Welcome to the News Navigators with me, Jeremy Deacon.
And me, Jonathan Starling. We've been both been looking at
the budget today, the 202627 budget.
Our heads are spinning, our eyes are a bit glazed it.
Was a big budget 2 hour long speech.
It was one of the biggest, longest budgets that I can ever
remember in Bermuda. 2 hours. 2 hours and lots and lots and lots
in it. And it's, it's about 58 pages
long to read for, for readers who do want to read it, it's
it's doable, but it is a lot to read.
I've only skimmed through it once.
I would like to read it again with more more detail, but I've
got some, I've got some good thoughts on it so far.
And I will say, Jeremy, I when I read these things like the
throne speech or the budget, I do try to read it with like a
critical eye to be like, why do they do this?
This is terrible. But to be honest, I've struggled
to do that with this budget. I think overall it's a really
good budget. There's a few smaller things I
would have done slightly differently.
But overall, I think it's a budget that while I'm sure
there's still going to be people who are going to be critical of
it, I mean, you can't please everyone all the time.
I think this one does a very good job of being a good budget.
Overall, there's not much that I can find to criticize in it.
The things I would change would be very small, minor things, you
know? It's, it's an interesting
budget. I mean, I think one of the take
outs to me was David Burt, the Premier and finance minister,
categorically saying this was his last budget.
Well, let me qualify that, he said.
It's my last budget as the Premier and Minister of Finance
doesn't mean it won't be his last budget ever.
Right, so there's wiggle room there, you reckon?
Yes, he could still be a Minister of Finance giving a
budget, but he won't be the premier and Minister of Finance.
The other thing is that is of great note the for the very
first time in the history of Bermuda government revenue will
be over $2 billion. Yeah.
I mean, a good chunk of that is the CIT of course.
It is. Well, it was about 250 million,
isn't it? Because the biggest chunk of CIT
750,000,000 will actually come next year the way the, the way
the collection cycle seems to work.
So even given that, you know, that was a pretty big surplus,
pretty big revenue anyway. And there's a projected budget
surplus of 472 million, which again is must be unheard of.
And I think he said it's the first budget surplus that
Bermuda's had in the last 2021 years.
Which doesn't say a lot about his predecessors, although of
course there were there were some mitigating factors in the
last five years or so. Well, even in the last 20, I
mean, 2008 was the worst economic crisis, even worse than
the Great Depression. Yeah.
I'm going to come on to that because one, one of the things I
wanted to talk about that looking at this, I think it's a
big stimulus budget. You know, there's a lot of money
potentially going into people's pockets, into household pockets.
When you look at the payroll tax relief, there's a lot of cost of
living relief, a lot of duty relief there.
And there's tax cuts for energy. They're really, he's really hit
the mark obviously because at the moment the cost of living is
a big ticket item and there's going to be a lot of extra
government spending. I think they talk about capital
expenditure 182,000,000 and he said that's the largest since
2008 nine. And I mean.
We were talking in our pre budget talk that I was hoping to
see a lot, a lot of infrastructure investment and
that's what we're seeing. Well, you specifically mentioned
things like the agricultural centre and that was noted in the
budget today. I had no advance notice people I
I was just saying that what I thought would be in.
You're my PLP insider. Come on.
But also the swing bridge. There's 9.8 million towards
replacing the swing bridge. There's going to be a lot of
infrastructure. Now.
I kind of two things struck me. The first of all, the capital
expenditure 180 a 182,000,000, the largest since 28 nine.
That was actually when the opposition warned of an
overheating economy. And I found a quote from Glenn
Blakeney, a former PRPMP, who said I would rather have one
that's overheating, the one that's lukewarm or not heated at
all. Now, I don't think we're going
to end up with an overheated economy, but the stimulus is
going to have a very significant effect on the on the economy,
isn't it? I mean, it's going to support
demand, lowering the debt, future interest burdens, it's
going to help with healthcare, it's going to help with
investment, it's going to help households.
And it's geared to supporting the working class as well.
Largely, yes. I mean, it's not going to be
massive savings for anyone that we're talking like a couple $100
a year. But in terms of real wages for
the working class, that's that's amazing.
