Tough decisions ahead on public sector jobs

Premier Paula Cox’s commitment to make cutbacks in today’s budget statement has been broadly welcomed as a step in the right direction.

But observers have warned that one year of cuts will not be enough to compensate for seven years of overspending.

Peter Everson, the Chamber of Commerce’s economic chair, said Bermuda’s financial crisis was largely of its own making and disconnected from the global economic turmoil.

In simple terms, he said, Government has spent more than it earned for the last seven years.

Shedding jobs

He said shedding some of the estimated 7,000 positions on the Government payroll was the only long-term solution. And he believes privatization of large areas of Government is the only way to do that without creating a deeper unemployment crisis.

Other pundits like Bermuda Employers Council chair Martin Law agree that the public sector jobs boom has contributed to the current situation.

But he said it would not be easy to walk back those decisions and let people go. He said job losses would be inevitable if Government services were outsourced — something the country and its social services system can ill-afford in the current climate.

“Cutting jobs is not a panacea because it pots extra strain on the economy with people being out of work.”

The spending boom, which began under then Premier Alex Scott in 2004, has bankrolled a growing civil service, with just under 6,000 people now employed by Government, according to last year’s Budget.

An estimated additional 1,000 – 1,500 people are employed by QUANGOS — organizations like the Bermuda College, the Bermuda Housing Corporation and the West End Development Corporation — which rely on around $200million worth of Government grants to pay their employees.

“We have more than 7,000 people on the Government payroll. That is more than one in four working Bermudians,” Mr Everson said. He cited the Department of Education as a classic example of overstaffing.

“You have 1,300 employees. Around 600 of them are teachers, the other 700 are telling them how to teach. You’ve got at least one person telling every teacher how to do their job.

“In the longer term some of those jobs have to go. In the short term they can be far more productive. Why not take 300 people out of the Department of Education and have them run a national after-school programme so the kids aren’t hanging around the bus station every night?”

He said Bermuda’s problems centered around its inability to spend within its means — even when the economy was strong — rather than the knock-on effect of the 2008 worldwide crash.

“In the year 2004, for the first time Government spent more money than it raised through taxes. At that time the economy was going gang busters — the concrete mixers were going as fast as they could, house prices were going up, rents were going up, tax revenues were growing, but they still, for whatever reason, decided to spend more than they raised. They have continued to do so since then by increasing amounts. The real question is ‘what was that money spent on’? About 70 per cent of it was on people.

“If you are trying to save $150 million without cutting jobs then you are talking about cutting half of everything else. That’s not something you can do every year.”

Mr. Law said a big step towards balancing the books would be for Government to keep to its Budget.

“If the Government’s Budget is $1 billion and they spend $1.2 billion then that is part of the reason we are in the hole we are in right now. If Government spent in line with its Budget the problem would not be as bad as it is.”

Auditor General Heather Jacobs Matthews has called for better controls within Government to prevent costs from escalating.

Mr Everson added that whatever the promises of the 2011/2012 Budget, the real test would be for Government to stick to it over the coming year.

“The big question is ‘will they adhere to it’? In that respect the record isn’t good.”

Ultimately he believes outsourcing landscaping, maintenance, airport services and other “ineffiicient areas of Government” will be necessary.

“I would suggest privatization — it takes people off the government payroll and it makes them more productive. We have 7,000 public sector employees and the tax base can support about 4,000.”

He said private sector companies were generally better managed and produced better results than Government.

“One example — it’s a front page story every year —  the start of school is delayed because some of the maintenance work has not been done on time. Those jobs should be outsourced into the private sector and it would have to be done on time. Civil Servants aren’t held accountable. If they screw up they still keep their job.

Fired

“If they screw up really badly they get moved to another department. In the private sector they would be fired.”

Statistician Cordell Riley, who runs Profiles Bermuda, fears privatization would ultimately lead to increased unemployment.

He said a better solution would be to cut the number of hours for Government workers. “I’ve heard a four-day week suggested but it would be a start just to close the Government offices at 3pm.”

Mr. Riley said the trade-off for a two-hour reduction in services would potentially amount to tens of millions in savings.

Bermuda Sun columnist Larry Burchall, one of the first commentators to highlight the looming crisis and a consistent critic of Government spending, believes jobs will have to go.

“In the long run, the over-expansion of Government must be tackled. If people numbers do not go down, then pay must go down. If people numbers go down, then the private sector must absorb them or they must emigrate.

“Privatizing? Downsizing? It all requires that spending equals revenue.”