SUBJECT:  Comments on The Budget Communications By The Rt. Hon. Hubert Ingraham, Minister of Finance – On May 28, 2008

JUNE 4, 2008

Mr. Speaker, I am privileged, on behalf of the good people of St. Thomas More and the Progressive Liberal Party to be their opening speaker in this important debate.

Mr. Speaker,one week ago, the Rt. Hon. Prime Minister presented his Budget to this Parliament. Based on convention,the entire Country,the business community in particular and The Official Opposition all no doubt would have presumed that the document reflected the government’s policy and what would become law on or before July 1, 2008.  This morning this parliament experienced a very material breach of this convention.  For in the process of moving the motion this morning, the Rt. Hon. Prime Minister foreshadowed a number of amendments and further injected such information which when combined have the effect in a very material way of having been a virtually new budget.

Mr. Speaker, this is not a question of the Opposition searching for an angle but it is truly part of a pattern where this government continually pays insufficient regard to conventions and due processes to good governance and the operation of this parliament as would have been the intention.   The abuse that took place this morning reminds me well of the discussion that took place when this government,  last in office and was proposing the referendum when critics of that measure were so firm in the view that “process is important”.  That was true then and it is true now.  For example Mr. Speaker, we would have noted this morning the Rt. Hon.  Prime Minister on his feet essentially making up the law as he would have it with his cabinet minister’s shouting out questions for him to clarify even for their benefit.   Just take the case of the Prime Minister explaining the idea of husband and wife being divorced or separated and how all of this was to relate to the stamp act for purposes of exemption.   None of this was written anywhere and is not even in the bill.   I will have more to say on this specific example.

In making this point Mr. Speaker, you would note that before the Rt. Hon. Prime Minister concluded his remarks this morning I left this parliament.  This was not in any type of protest or any form of disrespect.  Instead, it simply reflected the reality that because of the changes announced it became necessary for me to go and essentially write a completely new speech.  The two (2) speeches reflect that this government cannot be trusted from week to week.  If I thought there was any chance that the government of the day would be fair in it’s dealings with the Opposition I would move for an adjournment for some reasonable period so as to allow time to properly consider all that has been said this morning.  But because I have no confidence that this government seeks to be fair in it’s dealing with the Opposition I shall proceed.

Taken in isolation, there is no doubt that the measures outlined by the Rt. Hon. Prime Minister last week and this week though significantly different are measures which ought reasonably to be expected to generate economic growth.  However, while the foreshadowed amendments will make last week’s disaster of a budget more tolerable after the changes foreshadowed this morning two facts still remain;
This budget provides considerable painful evidence of failure on the part of this Government in so many areas of national concern since May 2, 2007.

In the context of what has gone before, an appropriate theme for this Budget Exercise could well be “fool them again man; fool them again”.

SIGNIFICANT FAILURE
Mr. Speaker, after a Government has been in office for more than one year, each Annual Budget has to be read in the context of what was said before.  Ideally, a Minister of Finance would be able to review last year’s promises and one by one say “so said, so done.”

So let’s take a look back before we look forward.  Last year’s budget promised a comprehensive program to “advance the sense of security” throughout the Bahamas.  It specifically assured that the “highest priority… was being given to the Judicial system”.  But this did not happen.  This is not just my view.

Consider the evaluation of none other than the person appointed by this government to be Chairman of the National Crime Commission.

“Elected lawmakers along with (others) all need to do more to rescue the country from the quagmire in which the country’s judiciary has sunk.”  In fact, the Chairman questioned whether the fundamental problem may not be “the presence of a self-serving colonial mind-set.”

Last year’s budget projected that “the Bahamian economy would grow by 4.5% in real terms in 2007.”  This did not happen.  This is not just my view.

In fact it is now the view of the Rt. Hon. Prime Minister. For finally in this Budget he admits this, proving again that the truth is indeed a stubborn task master.

Unfortunately, the Prime Minister still cannot bring himself to admit that his government‘s policies on cancelling contracts, reviewing contracts, suspending contracts, all contributed to the failure to have achieved the foreshadowed growth rate.  But time is longer than rope.

Last year’s budget affirmed that “economic growth was driven (in large part) by growth in construction… and the outlook for construction in 2007 (was) positive”.

This positive outlook was not realized.  In fact, construction activity got so bad that the President of The Bahamas Contractors Association reported that for large portions of the year, the overwhelming majority of the members had no meaningful work.

Worse still, the public response of the Prime Minister to this cry from the President of the Contractors Association was essentially to call into question the integrity of the gentleman. The Prime Minister asserted that he did not accept the assessment that things were as bad in construction as the President was suggesting and that he, The Prime Minister, announced he had mandated his Minister of Works to produce a report on all construction in progress. While the report has never been made public, presumably the concessions outlined in this budget reflects that the Prime Minister now accepts what was being said by the President of the Contractors Association, and common courtesy would suggest that an apology to the gentleman would be appropriate.

Last year’s budget promised to “give priority and attention to encouraging and facilitating”…”direct foreign investment and domestic investment.”  This did not happen.

Regarding Direct Foreign Investment, the story of Bahamar and the delay in Albany would provide evidence.  This is not just my view.

Mr. Speaker a quote from the immediate past Governor of the Central Bank is as follows:

“If I were to be at all critical – which I don’t really wish to be – it would be to say that we  [the FNM led Government] are not doing enough and we are not focused on what needs to be done… we are still “allowing” things to happen.”

At the Business Outlook Seminar in January, 2008, Mr. Christopher Annan. Managing Partner of the Albany Development was even specific in making reference to the value of a strategic plan where everything that the Government does revolves around a clear vision. The Budget confirms the absence of both a strategic plan and a clear vision.