And you know, the working class is going to spend that more,
that money more likely in the local economy, whereas savings
from an upper class individual that's probably going to go into
their account and not actually be used, whereas working class
persons more likely to use that money to stimulate the local
economy. Yeah, which is good as long as
it's not too much, I suppose. Well, it's just a thought.
I mean, looking back to the 22,000 and eight nine, I just
want to put it out there. I don't think it'll happen, but
I want to put it out there. I think.
I think there is a a real problem though that the
government could encounter and that's with supply.
And we know that we don't have a supply of labour that we need.
Unemployment is 1.4%, that is full employment.
So the only people who don't have jobs are those moving
between jobs or who cannot work. So we have a real problem with
this stimulus. I mean, from a worker
perspective, at least in the short term, it's beneficial
because you can command a higher wage at the moment because the
capitalists, the business owners are going to be competing for
labor. So you can argue for a higher
wage. At the same time, as you said,
we don't have enough workers to do all the work that he's done.
Look at Southampton Princess, which is coming online later
this year. And that's going to need, I
think, I think I write about 500 jobs are going to be required
for that. We don't have that at the
moment. So there is going to be a
requirement to import workers that's going to mitigate the the
wage demands that the workers can say because it's going to
increase the overall total amount of labour force.
And it is something that David Burke did flag in the budget
when he said a tight labour market can generate inflationary
wage pressures. And, and this is the one thing
that really caught my eye because we knew about the
spending, we knew it was going to be gazillions with the
corporate income tax and stuff like that.
It's all pretty much, you know, flagged up in advance.
But I just want to, I just want to read this extract from the
budget about labour market reforms.
And this is quoting David Burt and the the budget speech.
Mr. Speaker, economic growth does not sustain itself.
It requires steady management and policies that are sound.
One of the clearest signs that our economic policies are
working is what we see in the labour market, with unemployment
at record lows. But Mr. Speaker, we also have to
be honest about what comes with success.
A growing economy creates demand for more jobs and one constraint
in our continued growth is a lack of available labour.
No surprises there. If we were to keep this economic
momentum going, this government must take a balanced approach to
the labour market, one that protects Bermudian workers while
ensuring that businesses can access the talent they need to
grow and invest now. To me, this is the next
paragraph is a kicker. To address this, the Ministry of
the Economy and Labour will further modernise our work
permit processes. We know that they want to do
them electronically, but also by reviewing and making adjustments
to closed and restricted job categories to assist with
closing the gap between the supply and demand for labour Now
closed and restricted. It's been something that's been
ongoing for a very long time. And I think it's designed to
protect Bermudians perhaps in, in lower paid jobs.
And if you look about it, I, I looked at the last list of
closed and restricted. These are everything from like
administrative assistant, airline ground agent, bank
teller, carpet installer, cashier, childcare assistant,
entertainer, musician, fisherman, general bartender.
I could go on and on and on, but you get the point, you know, do
restricted jobs category is dish pot, dish pot washer,
electrician, landscape gardener, waiter, server.
Now, I kind of put emphasis on that because this signals to me
a fairly significant immigration policy, you know, and we're
going to have to accept that these jobs won't be restricted
and that we're going to have to bring more people in.
I, I, I don't know, am I, am I getting this wrong?
It just struck me that that was quite an admission that was
rather buried in the in the budget report, I thought.
No, I think that's AI. Think that's a good assessment
on your part. Yeah, we are going to need more
workers. I mean, the government has been
clear about the need to increase the overall population anyway.
It's just being a matter of how like what kind of conditions for
expat guest workers are going to be there and, you know, the, the
pathways to status, third rail of Bermuda politics, you know?
But this is the first time I've seen them treading on the toes,
as it were, of restricted, enclosed job markets, which has
been in place for a long time, haven't they?
For years, I think. And Bermudians aren't going to
get first dibs at these jobs. And I just wonder.
You know, I think the way I would read it is more like once
every Bermudian that is qualified for those jobs is
hired, then they can go to expatriates, guest workers.
