Stop the blame game and let’s work as one

Bermuda’s debt – whose fault is it anyway?

I am getting the ‘debt question’ with increased frequency as SAGE, the end of year and Christmas approach

After a brief conversation, it is easy to determine that the question is rhetorical.  

The expected answer is to blame the former administration.  My usual answer is to use the analogy of two people in a boat off North Shore.

The two men hear a loud bang. Water starts leaking into the boat. 

Thankfully the hole is not too big and the men can get to shore before it sinks.  

One extra problem is a strong tide that will prevent them travelling ‘as the crow flies’.  

At some point they will have to travel parallel to shore because of the current, which will make the total trip to shore a little longer and a little more risky.

Given the limited time to get to shore, the men really have two choices.  They could decide on a plan to get to shore (Devonshire Dock or Mid Atlantic Boat club?) or they could waste time arguing about who caused the leak.

What is clear is that they will sink or swim together.  The practical solution is to get closer to shore, navigate the current and then get to dry land.  

Once they get to shore, of course, it is time for the gloves to come off as they fight over who caused the leak.

Sprung a leak

In the instance of Bermuda’s debt, we have clearly sprung a leak in our boat with the gross debt at $1.45bn on December 18, 2012 and expected to be at least $2.25bn 12 months later at December 17, 2013.

Our tide is the $2.5bn debt ceiling and the inevitable need to borrow more money in 2017 at higher costs unless drastic action is taken.  

Borrowing more money will probably also result in a downgrade in our sovereign rating. 

In summary, the collective Bermuda will either sink or swim together.  That is a reference to needing more money and not a reference to bankruptcy.

Time is of the essence and I believe we have focused too much time trying to apportion blame for the current debt. To be clear, my comment is not a ‘cop-out’ or deflection. 

An objective analysis of the current debt can apportion blame and increased risk to the current government for the new $800m borrowing and the previous government for the initial $1.45bn. 

The ‘previous, previous’ administration can also be shown to be at fault for some of the structural challenges of the local economy and the tax structure that is based on labour and consumption.  The answer can be whatever you want it to be based on your personal perspective.

My public request is for the Department of Statistics or Ministry of Finance to publish a summary of capital expenditure for the past 10 to 15 years, which encompasses the current accumulated debt.

For those who persist, perhaps the former administration is responsible for $1.45bn of the debt (there are reasons why).  

The current administration is responsible for $800m of the debt but accountable for the entire estimated $2.25bn of debt.

All hands on deck

In due course, we may all be surprised to find out how close we are to the $2.5bn debt ceiling, notwithstanding the technical definition of debt under the Government Loans Act 1978 (as amended).

Bermuda’s getting to shore will occur in the latter part of 2016 and into 2017 when the parties get ready to spar for the next election under our Westminster system. 

In the meantime, it should be all hands on deck. Bermuda will sink or swim together. 

Anthony Richardson is the former Accountant General. Feedback: [email protected]