2017 BUDGET PRESENTATION BY I.CHESTER COOPER, MP
2017 BUDGET PRESENTATION
I.CHESTER COOPER, MP – EXUMA & RAGGED ISLAND AND SHADOW MINISTER OF FINANCE
It is with great pleasure that I formally address this House for the first time. It is among the highest honours of my life and I pray that my time here will be fruitful and to the benefit of the Bahamian people.
I must thank the people of The Exumas and Ragged Island for reposing their faith in me in what has been a tense and competitive race.
For the hard work of my campaign team, for the confidence placed in me by the former Prime Minister Christie, Leader Philip Brave Davis, for the support of the Progressive Liberal Party and its National General Council, for the unfailing strength and commitment of my wife Cecillia, the sacrifices of my children and the help of Almighty God, I will be forever grateful.
Mr. Speaker, as we look around us, it is evident that the FNM had the momentum going into and coming out of this election, I congratulate PM Minnis and his Colleagues on their victory.
People often ask me how we were able to secure Exuma and Ragged Island for the PLP, while other traditionally PLP areas, fell like dominoes on election night. Some say, ‘Well, Exuma was pretty much always PLP, and it was expected.’
I want you and The Bahamas to know, Mr. Speaker, I don’t believe that for a second.
I was born and raised at Forbes Hill, Little Exuma, Mr. Speaker.
I know every inch of the place, and if there’s someone on Exuma of voting age I haven’t met or spoken with in the past year, only the slimmest circumstance of fate must have kept us apart.
I talked to everyone, I listened to everyone, I laid out eVision2030 – a sound vision & plan and I made solemn and earnest promises to the people of Exuma to fight to make life better for them, every day – every step of the way.
I know my people, as I said, Mr. Speaker, and my victory was secured by about 110 votes.
I learned through campaigning, that people are tired of political rhetoric.
They’re tired of empty promises and little action.
They’re tired of being disregarded while Parliamentarians waste time attacking people’s character and doing not enough to better the lives of Bahamians. They are tired of the blame game every five years.
I don’t believe in wasting time, Mr. Speaker.
Not that of others and certainly not my own.
So, I didn’t come here for fun. And for MP plates and to suit up and figure out my best angle to look handsome on TV.
I didn’t come here to make FNMs feel bad about themselves, in any personal sense; so if I do I offer a blanket apology in advance for the next five (5) years.
And I didn’t come here to sulk about the PLP’s loss.
The election is over. The FNM won, the PLP didn’t; it’s now all of our jobs to see that the Bahamian people benefit.
Because this is their House, their Parliament, their budget, their money, their ‘tings’. And it’s our job to protect them and to make sure in the end the Bahamian people benefit. Not our egos.
So now; I am reporting for duty, I am happy to get to work
Because that’s what I came here to do, I came here to work.
I came here to help.
To help The Bahamas, and in particular the people of Exuma and Ragged Island, and so it’s time for me to do just that!
Mr. Speaker, to put it simply but respectfully, this budget communication by the honourable member for East Grand Bahama in my view was the wrong speech, at the wrong time at the wrong place.
I have listened intently and read carefully the Budget Communication and much of it comes off as rally talk, but the rallies are over. I expected a mature assessment of the state of the economy. We have come to appreciate careful deliberations in this important communication so as not to talk down or undermine the economy. We anticipated a call for unity to move forward together to resolve whatever challenges that may exist. A budget communication is an opportunity for serious and mature conversation! The consumers of this report are not just the electorate but the international rating agencies, the business community and the investment community at home and abroad. This is one reason why it was the wrong speech.
Trust me, I’ve been dealing with rallies for months now and we all have our fill of it.
Let’s give it a rest. Less rally talk in here
more governance talk. More let’s work together to help the Bahamian people talk.
Firstly, why on Earth would the government come in here and put forward resolutions to borrow $722 million on day One!
Let me say it slowly so it sinks in for those who haven’t grasped it yet – SEVEN HUNDRED AND TWENTY-TWO MILLION DOLLARS!
That is three quarters of a billion dollars, within the first thirty (30) days of Gov’t.
And they say that’s the PLP’s fault? They berate the PLP for $2bn in five years (including the $500m that the PLP said was theirs). Well I tell you at a clip of $722m in first 30 days, but they have yet to explain how and why – they have a duty to do so! I am frankly frightened as to how much will they borrow over a 5-year period?