It doesn't make that plain. No, I'm just saying that's how I
would interpret it. Whether that is the case or not,
that's going to. Well, as the devil's in the
detail, don't we? Yeah.
I mean, no, Yeah. I mean, it's a massive stimulus.
I think it's as big a stimulus packages a government the size
of Bermuda could do. Yeah.
And they introduced a couple of fiscal rules as well in relation
with the corporate income tax. I need to pull it up on the
thing. Well, one of them was at least
70% of net corporate income tax over three years go to goes to
debt interest. Net debt reduction and building
net financial assets is quite difficult to read.
Yeah. And the idea is to kind of not
totally wipe out our debt in the next three years, but to take a
huge chunk of it out, as I understand it.
And I agree and I that's why the David Burt announced today they
were planning I think to spend 500 million to offset the
605,000,000 that was due next January.
But he's actually announced they're going to pay off that
full 605 and that actually will save around about 25,000,000 a
year in interest savings alone. I mean, it had become the
ministry of debt, It's the fourth largest ministry, the
debt repayment. And I think that's going to be a
challenge for the Opposition, the 1 Bermuda Alliance, because
that's something they've been kind of drumming.
I, I mean, in terms of their reply to the budget, because
they've been trying to push for a greater focus on wiping out
our debt. And that's exactly what the
government is doing, while also seeing a budget surplus beyond
corporate income tax itself and putting all this investment into
capital, infrastructure and a few other priorities.
So that's why I, I'm thinking it's going to be very difficult
for the opposition to launch a reply.
They're still going to do it. They have to, but I think it's
going to be more challenging for them.
I, I think it's an impossible job for them.
What, what are they going to do? Are they going to go up against
the electorate who've just seen more money put in their pockets
and say that's the wrong thing to do?
I think they will have to focus on questioning whether the
budget is actually a surplus or not type thing and they're going
to say, oh, it's a sleight of hand with the count.
That's just my guess. That's what I would expect the
Oba to to do. They they did that before last
year if you remember, I think. Which is why I'm thinking that's
and with the debt being addressed in this, I feel that
that's kind of the only option they have is an attack line.
Whether they are correct in that argument or not, I don't know.
I'll listen to what they have to say and consider it, but I'm
just saying I think that's going to be their line of attack.
I think you might be quite a weak on it because if I remember
rightly, last year, Doctor Kuto, the shadow finance minister,
accused David Burt of a sleight of hand by using money from the
sinking fund to to pay for or subsidise some of the things in
the budget. And if you remember the the law
was changed about the sinking fund, which was originally set
up to pay down the debt. And the law was changed so it
could go into the capital account, the current, the
government's current account, if you like.
And he was saying government then use a sleight of hand using
this, the sinking fund. I'm not sure he's got the same
argument this time. Not sure at all.
No, but I think that's probably what they're going to try to do.
You know, old wine and new bottles.
I think you'll probably sell all the money.
Should have gone off to paying down the debt immediately.
See, if I was, I probably would have put it as 50% instead of
70% and use the rest of the money to fund other things.
But as I said, it's a good budget, I'm just quibbling over
smaller things. No, I agree.
I think, you know, just quibbling over smaller things,
there is one smaller thing that I didn't see any mention in the
budget about ensuring that these cost savings, the reduction in
energy, etcetera, etcetera, were actually had to be passed on to
the consumer. There is a risk, isn't there,
that they could be used for businesses to have higher profit
margins. I didn't see that written in
there at all. And it'd be interesting to see
if that is addressed during the budget debate.
For those who don't know, after the the opposition will have
their reply next Friday and after that there'll be two
weeks, three days a week, very, very long days where individual
ministries will be put on under focus on the spotlight to talk
about the detail of the budget as it affects them.
And it'd be interesting to see if there's any any mention of
this. One, no, no, one thing that that
I noted, it's a small thing. I don't think it's even covered
in any of the other news yet. So it's a kind of small thing,
but to me it's a pretty big is they're committing a quite a bit
of money to capital investment into the corrections facility.
Yes, long overdue. Yeah.
