Economy

Workers pay cut? Shared sacrifice is needed first

By Craig Cannonier, Opposition Leader, February 5, 2012

The Premier and her Cabinet colleagues have been asking workers to sacrifice for the difficulties with the Island’s finances.

They have instituted overtime bans, reduced pay, curtailed public services, shut down funding to charities and been slow to pay people. Now they are asking workers to take an 8% pay cut.

The One Bermuda Alliance would be less troubled by this latest turn if the Government itself exhibited a degree of solidarity with the working population.

Instead, it has repeatedly passed on opportunities to lead by example and cut their own pay.

The OBA is at a loss to understand this failure of leadership. The people of Bermuda would be much more ready to work with government if the Premier and her ministers demonstrated the spirit of shared sacrifice. A ten percent pay cut for ministers would be a convincing step to assure Bermudians their government stands with them in tough times.      

A few months ago, the Premier rejected our proposal that ministers take a 10% pay cut, declaring it would be “an empty gesture.” This weekend’s press reported the issue back in play, with the Premier not yet willing to lead by example. It would be interesting to hear if all her Cabinet colleagues are equally reluctant to stand with the people in shared sacrifice.

As her Government continues to come after taxpayer money to shore up its financial position, people should demand that she and her ministers step to the wicket to shoulder at least some of the burden they’ve created.

This is a great opportunity for the Premier and her colleagues to show they stand as one with working Bermudians. They should do it.

Politics is driving this thing

By E.T. (Bob) Richards, Shadow Finance Minister

The final shape of the Finance Minister/Premier’s proposal for unionized workers to take a one-year 8% pay cut in exchange for a one-year freeze on their pension contributions is not yet clear and may depend on responses this week from the BIU and BPSU.

In the meantime, we have a few observations to make:

A pre-election exercise

This initiative is driven solely by the Government’s bad fiscal situation. It is a desperate last-minute political exercise that helps the Finance Minister shuffle numbers to make her Budget look better than it is.

To ask for a pay cut in exchange for a pass on pension payments serves no real purpose other than to bury the hard realities of the Minister’s mishandling of the public purse.

More debt for taxpayers

The Finance Minister is clearly addicted to debt. Her proposal will shift even more debt onto taxpayers. She is simply exchanging one form of debt for another at the taxpayer’s expense.

This time, instead of financing her Cabinet’s overspending by further increasing government debt, she is effectively borrowing from the civil servants pension fund, formally known as the Public Service Superannuation Fund, to finance it and to make her budget deficit look smaller.

The reality behind this smoke and mirrors exercise is that the Minister will further mortgage Bermuda’s future, because she knows full well that the 1981 Public Service Superannuation Act, Section 7 (6) states the following: “If at any time the Fund is insufficient to meet the payments chargeable against it the deficiency shall be made up out of the Consolidated Fund.”

Pushing the problem down the road

In effect, if the contribution by civil service employees is not made now, any deficiencies will have to be made up by taxpayers later. She is pushing the problem down the road for taxpayers to deal with later.

It is also worth pointing out that this proposal is for just one year. What about next year? The problem will surely recur.

The minister appears to view the public pension funds as a giant piggy-bank which her government can draw from after it gets itself into a financial jam. It is not. This money belongs to its members, not the government. The next shoe to drop is likely to be that the Government will formally borrow even more money from public funds by way of Bermuda government bonds purchased by the public funds.