No sooner was the ink dry on the minister’s communication that Moody’s issued a statement which effectively said “At these levels [referring to the borrowings], the Bahamas’ debt/GDP ratio will be the highest for an emerging market sovereign rated Baa”. It’s clear to me where that discussion is headed. Wrong Speech – Wrong Time!
Let’s shift ourselves from the rally stage.
Why? Why would you already plan to borrow, before the fact, for the upcoming year, over $300 million dollars?
And why would you think Bahamians would just nod their heads and go along?
Let’s get serious.
Let’s look at what the FNM said it would do.
I don’t have the entire list here. I doubt we have time for that, but let’s look at the rally talk, then let’s look at the budget talk.
Whilst I have the greatest respect for East Grand Bahama, when I say again that this is the wrong speech. I wonder whether this is the speech we will take with us when we go to defend the int’l rating of the Bahamas. Is this the one that we will take to the debt market? You don’t tell me you broke, you busted, you unemployed and that the “cupboard is bare” then ask me to borrow $722m.
From the rally stage, the FNM said it would cut expenditure.
That’s the rally talk too.
Real talk: There are no significant cuts. In fact, this budget appears to build on the post hurricane deficit.
Before a dollar has been spent or collected, they already plan to overspend revenue collection by hundreds of millions of dollars.
If the PLP was so reckless, so spend happy and bleeding money, surely the FNM could have identified some significant cuts, savings and efficiencies. Hopefully, before this exercise is done, the minister can reconcile how wasteful the PLP was, but how the FNM can hardly identify areas in which to cut waste.
As an administrative and perhaps a constitutional point, I note the published “draft estimates by revenues & expenditures” this one that is labelled “entering a new era of public accountability”. However, I was unable to discern reasonableness versus prior periods as I have not seen the gazette allocation of responsibilities. For example, we don’t know whether Regattas is in MOYSC or whether it is in MOA&MR; I don’t know whether the landfill is under MOH or the MOH&E; I wondered whether that was part of the impetus of a joint press release by two Ministers. Similarly, we don’t know at this point whether the BIA is a part of OPM, Finance, Financial Services or Tourism. I believe it’s a matter of constitutional correctness Mr. Speaker, that anticipate that this be gazetted post-haste. We need to know.
In this “new era of accountability” I know that the MOF being a decorated Chartered Accountant with seek to modernize the budgeting and reporting process, transition to the accrual basis, a proper income statement and proper assessment of the assets and liabilities of our country. A transparent and accountable framework engenders Understandability, Relevance and Comparability. He certainly has his work cut out.
With great emphasis Mr. Speaker – great emphasis; the honourable Minister castigated the Gov’t for spending $10m on consultants related to NHI. I make a few points in relation to this matter. Firstly, I wasn’t there (I’m new here) so I accept the MOF and his word. Secondly, I was a part of the private sector who said we support universal healthcare – but get it right. Well if the expertise is not resident in Gov’t how you expect them to get it right. Thirdly, I am not clear at this point whether the Gov’t has been able to be enlightened by this body of work to help to guide them as to the prudent next steps for NHI, funding strategies and a roadmap to success. Whilst I hear the inclination towards catastrophic health care I would be listening intently to the Hon. Min. of Health as he explains how it will be paid for, or whether there are provisions already in the budget for what I anticipate will be an expensive undertaking. This is sure way to bankrupt a small country. We must still get this right. Fourthly, successive Gov’t (successive I say) have hired foreign consultants sometimes at the exclusion of the local professional community. Let me go on record as saying that this is often lamented (as a sore point) as an affront to local professionals and it is my view that there should be a move effort to supporting our qualified locals where the expertise exist which will also build capacity for our country for the future. And finally, on the subject of consultancies Mr. Speaker, I wonder whether the MOF in due course would investigate and advise whether the previous Gov’t spent in excess of $30m on the consultancy to sell BTC to CWC and whether it was those consultants who advised leaving $15m of free cash in the bank for the new buyer? That is a question Mr. Speaker.
Rally talk: The FNM was going to cut the deficit.