I mean, it's almost every year you hear about, oh, the hot
water boiler system is not working or other things like
that. And so I am grateful that that
is happening now. I mean, and also they're
introducing more, I forget the exact line they used in the
budget, but it was talking about more investment into like the
mental health and psychological welfare of prisoners and all of
that. Which is something we talked
about on the podcast when Justice Wolf talked about the,
like, a psychiatrist in the prison.
So yeah. So I was very happy to see that
and another thing that they have in it and we talked about it in
our pre budget talk as well, installing and while increasing
the amount of solar panels on government owned buildings to
reduce government. Installed.
Yeah. Yeah.
But I think, I think it's only, it's not much, it's like 1.3
million or something that is in the budget for that.
But that's good. That saves government overall
costs in the long term. It's a good return on
investment. 20 additional buses. Yeah, I'm focusing on that
because I rely on the buses. You rely on buses, yeah.
And so, you know, having more, I actually don't know if there's
any actual report to see how the new electric buses compare with
the diesel ones in terms of, you know, repairs and quality and
all that. I assume it reduces government's
cost on fuel. I like the electric buses.
I don't have to drive them or repair them so I don't know the
actual cost benefit, but I like them and having additional buses
going to be really beneficial not having to wait for for buses
as much. And of course, a lot of
investment into health as well. Yeah, They really focused a lot
on trying to get people out of the acute care ring.
So they're going to increase like I think they caught it a
step down type thing. So to have a place for people to
leave the hospital so they're not blocking beds.
And that's something we've talked about quite a few quite
often on this podcast. I mean, it's not going to happen
overnight, but it is good to see that movement is happening
there. Yeah, more money for future
care, which was telegraphed as well.
We know about that, although not as much as the Tax Reform
Commission had. One of the biggest budget
increases, at least in a relative sense, was for housing,
which we kind of expected to be there.
The deputy leader, the Minister of Housing, Zane de Silva, has
been really pushing a housing agenda to address the housing
crisis. So it wasn't any big surprise.
But in terms of a relative budget increase, that's 43% for
that ministry. That's the largest budget
increase relatively that I saw of all of the ministries.
Well, I think that probably reflects how important it is and
it comes back to what I'm saying about labour issues because we
need to get more people on the island.
But if there's nowhere to live, what happens and the prices is
the rent except to go screaming up and then people can't afford
it. I mean, to me those two were
kind of the biggest issues in many way to making sure the
stimulus can actually work. I mean I.
I am wary about, you know, building on green space.
I would like to see more like large apartment type buildings
rather than I. I don't think we can all live in
cottages with gardens anymore. I don't think that works in
Bermuda's economy. We need to start transitioning
to more of an urban system. There's only so much land is
what I'm trying to build up instead of.
I think Zane Deserver has pointed out that I believe all
the projects he's outlined are on brownfield lands.
Brownfield land, isn't it The one that's in Davis is, the one
down at Dockyard is and I think a few others.
And so that is good. But I agree it's probably a need
to start building up as much as anything as much as building on
on brownfield. And I mean, I think that would
increase the footfall within the city as well.
If you have more people living in the city, they don't
necessarily need cars, so that won't impact the roads too much
and they can just walk around. If you live in the city, you're
more likely to go out for dinner, I'll put it that way.
And a coffee and everything else.
And you know it. It leads to a vibrant city.
Really does. But yeah, I mean, yeah, I think.
Another budget increase was on education, the physical
infrastructure of the schools. Now that's interesting with the
pause on education reform, which was also in the news today.
Well, I laugh because what they're going to build and where
does anybody actually know? But at the same time, I mean, my
understanding is one of the reasons why the education reform
is paused is because the work to create the schools to facilitate
the education reform hadn't been done for whatever reason.
At least that's what I'm understanding.
They're saying we don't physically have the space to do
to move the students to these schools at the moment.
That was always a question mark about how this is going to be
funded. I agree.
So I see that investment into the schools as part of that to
kind of pause the education reform for now so that the
physical infrastructure can catch up to facilitate the
education reform that has been proposed.
That's what I read is the pause. You might be right, you might be
right. Well, hopefully when this money
kicks in, the pause will unpause and people will get a very clear
idea of where their kids are going to go to school.
