Cox says Budget will help stabilize 'our fragile economy'

FRIDAY, FEB. 24: Premier Paula Cox today called on the entire community to help Bermuda get back on its feet.

Her Budget theme is ‘Let us build one another, together’.

There are three sub-themes: protecting the vulnerable, strengthening the community, and getting businesses to fire on all cylinders.

She said Government does “the right thing if our national Budget helps protect Bermuda’s vulnerable economy in these difficult times. Government does the right thing if our national Budget nurtures and strengthens the social fabric of our community. Government does the right thing if our national Budget stabilizes existing businesses and ignites the imagination of new entrepreneurs.”

Customs duty

Duty rates for personal imports will be 25 per cent across the board, at all ports of entry. This takes duty down from 35 per cent for those bringing in personal items at the airport, but also signals a substantial increase for goods shipped in by courier or sea freight.

Revenue and expenditure

Ms Cox — unveiling the economic blueprint for the next financial year — said Government revenue was expected to top $909 million, down three per cent on the previous year.

Government expenditure is expected to be $1.08 billion and the total Budget deficit is $172m — which, Ms Cox said, will be offset in part by a locally issued bond.

Ms Cox, who is Finance Minister as well as Premier, said that payroll tax payments to Government had dropped and are expected to be $38 million less (11 per cent) in 2012/13.

She said that was due partly to a shrinking jobs market and also to payroll tax breaks for the hospitality, retail and restaurant industries. These tax breaks alone will reduce income by an estimated $21 million in 2012-13, with a further $27 million to go on other measures designed to boost the economy, $48 million in total.

National debt

At the same time, the debt ceiling is to go up to $1.45 billion.

Ms Cox told MPs: “Debt is a natural and unavoidable part of economic life. It is neither good nor bad. The key is to ensure that borrowed funds are within an affordability limit and the funds are used wisely.”

She added Bermuda’s debt to GDP ratio was 24 per cent.

Ms Cox said the total of $98 million added to the debt last year as an “economic backstop” was money well spent. She said $50 million came from the rollback of the payroll tax to 2009-10 levels from the increase instituted in 2010-11. The other $48m (as mentioned above) came from tax concessions for the hospitality and retail sectors.

The economy

She said: “Government considers it did the right thing. Preserving jobs and helping to stabilize vital sectors of Bermuda’s economy was the right thing to do.

“Some 8,500 jobs were at risk if Government had not responded with assistance.”

Ms Cox said with signs of the US economy recovering, there is “reason for optimism in Bermuda’s medium term, as there may be a lag in terms of positive knock-on effect for Bermuda, perhaps nine to 15 months.”

She expects economic growth to continue to be weak in 2012, with modest growth expected here in 2013/14.

Ms Cox said those people who were still struggling to make ends meet could opt out of the five per cent private pension for this year, which would also provide some relief to businesses as they would not have to pay their five per cent portion, either.

“If the suspension of contributions is taken up by the private sector, it will provide both relief and stimulus to families and businesses. The stimulus to the economy will be generated if some of the saving is converted to consumer spending in the local economy and business investment in infrastructure and improvements.”

Seniors

Seniors who have bigger houses and cars will no longer get a financial break. Those who live in homes with an ARV above $50,000 will have to pay land tax and those who own a car in E Class or higher will also have to pay licensing fees. She said Government expects to collect an additional $7 million in revenue from these two measures.

The duty on cigarettes and tobacco will be raised and is expected to generate $1 million in revenue.

Government will also sell surplus property, which is expected to bring $10 million to its coffers.

It is also looking at forming a public-private partnership from Bermuda’s commercial airspace, which could generate $18 million in revenue.

Community

In the area of youth development, Ms Cox said because Sandys 360 helps reflect strong community values, it will get a $2 million capital grant.

The Bermuda Hospitality Institute will also get a grant, but no figure was released.

She said Catlin [the insurance company] had stepped up by supporting the Bermuda Football Association youth academies and Ironshore Insurance had done similar good work with Sandys 360.

Ms Cox said: “People in the community have also shown an enthusiasm and hunger to participate in community development initiatives in their neighbourhoods. There was a record turnout at a recent Community Speaks meeting in Somerset. The spirit of self-reliance was palpable.”

Employment

She said Government was going to help spearhead employment by creating a One-stop Career Centre and the start of a Jobs Corps programme.

Ms Cox said while Government is providing the seed money for the Jobs Corps, the implementation “will depend largely on private sector support and commitment”.

Along these lines, a Career Pathways programme will be started in the coming school year, which will re-introduce vocational education to Bermuda’s schools. It will become a component for the senior school graduation certificate.

National Security Council

For the first time, Bermuda will have a National Security Council (NSC) to help tackle the problem of gang violence.

The NSC will consist of the Commissioner of Police, Premier, Deputy Premier, Minister of National Security, Attorney General and Minister of Justice.

Ms Cox she is hopeful this will be “effective in reducing unlawful gang activity and providing a way out of the tragic circle of gang violence”.