Real talk: I’d be impressed if the government held the line at $323 million in deficit spending for the upcoming year as it projects. In fact, they recklessly promised to reduce taxes, yet have no apparent plans to make that revenue neutral, let alone reduce spending in any significant way.
You also promise “free stuff”. Free tertiary education; free money for family island student accommodation, (my people in Exuma are waiting for that) free pre-school, free catastrophic health care, tax-free zones in the inner city. Maybe no one else told you. So, let me be the first. There is no “free” in government services. Someone must pay. And that someone is always ultimately the Bahamian people and our Children. I suppose at some-point, you’ll get around to telling the people that.
Rally talk: The FNM is going to promote economic growth.
Real talk: You just came in here last week and suggested the PLP gave away too much in concessions. So where is your plan to attract foreign direct investment? Where is your plan to end concessions and at the same time encourage Foreign Direct Investments, and spur economic growth? Perhaps next year, eh?
When I say the wrong speech at the wrong time; I looked through the presentation and don’t see much in this budget communication that gives me confidence that the people who we are here to represent will be any better off in five years than they are today. I see no initiative to alleviate poverty or bring relief in the inner city. When I say the wrong time; I hear very little optimism (at a time we need it most) and see very little plan for Economic growth. Instead I noted an unprecedented level of negativity, partisanship and tribalism if you will. What is more troubling, when I look at the projections for the national debt and the deficit 2 to 3 years out I see that this Gov’t is not predicting that it will get much better. There is no real plan to reduce the national debt despite all that rally talk.
What I find incredibly curious though Mr. Speaker, was that there was no mention of Baha Mar in the speech from the throne and the only real spark of optimism in the Budget Communication itself in terms of economic growth is its reference of Baha Mar over the next few years. With this in mind, I ask the Minister of Finance and the Minister of Tourism in particular, if they would go on record in supporting Bahamar and helping the Bahamian people to put the recent squabbles of the former Developers aside as “water under the bridge” and do all in their power to dissuade any protracted legal battles and ensure that Baha Mar is a productive and successful business free from legal entanglements. Baha Mar must succeed. It would be comforting if the Minister of Tourism would commit on the record to using the incredible power and influence of his office in protecting this only ray of optimism in his Government’s budget.
Here’s the thing:
The Bahamian people – especially the Millennials and the young people across the Bahamas don’t care anymore, about who blames who. They want solutions. So, we’ll sit here and more than likely hear 30 or more epistles about how bad the PLP was but not really any plan to fix it. The reality is Mr. Speaker that if it broken you’re the Government now. Fix it! I say Fix it Mr. Speaker. The FNM won the mandate from the Bahamian people so it’s now the FNM Gov’t job to fix it. So, let’s have some real solutions that will fix it! Fix it Mr. Speaker.
Here’s some more rally talk for you: The FNM will repeal value-added tax on breadbasket items, water, education, electricity, and healthcare.
Real talk now: How? You say not now because of the fragile state of the economy. But I suspect, upon coming to office, someone quickly gave the FNM an education on how VAT works and told them that’s just not going to happen.
But here’s my question? Did no one think about this all along on the campaign trail, that this wasn’t viable? Did everyone just say it for fun? To win? No one advised better than this?
I can tell you, Mr. Speaker that I cringed at some of the promises I heard during the Campaign. It is with that in mind that I predict that this Government will champion the largest budget deficits OR largest increases in taxes OR the greatest amount of broken promises ever seen in the history of modern Bahamas.
I trust that it is not all of the above; but I am not persuaded that there are well-crafted plans for delivering those promises. I surely don’t see them in this budget.
But, I take some comfort, however, that if the Bahamian people feel like you “Swing Dem” in 2017 in not delivering on the notion of the “People’s Time” they will judge you harshly in 2022 and if they determined that you didn’t act right – expect to be fired too! That’s the beauty of our democracy.
But let’s not get ahead of ourselves.
Let’s stick to VAT for a minute, because I’m still wondering who made them make these promises.
Firstly, I don’t think anyone was surprised that this budget did not deliver on the promised VAT exemptions.
During my time as chairman of the Bahamas Chamber of Commerce and Employer’s confederation we lead negotiations with the government on VAT on behalf of the business community and the private sector.
In consultation with the Chamber and other stakeholders the PLP Gov’t was able to lead the way in responsible tax reforms. The IMF praised the Gov’t on its successful implementation.