But that's the subject of another long podcast.
I think so, yeah. I mean, I think like you
potentially, it's all very good. I think there are a couple of
issues, like I say, housing, the labour force and also now it's
going to be down to execution. Isn't it?
That is all. Well, that's the devil in the
details, isn't it? It can have a good policy, but
if it can be executed badly. Can we execute the, the, the
labour reform properly? Can we execute building houses
quickly? Can we make sure that the cost
reductions outlined in the budget are actually passed on to
the consumer? You know, and I think can we
measure that? So it's, it's going to be
interesting to see how this Budget will be executed over the
next 12 months, hopefully sooner than that, because it is, well,
it's the, it's the biggest, is this the biggest?
It's the biggest giveaway since I've been back in Bermuda in
terms of a budget, I think. It's a, it's a sweetheart
budget, but I don't think if it wasn't, if it wasn't for the
election last year, I would say this looks like an election
budget, you know? It looks exactly like an
election budget, but this one doesn't rely on borrowing.
Yeah, but it does give whoever will be the new premier, the new
leader of the PLP post October. It gives them the a nice
opportunity if they wanted to go for a snap election.
I'm not sure if it's warranted, but a new leader might want to
get their own, you know, mandate.
Well, we talked about that in the past, didn't we?
That is what happened. The other thing Jonathan, I, I
wanted to look at, there was a mention of a sovereign fund,
wasn't there, although I didn't hear any details about that.
And I don't know if that is the same thing as a stabilisation
fund, which was recommended by the Tax Reform Commission.
But I would like to see a bit more detail about how much money
was going into that because I think if, if there's a
significant amount of money that could have huge implications
further down the line. If we actually, you know, need
to replace the Causeway, for instance, without we could draw
from that. It's like Norway's sovereign
then what's that worth? About a trillion dollars now?
I mean, the budget did speak in the first third of it.
It talked about committing I think $100 million a year
starting in the 2728 or the, you know, not this year's budget,
but next year's budget, committing $100 million a year
to an emergency fund essentially.
Was that the stabilization from I?
Think so, yes, to address if there's economic problems.
And then it also talked about committing additional funds to
kind of like a sovereign wealth thing, like into investing into
local businesses to have a good return on investment.
Right, OK. It did also mention some funds
for I read like $5,000,000 I think to support like the on
chain transition and a few other smaller things like that but
those are supposed to be like 1 offs.
I'll be, I'll be quite honest when that, when that kind of
thing come, when that kind of thing is mentioned, my eyes
glaze over. I hate to say it.
So it looks like it looks like I'm just called up the Tax
Reform Commission's waterfall chart.
They said stability fund 100 million.
So it looks like that has happened, that sinking fund 200
million. Yep, that's mentioned as well.
Although all of those are kind of put off until next year's
budget as I read the as I read this budget thing.
They are because the bulk of the CIT money will come in for next
year's budget, some 750 million. I think he got around 22230
million from the from the various tranches of collection
that in the last financial year. So one thing in the budget, it
talked about CIT and it said that, you know, one reason why
we're not budged, why we're committing our budget as if
there is no CIT even going forward as a fiscal rule is
because we expect this, this year's CIT to be the kind of the
high point and we expect it to go down from now on.
And. Until stabilized.
The 7:50 will be the high point. I think that's what they said.
So not this year, the collection for the next budget.
Right. But like for years going
forward, it's never going necessarily going to be this
high ever again. So we can't, we can't budget
from that type thing. Which is, you know, great to
hear. It's extraordinarily sensible,
isn't it? Yeah.
I mean, as I said, I try to read this budget critically and I
only found a few small things to complain out, complain about.
Like I would have liked to see an increase in funding for legal
aid. There's some support for legal
aid in terms of the relocation of their services, but those
those are tiny things. Overall, I like the budget.
But Jonathan, one, one of the big things is, is going through
the budget. We can only work off the budget
statement. There is the blue book.
Now, those who aren't aware, this is a voluminous book.
Must be a couple of inches thick.
I've got last year's one in the other room.
I think it's. What you're using is a
paperweight, but it it is, it goes line by line through every
ministry. What was, what was forecast,
what was actual next year's forecast.
