Economy

The cost of government gone wrong

By Craig Cannonier, Opposition Leader, February 12, 2012

It is apparent that a lot of people are confused by Premier Paula Cox’s pay and pension cut proposals.

As the Opposition, we have limited options to work with, but we will do what we believe is the right thing to do.

OBA MPs and Senators have agreed to take a 5% salary cut, effective March 1, 2012.

We will set up an escrow account into which we will deposit that 5% of our parliamentary salaries on a monthly basis. We will contribute these funds to charity until the Premier sorts out her Government’s course of action.

After careful consideration and having had the chance to talk with members of the community, we do not support the plan to forego pension contributions over the next year for both the civil service pension fund and the pension fund for Ministers and Members of Parliament.

Here’s why:

• The Government is proposing to break a promise to help workers build a safe and secure fund for their retirement. That promise should not be violated.
• If the current proposal to the unions goes through, the government workers pension fund will lose more than $60 million in contributions this year – $30 million in worker contributions and $30 million in the 8% matching contributions from Government.
• Although the Government has cleverly softened its 8% pay cut proposal to union members by proposing to forgive their normal 8% pension deduction, the net result is will keep more than $60 million that is supposed to go to building pensions for government employees. The Government will put it toward other government spending. It’s simply more debt in another form.
• Failing to support the civil service pension fund for a year is a raid on the future and it’s not right. It will create a ‘deficiency’ that will more likely affect younger taxpayers.
• The government workers pension funds are already underfunded and, by law, any deficit must be covered by the taxpayer – or in the medium term through potentially higher contribution rates by both government and its employees. This already happened once in 2006 when government raised the contribution rate from 5% to 8%.
• A one-year pass on pension contributions will not alter the Government’s serious financial problems. It will only push the problem further down the road. Indeed, there is no reason to believe the same situation will not rear its head again next year.

It is important to remember that these pay and pension cut proposals are being driven by significant shortfalls in the Premier’s impending budget. They have nothing at all to do with making things better for working families.

What we are watching is a last-minute scramble for access to pension monies to make the Budget look better than it is and to hide the truth about the Government’s terrible financial situation. It is very cynical exercise to buy time and to help the Government avoid any hard decisions in an election year.

The Government is, in effect, asking working Bermudians to pay for its mistakes, from the many building projects that went tens-of millions of dollars over budget, to the many millions spent each year on consultants (nearly $100 million in 2010 alone).

The net result of those mistakes is our $1.2 billion debt and $70 million annual interest charges – some $90,000 every day. That’s money that must go to pay the Government creditors before anything else. This is the difficult position the Government has put us in, and now the Premier is asking working Bermudians to foot the bill.

Finally, we reiterate our position that Cabinet Ministers should take a pay cut of 10%, not the 5% proposed by the Premier. Again, here’s why that’s important:

• Cabinet ministers are the Government. They are responsible for all its decisions and for overseeing the consequences of those decisions. It is imperative that they lead by example.

• Otherwise, the Government is asking workers to take more of a pay cut than its own Cabinet Ministers. No political party should ask people to do something that its leaders are not prepared to do themselves.

Bermudians have to ask themselves whether they are willing to subsidize the Government’s scheme and let it off the hook, or force it to face up to the consequences of its actions.