Good afternoon members of the media and colleagues; good afternoon to the people of Bermuda.
Last Friday, I provided an update in the House of Assembly on the latest estimates relating to the 2021/22 Budget as the Government prepares for the annual audit of the Consolidated Fund.
Based on the latest estimates, I am happy to report the budget deficit estimate for the previous fiscal year is now projected to be $81 million, compared to the $125 million deficit originally estimated in the 2021/22 Budget Statement. The $44 million improvement is primarily driven by a $74 million increase in Revenue and a $17 million decrease in Capital Account Expenditures offset by a $42 million increase in Current Account Expenditure and a $3.5 million increase in expenses related to the Morgan’s Point project.
These results demonstrate that we are exceeding our targets laid out in Bermuda’s Economic Recovery Plan and will reach a balanced budget with far less of an increase in debt than was predicted just 2 years ago.
The Revenue for 2021/22 is projected to be 1.07 billion, which is 7% above the original estimates of $999 million, primarily due to increases in customs duties, stamp duty, civil aviation, payroll tax and increased revenue from the Bermuda Travel Authorisation.
Current Account Expenditure for 2021/22 is projected to be $945 million, $42 million above the original estimates, recognizing that over half of the increased amount is a result of higher-than- expected COVID-19 Expenditures, including continued payments to Skyport. These continued payments to Skyport directly affect the average Bermudian; while the over $40 million paid to Skyport during the pandemic should have been used to provide further relief to hardworking families, instead was paid to Skyport, which helped their parent company, Aecon, approve a dividend increase for their shareholders in April of this year. This, people of Bermuda, is why elections matter.
The public should also note that while the interest on government debt remained relatively stable, the Government continued to cover the costs of the failed Morgan’s Point project inherited by the PLP Government, which was $3.5 million more than expected.
It is regrettable that to date, the Government has paid over $210 million to honour an obligation made by the One Bermuda Alliance Government, as these payments have limited government resources significantly, which would have otherwise been used to better assist the people of Bermuda during these difficult times.
Despite that, we continue to effectively manage the economy, and the declining deficit and GDP growth seen in 2021 help to demonstrate a strengthening economy aided by the
Government’s commitment to sound finance and ensuring we remain on the path to a balanced budget still targeted for the 2024 fiscal year.
As I shift focus from the previous fiscal year’s performance to our current fiscal year, I’m once again encouraged by the first quarter numbers the Ministry of Finance has received to date. Once again, strong payroll tax, land tax, stamp duty, customs duty and tourism-related revenue have not only offset the income lost from the aircraft register as a result of the Russian/Ukraine war but have resulted in revised estimates to project a $30 million increase in Revenue.
Despite the negative impacts of the mentioned war and the tax relief provided to the people of Bermuda, the Government is expecting Revenues to be $30 million higher than originally estimated. These revenues are higher due to a better-than-expected tourism season and continued strong growth in international business.
This increase, along with the improvement in the 2021/22 deficit position, enabled the Government to fulfill its promise made in February during the budget statement to provide more relief to working families in Bermuda, who have been negatively impacted by rising global inflation.
In this fiscal year alone, we have increased support for financial assistance, reduced payroll tax for our workers, reduced vehicle licensing fees, increased pensions for our seniors, provided land tax relief for local charities and registered care homes, and froze the price of fuel at February levels. We are currently providing direct financial support to many of our parents, preparing to offer a payroll tax rebate for 75% of our workforce. Tomorrow the Government will move to eliminate customs duty on all essential goods, which will result in more relief for working families.
Despite the additional relief, this Government is providing to working families and the additional investment in affordable housing, which is a critical need and will be announced by the Minister of Public Works in the House of Assembly tomorrow, it is expected the Government will meet the deficit target, laid out in February, of $70 million. When this deficit is combined with the deficit figures from last year, will see the government’s net debt lower than forecasted during February’s budget presentation.
The facts are Government revenue is up, the Government’s deficit is decreasing, and our economy is growing, as evidenced by the 4 consecutive quarters of GDP growth. As a Government, however, we also understand more must be done as we hear the concerns of many Bermudians.
The cost of living in Bermuda, for example, must be addressed but we must also be balanced with the responsible management of the Government’s revenue and expenditures to ensure that we return to a balanced budget and put the Government in a place to start reducing Bermuda’s national debt.
I will now turn to matters related to the refinancing of the Government’s debt. As stated in this year’s Budget Statement, delivered in the House of Assembly in February, a key challenge was the almost $1 billion of the country’s debt due within 2 years.
Over the summer, the Government successfully refinanced the debt that would be maturing in the next two years and, despite interest rates rising globally, managed to keep any increase in interest payments at a minimum while ensuring that there is no need to access international debt markets until 2027.
