending. No one can spend without that Minister’s permission. With the mere stroke of a pen, or click of a mouse, that Minister can immediately stop any and all Government spending.

It is an awesome power. But it is a power that seems to have been disregarded or not used at all over those nine years when overspending of the kind that I’ve described was rampant.

The one thing that newbie Bob Richards has to do is wield an Excalibur-like pen. He has to cut. He must look his fellow Cabinet Ministers in the eye, not blink, not flinch, and calmly and firmly say a word not heard in the past 116 months. He must say “NO!”.

Sure, he’ll be importuned, Ministers will beg and plead, Permanent Secretaries will prepare forceful arguments. Even the Premier may lean heavy with his ultimate threat of ‘political displacement’ if some pet idea is not funded. But this new Minister for Finance must not blink or flinch or bend.

The one tool that he has got to use is that simple monosyllabic utterance: ”No.”

As a consequence, he may find himself a lonely man, but his loneliness will be part of the price that must be paid in order for Bermuda’s recovery to begin. The recovery must start with a cessation of reckless Government overspending.

The kind of problem that Minister Bob has to face is neatly enscapulated in the Bermuda Post Office.

In 2013, with email, cellphones, Fedex and UPS and DHL, faxes, SKYPE, Facebook, on-line banking and business billing, and all other easy, cheap, and swift communications; the BPO is still offering ‘snail mail’ at $0.35 for one letter. Total snail mail volume in 2011 was 10.9 million. In 2004, the BPO reported that it handled 20.8 million pieces of mail. In 2013, how many people and businesses still communicate primarily by snail mail?  

In 2011/12, the 200 person BPO cost $14,306,280 to run, but only took in $5,369,529 in revenue from all sources. So taxpayers had to pink up $8,936,751 just to employ people who no longer had any real tasks.

If it is argued that the BPO should charge more, then the BPO must start charging $0.94 for delivering each local letter. And who will pay that much for a letter that takes at least two days to arrive?

In a downsized BPO, all 200 workers will not be required.

Sudden, massive, and harsh layoffs are one of the cruel outcomes when business and government managers do not act judiciously, and let change and events outrun them. This is what has happened with the BPO where 2013’s technology and manning problem has been steadily worsening since far-off 1996.

Two clear choices. Cut BPO people or raise stamp prices. Still and ultimately, downsizing will be the only real solution.

There’s nasty work ahead Bob. Hope you’re up to it. Twelve months from now you may find that many will call you Herod. Prepare yourself.