How about this, let’s not wreck the system by tinkering with things you seem to think can be solved with fanciful rally talk.
Instead let’s give the system a full opportunity to prove itself, until there is a comprehensive orientation on the complex triggers and a thorough examination of the impact of such proposed exemptions.
A system with limited exemptions enables a more efficient tax scheme. We’ve been through this over and over again. It’s too late to be playing catch up on how VAT works.
Varying rates and/or exemptions, would require system amendments and increases the complexity of the tax collection and filing process, which is already a sore point for the business community. A change will likely impact the level of system related costs and compliance rates experienced with VAT. Fewer exemptions and more elimination/reductions of Customs duties might be the way to go to create a more comprehensive VAT.
As it now stands it would be beneficial to have an even more simplified system of both reporting and filing. A system where the cash flow of the business follows the payment of the VAT. One where the business community does not have to provide free short-term financing to the government while it waits to receive payment for its credits. A VAT system that does not increase the cost of doing business but is efficient. The majority of business owners are in support of reasonable taxes, and supports a refined system so that they can get on with the business of doing business.
With respect to the promise of removal of VAT on breadbasket items, retailers will tell you that these represent roughly 60% to 70% of the sales. This would mean that VAT input credits currently enjoyed by the retailers of these items would no longer be credits. This, in turn, increases the operating costs, which will be passed on by way of increased prices at the grocery store. Therefore, the exemption of VAT will not result in the perceived reduction of cost of 7.50%. The same analysis may be made for exempting electricity and if not done properly might lead to the unintended consequence of increasing the cost of electricity with the unintended consequence of adversely impacting the lower income households.
It is my view that the PLP Gov’t got it right when they increased the minimum wage from $150 to $210, a whopping 40 percent; and improved social services benefits in a dignified manner with the cash loaded cards. This was the right approach to offset the potential adverse impact on this demographic.
Again, I ask, who analysed this campaign promise? They would have had access to the great body of work by the Chamber and its Oxford Economists, the IMF, the IDB and the Compass Lexecon (U.S. consultants engaged directly by the government) and others who rely on empirical analysis.
Should the government start tinkering where it needs not, I foreshadow that it would likely result in the increase of VAT to as high as 15 percent. We must not inflict this injustice on the Bahamian people.
Further, Mr. Speaker, I noted the political gimmickry and mischief making about VAT money throughout the campaign. Curiously, the Gov’t launched many forensic audits but did not launch an investigation on “where the VAT money gone”. I believe the Minister of Finance now has a duty to report to the Bahamian people on the matter.
CUSTOM DUTY REDUCTIONS:
Let’s look for a minute on the areas where there were tax reductions. What is the mechanism to ensure that businesses are passing on these savings rather than using them to improve their profit margins?
a. Paint for example. In prior years the Gov’t increased duty on bottled water to protect industry and jobs. A reduction in duty on paint by 20% will potentially harm the local manufacturing industry resulting in job losses and adversely impacting Lower income households. As the shadow Minister for Industry I want to know why? And who stand to benefit? Without suggesting anything untoward, before I vote on this budget Mr. Speaker, we would be grateful if the Gov’t would declare whether any members of the Cabinet has a substantial interest in a paint distributor who might stand to gain?
b. On potato chips, I wonder whether it was determined that this food presents some nutritional value and encourages healthy life styles.
c. On Bread, I wonder whether the MOF will now be subsidizing bread imports because they say they are reducing imports on bread, but its already zero. I would suggest that that may have been an oversight, rather than an attempt to show the People that the Gov’t is for them?
d. With respect to reduction is Customs duty on foreign art. At first glance Mr. Speaker it is tempting to see this again as a tax break for the rich and counter to the encouragement of the creative talents of local artists and artisans. On reflection however, I am aware that there are substantial interests promoting bi-partisan support for the concept of the Bahamas being a centre to store Art in a shared vault scheme similar to what is done in Switzerland. If this is in fact the intent of this provision, as the shadow minister for Financial Services, I would be minded to support it as an innovative idea in context of value added to our financial services and home office businesses which is designed to attract High Net Worth (HNW) individuals.
So let’s just quickly recap: The FNM said they were ready to govern. They said they could do a better job. They said the PLP spent too much. They said the PLP borrowed too much. They promised reduction in VAT and a lot of free stuff.