These achievements are important as the Government is committed to continuing on a path to begin reducing our debt within the next 2 years. The objective is clear, the less the Government spends on servicing the country’s debt, the more we can spend on servicing the people of Bermuda. By the time we go to the markets again, Bermuda's debt will be on a downward trajectory.
As a result of our management of the country’s finances and combined with the successful execution of Bermuda’s Economic Recovery Plan, we have not had to utilize the country’s sinking fund balance for the management of ongoing cash needs to the extent originally projected.
Therefore, this gives the Government the option to repay the $50 million in Bermuda dollar debt outstanding next year without having to refinance this debt. And this will allow for a further reduction in outstanding debt and is positive financial news.
The successful execution of this refinancing initiative, coupled with the recent positive assessments by independent rating agencies and the strong economic growth reported by the Minister of Economy and Labour recently due to the successful execution of Bermuda’s Economic Recovery Plan, reinforces the fact that Bermuda’s economy is on the right track.
However, too often in Bermuda’s history, the story has been purely the health of the balance sheet or the apparent skill at achieving some measure of fiscal discipline and accounting mastery.
Yes, this is important, and it is something to which we must continue to aspire.
But, a healthy or improved balance sheet must be used to support the people we represent. It makes no difference to the struggling mother working two jobs to keep lights on - that the Government reduces its deficit unless those savings and better-than-expected fiscal performance mean relief for her and her family.
Hardworking Bermudians have had to endure plenty of “shared sacrifice” since the global financial crises. We have all experience these difficult times, and it is high time that the taxpayers of this country benefitted from “shared success”.
This Government’s fiscal performance provides us with the scope to do just that, as I promised in this year’s Budget Statement “Relief now and more relief to come”.
As I said in the house of assembly, this Government will outline further measures to return more funds to working families in the coming weeks. It will keep its promise to ensure that the shared success is not kept by the Government but shared with the hard-working taxpayers of Bermuda to help working families cope with rising global inflation.
Items under consideration are more support to parents of young children due to the crushing cost of childcare, consideration of further tax rebates for working families returning more hard- earned funds to the taxpayers of this country, and further measures to cope with high energy costs.
In keeping with our promise of more relief now and more to come, on Friday, I announced the Customs Tariff Amendment Act 2022, which eliminates duty as high as 25% from 21 more essential goods, which include items such as ground beef, chicken, bananas, and cooking oil as well as diapers, sanitary towels, tampons, laundry detergent, dish detergent, and more things that a family need to survive.
I know that there are those that are worried about how savings will be passed on, but the Cost of Living Commission, under the leadership of MP Derrick Burgess, has been working hard to ensure that working families will see a reduction in the price of staple goods.
The Attorney General will be publishing regulations to ensure that the Cost of Living Commission can monitor the action of grocers. In addition, earlier today, I held a meeting with local grocers and wholesalers, along with members of the Cost of Living Commission. I am confident that through the collaboration between them, the Government, and the Cost of Living Commission, we will ensure that these reductions are felt by Bermudians at the till when purchasing essential items.
As we announce new measures to assist Bermudian families with the cost of living, we are also ensuring that we follow through on promises we have made previously. On July 15th, I announced a relief package that included $150 support for parents of public school students, free LED lightbulbs to reduce household energy costs, a 15% increase in the food allowance budget for the Department of Financial Assistance to support families in need, and a payroll tax rebate for 75% of Bermuda’s workers.
This payroll tax rebate included a $250 rebate for persons making less than $60,000 and a $100 rebate for persons making less than $96,000. The delay in administering these rebates was to ensure that as we establish such an innovative first-time programme, we do so efficiently and responsibly and avoid any issues with the Auditor General when these funds are audited. We also want to ensure that the process is as smooth and that we have the full understanding and cooperation of employers.
Today I can announce that the application for these rebates will go live before the end of next week, with the deadline for applications set for December 15th of this year. Payments will be processed within 10 working days of receipt of a completed application. Further information on the process will be published on www.gov.bm in the coming days.
And as I mentioned earlier, as Government financial performance continues to improve and as we consider the impact of this improved performance on the total budget, we may be able to increase the relief we are providing to Bermudian families and even possibly expand the rebates we are giving to taxpayers.
These are unprecedented times for Bermuda and countries throughout the world.
But just as we rose to meet the challenges of a once-in-a-century pandemic, together, this country will rise to meet the challenges of global inflation not seen in 40 years.
Bermudians can be assured that this Government will meet this challenge and is committed to easing the burden of rising prices due to global inflation. We will outline further relief measures in the coming weeks and will return more funds to working families who need it most. The Government will keep our promise and ensure that the Government’s improved financial results are shared with the hardworking taxpayers of this country as our economy continues to rebound and grow.
Thank you.