It breaks down what's spent on what.
And they may well be amongst all these increases, things like
money for legal aid, I don't know.
I mean that's double in the detail and it is quite a read
that thing. Just just going back to the to
the tax reform Commission, senior healthcare support
recommended 30 million didn't get that, but it got a good
slice under insured healthcare, 12 million TLC recommended it
got a slice, didn't it? We know employer payroll tax
reduction and employee payroll tax reduction both came in the
TRC was saying 68 mil and 24 mil respectively.
Not seeing the figures, but probably going to be near that
low income healthcare subsidy 18,000,000 that has happened.
I don't know the figures. Utility tax relief, 8 million.
We certainly got utility tax relief.
What I'm saying is it does look like he's stuck to the tax
reform Commission recommendations.
He said he would. But what a politician says he's
going to do and actually doesn't don't always match, you know
that. But he has pretty much I think,
and that's, that says a lot actually for the whole system.
You know that it's gone through this kind of debate, this kind
of consultation, and we got a good result out of it.
Yep. One other thing from the budget
that I wanted to highlight, it doesn't tell me how much money
is going to be involved, but under the ministry of, what's
his full title, the Ministry of Youth, Social Development and
Seniors, I want to say that's under Minister Tinae Ferbert.
It talks about introducing. What did I write down in my
notes? Yeah, disability unit within the
aging and disability service to allow for enhanced care and
alignment. And you know, I think that's
great. A lot of times disabled people
are overlooked. Now, I don't know exactly what
that's going to involve, but bringing it in line with the
United, the UN, the UN Convention on the Rights of
Persons with Disabilities, I'm grateful to see that there.
As someone who has a disability myself, I'm I'm grateful to see
that there. No, I agree.
And there was mention as well of increasing residential care home
places, rebuilding Le Frey House, I think and and that's
critical. We know that that ties into the
extra money going to the Bermuda Hospitals board, you know,
because I hate using the frame, but bed blockers because and
it's not their fault. There's nowhere to go, these old
people. So having used that, see, that's
brilliant use of CIT because that affects society so much and
it affects the welfare. You know, my mother's just gone
into a residential care home, so I know what it's like and it's
really important. I guess these elderly people get
settled in a place, really. We should address senior issues.
I think we should dedicate a series or a closer look to
senior issues in Bermuda going forward.
Well, I'm almost there so I can talk about it.
But yeah, overall my first read of the budget, my first
reaction, it's a good budget, I like it.
I'm going to spend the weekend listening to critical viewpoints
and try to meditate on it and see are they good criticisms?
Do they raise issues I hadn't thought of?
But my first reaction is I like the budget.
It's a good legacy budget for the Premier to go out on as his
last budget as Premier and finance minister.
I like it. Well done to well done to the
Premier. Yeah, I agree.
Well done to the Premier. I think this benefits virtually
everybody in Bermuda, you know, and I think it's great and we'll
get our potholes fixed. I am looking forward to see what
the opposition reply is going to be and what their thoughts are
that I'm hoping they raise good points that I haven't thought
of, so I'm looking forward to that.
We'll see. I think just prior to the
budget, we were trying to get some more people in to, to
comment. We left it a bit too late
unfortunately, but some people have subsequently got back to us
and kind of interested in in taking part on a, on a panel on
on a round table panel. I think we should pursue that,
Jonathan. Yeah, I look forward to it.
I mean that they're all going to come with their different
perspectives and they will see things we didn't see.
Absolutely, I'm looking forward to that.
It's kind of, it's taken everybody by surprise that it's
a great budget. Here we go.
Well, I hope you enjoyed that. If you've got any observations,
let us know. You can WhatsApp 5342205, you
can e-mail the news navs@gmail.com or you can get us
on any of our social media sites, the usual suspects there.
Please let us know. We will circle back on this.
We'll listen to the budget reply from the opposition next Friday
and maybe take the 2 together and go back having had some time
to analyse the budget in more detail.
Go back and have another deep dive on it.
Jonathan, what do you think? No, I think that's fantastic.
Until then, take care.