And what did we get?
No real plan or programs to grow the economy.
No new incentives – they just continued the Family Island Incentive Act and City of Nassau incentives Act for another year. Not revolutionary stuff. Nothing new. Nothing original. With respect to the stamp tax on exemptions to home owners it appears that all that is being done is codifying into law what was already a PLP policy?
[I will turn my attention to the business license issue shortly] We got more borrowing, the largest ever at one time, I do believe.
We get no real expenditure cuts.
No reduction in pre-hurricane deficit.
No real plan for debt reduction.
We got a record time backtrack on VAT reduction promises.
We got some reductions on salmon and shrimp. I’m sure hurting low income families will appreciate that.
We get a budget communication that sounds like a rally speech with a built-in narrative of fiscal constraints as an excuse not to fulfil all of the unrealistic promises they blurted out night after night.
And No real plan to find savings and efficiencies.
NO RELIEF FOR THE POOR
Mr. Speaker, I expected relief for the poor, the down trodden and incentives for the inner city. Based on the rally talks we expected elimination of VAT on bread basket items, on electricity and health care. We got not one IOTA of relief for the poor. I see very little that improves the life of the low-income household in the inner city. They say “not now”.
Meanwhile over on the other side of town Mr. Speaker the Business License (Amendment) Bill 2017 seems to provide a tax reduction to businesses with turnover exceeding $50m from 1.5% to 1.25%, but does not make any reduction to business license for Small and Medium Sized businesses. I would imagine Mr. Speaker that the list of businesses who will benefit from this exemption is decidedly small and it would be very very interesting to look at that list of businesses to examine who might be the beneficiaries of this tax break. If I am mistaken, I stand corrected Mr. Speaker but if I am right this implies that there goes another tax break for rich big business who might be cosy with this so called People’s Time Government, whilst there is no reduction for Small and Medium Sized businesses who also employ people but struggle every day to keep their doors open. As is the case with most modern economies small business account for as high as 70% of jobs in the private sector and is considered the engine that drives organic economic growth.
For business license, may I suggest incentives geared towards small business and other businesses that operate at a loss. Let us be mindful, that this tax is on turnover not profits it is conceivable that businesses may be loss making and on the brink of closure and still have to pay business license fees to their further detriment.
THE ELEPHANT IN THE ROOM
The elephant in the room is that there are some needed restructuring and reforms required in our economy, our budgeting process and business model, that will take some heavy lifting by sober and diligent policy makers.
Roughly 60 percent of the budget goes to salaries and emoluments, another 20 percent for other unbreakable commitments like rents and most of the rest for capital expenditure. This leaves very little wiggle room. This is not sustainable.
I don’t know if any business can survive if 60% of its revenue goes to salaries. There are some simple rules to the survival of any enterprise worth having. A third of revenue to salaries, a third of revenue to overheads and a third of revenue to growing the business. As it stands it puts the government consistently in debt and our children’s future at risk.
This is why I am so hard on the point that we must be focused on growing our economy. We must do more with the existing infrastructure and the government is now faced with the reality that the economy must grow, the pie must expand. And magic and fanciful campaign dream selling don’t make for sound fiscal and prudent management. Governance is serious business Mr. Speaker.
It just makes us look bad at home and in the eyes of the international community who seem to have no problem downgrading our credit ratings on the fly.
In that vein, I caution you to provide responsible fiscal leadership in order to harmonize our business model, grow our economy, improve ratings in the international community and confidence with the business community and Bahamian Public.
Turning to Exuma, Mr. Speaker, I trust that in the presentation of the ministers we will hear some announcements that address the numerous pressing PRIORITY issue in Exuma including:
1. Running water for Little Exuma
2. With urgency, the full opening of the mini hospital at George Town, inclusive of more Doctors and technical staff
3. Continuation and completion of the Forest Road and other essential road works
4. Construction of a new straw market in George Town
5. Advancement of a Public Private Partnership (PPP) to expedite the construction of new airport terminal at George Town; and the
6. Expansion of the airport run way at Black Point
7. The tourist product has outgrown the infrastructure in Exuma we need today more taxi plates and more SD plates.
RAGGED ISLAND MATTERS
Let’s not forget Ragged Island, Mr. Speaker.
She is a clear case for development of a model for handling the peculiar issues of Small Islands in the Bahamas and the region. With a population of about 65 and 44 registered voters, Ragged Island requires the same level of government services. There is an ongoing issue with the closure of the post office due to the Post Mistress being on maternity leave. Whilst in the grand scheme of things you might consider this minor. I invite you to consider the disconnect that Ragged Island already feels with no direct flight services and no banks making the Post Office the only option to get money to Nassau so that supplies can come on the mail boat. This is just one example but I will bring to the attention of the relevant Ministers the various “small issues” that continue to create discomfort for our people on Ragged Island, like providing more reliable water supply and much needed repairs to the clinic, nurse’s residence and police station. No doubt there are grants or resources accessible through our international affiliates like the IDB for subsidizing connectivity of remote areas. We must not forget our brother and sisters in places across the Bahamas like Ragged Island. The strong must bear the infirmities of the weak Mr. Speaker.
As I close, Mr. Speaker, I do want to point out some good things the government has proposed and a few suggestions.
On the issue of Campaign Finance Reforms – I was delighted to hear mention of this, but there can no longer be lip service to this issue.
• Ease of doing business – I do await the government’s plans on this. We recognize that this is all of our problem and I and the private sector are prepared to help in a structured bi-partisan way to improve our rankings.
• Natural Disasters: With great pains the Minister outlined the potential volatility that may be caused by natural disasters. I pray that God spares us this year. We must then get to work in a bi-partisan way with the help of our friends in the private sector to find a solution to mitigate the impact of such events as we live in the hurricane belt.
• More Funding for the Venture Fund and technical assistance to entrepreneurs Empowerment of Bahamians
• Family Island Development,
o Getting projects out of the pipeline particularly for Exuma where there is more than $500m announced which is earmarked to create hundreds of jobs.
o Strengthening of local Gov’t inclusive of more funding. Exuma collects hundreds of million for the public treasury but its local Gov’t only gets $400k. This is not equitable and it was with great delight that I hear mention of islands receiving a percentage of their collections in the speech from the throne. I trust that the Minister of Local Government in his presentation will bring life to this important issues
o Second home owners and home rentals have boosted room availability through the use of engines like AirBNB and VRBO. We must require these entities to collect a tax and remit to the Gov’t this might be a significant way to get more funding for local government in our islands.
o NDP: The lack of reference to the National Development Plan is very alarming. This is the tool to pool ideas and formulate strategies, to innovate and to maximise partnerships. Adequate funding, bi-partisan support is required here in creating a common set of goals. We must avoid the polarization that has stifled us as a country and demonstrate political maturity in mapping out progress and ultimately our fiscal successes.
So, Mr. Speaker, my takeaway is: This is not a good start for the Free National Movement Gov’t. It’s the Wrong Speech, at the Wrong Time in the Wrong Place. I sincerely hope this will be the last administration to come to office and claim it did not know what was left behind by the previous one.
As I mentioned earlier, the majority of the Bahamian people don’t care. As the Gov’t we just want you fix it if we deem it to broken. Fix it! Fix it!
We the Bahamian people will not accept excuses. We do not take kindly to the notion that the FNM Opposition did not know; effectively an admission of not doing its job. This is why we have a Public Accounts Committee, on which I now sit.
This is why we have a Public Treasury Committee, Why we have a mid-year budget exercise and Central Bank reports.
Mr. Speaker, claiming you did not know is no longer good enough. Not a good defense Mr. Speaker
For the record Mr. Speaker, I am not so pessimistic about the future of our beloved Bahamas. I am hopeful that once the new Gov’t finds its footing and adjust to its role of being responsible for the future of our economy they will see and harness the silver linings of healthy reserve levels unemployment trending downwards and the prospects for a successful Baha Mar. The Bahamian people want action. Not rally talk and empty promises. A healthy dose of real talk and actual work would go a long way.
Mr. Speaker, I was sent by the people I work for with a very clear job description – to present their concerns and help to make the Bahamas a better place to live, work and Play. I promised them each day that I will do my part in holding the Government’s feet to the fire and with that in mind, I expect that this honeymoon will be a decidedly short. We have a country to build!
Mr. Speaker I rest, on behalf of the good people of Exuma & Ragged Island.
Thank you, Mr. Speaker.