With regard to domestic investment, we all heard from the FNM propaganda piece – that  the last PLP Government was slow in decision making, and that under this current Prime Minister, answers would be forthcoming more rapidly. Increasingly however, the community is seeing the falsehood of this propaganda. For example, we hear increasing complaints from wholesalers and retailers about their inability to get timely decisions on matters relative to price control and we see more and more businesses going public with other complaints about Government delays.  One recent example, was from a major waste management company complaining that they could not start a bio-fuel initiative, this at a time when the need for alternative energy options is so apparent.

Last year’s Budget promised to ensure that by this time in 2008 there would not only be “growth” but also development” throughout the country. The Minister of Housing, for example, got specific about how he was not only going to develop homes but would do so at reduced costs. In fact, as late as September 28, 2007 a local newspaper quotes, the Minister of Housing as follows:

“I have not done a comparative analysis on it but I think these materials (which I have found) should reduce the price (for houses) appreciably.

As soon as we decide that this is the direction we are going, we will do that on the particular material.  We will then be able to say the difference in cost… and after will go to Cabinet.”

Alas, again, this did not happen.  In fact, not only did it not happen but the Minister has become the butt of jokes for “talking fool”.   More importantly, he has clearly lost the confidence of his cabinet colleagues because this budget makes clear that the entire government policy on the matter has been changed since it is now the intention of the government to spend the proceeds of the $75 million bond issue for the selling of lots for sale and not the construction of homes.

Last year’s budget projected “a Recurrent Budget Surplus” of $25,000,000.  Many words were used to explain what a wonderful accomplishment this was to be and in effect, how only superman could have it done.

The latest independent information available to access this promise can be found in the monthly Economic Review from the Central Bank published May 2, 2008 reports as follows:

“Based on initial estimates for the first eight months of Fiscal Year 2007/08, the Government’s overall deficit widened by 24.4% ($18.2 million) to $92.7 million.  Expenditures grew by 2.8% to $966.1 million, surpassing the 1.0% rise in revenue receipts to $873.4 million.”

Thus, not withstanding the Rt. Hon. Prime Minister’s reputation to the contrary, the record would suggest that this also did not happen.

Last year’s budget promised to “accelerate… the process of reducing the ratio of Government debt to GDP.”

Trying to assess this promise from last year’s Budget is proving to be a real problem.

Why? Because, on the surface, the Rt.  Hon. Prime Minister is not being candid enough in explaining the various figures he is using in this Communication.  I do not yet accuse him of using bogus numbers, just pointing to the need for greater clarity and precision when dealing with figures in such an important document as an Annual National Budget.

For example, at page 13 of his Communication, the Prime Minister compliments the Department of Statistics for producing “timely, accurate and comprehensive National Accounts Data.”

Furthermore at page (ii) of the Annex entitled “Economic Background,” the Prime Minister begins by quoting from reports produced by the Department of Statistics.

Thus when looking at Table II, of the Budget Communication for the report on the deficit as a percentage of Gross Domestic Product for 2007/08, it would appear reasonable for a reader to assume that the numbers were produced by the Department of Statistics.   In fact, just this morning the Prime Minister repeated this view.

But an email exchange with the Department of Statistics establishes that it has produced no estimate of Gross Domestic Product for the Governments fiscal year of 2007/08, and is not therefore providing any verification of the results for the fiscal year 2007/08.

So there is no clarity as to where the Prime Minister is getting his information to support his claim of progress in this area, but the independently verified data supports the conclusion that again, this also did not happen.

Last year’s Budget said that the FNM would “ensure that the economy expands at the fastest sustainable rate.

But also, again, this did not happen.

In fact the information provided by The Rt. Hon. Prime Minister makes clear that by any measure the FNM’s first full year in office failed to match the PLP’s last full year in office.

It’s a matter of Truth and Truth builds Trust.

Last year’s budget promised that the Government would be “especially prudent in public expenditure policies”.  Again, this did not happen.

Need proof you say?

The Minister of Works has acknowledged that negotiations are underway to determine just how much monies will have to be spent to compensate the contractors who suffered when legally binding contracts were unwisely terminated.

Need more proof you say?

It was only months after the Director General of Tourism went public with her appeals for more resources with which to promote our number one industry that this Government responded with an increased budget allocation – most imprudent, especially in the face of a slowing economy in America and after failing in last year’ Budget to have provided one extra cent for tourism promotion.

Last year’s Budget promised to ensure that the Defence Force had the resources necessary “to effectively patrol our territorial waters to deal with poaching, illegal immigration and the movement of contraband”.  This was to include again, the recruitment of “an additional 100 recruits”.  Alas, again.  These promises were not kept.

Last year’s Budget promised to expand the Royal Bahamas Police Force by 200 officers, to ensure additional “technical resources…to detect serious crime and to bring those responsible to justice quickly”.
Again, this has not happened.  In fact, the most important “technical resource” in policing is experienced and competent officers.  In the past year, the country has gone backwards in this area.

Last year’s Budget promised “an additional 50 personnel…and additional resources…for the repatriation of illegal immigrants”.  Again, this has not happened.

Mr. Speaker, I could go on and on pointing to instances of where last year’s Budget never achieved the results which were foreshadowed or promised.  In the interest of time, I will only mention one more.

The Prime Minister began last year’s Budget Communication as follows: “Leadership in public life calls for and indeed requires integrity (and) transparency, so as to engender trust.”
The Prime Minister went on to detail what this meant and in doing so, he essentially re-affirmed the Seven Principles of Leadership as outlined in this Party’s Manifesto.  The first of these seven Principles is “selflessness– holders of Public Office should take decisions on the basis of public interest. They should not do so in order to gain financial … benefits for… members of their family.”

Additionally, he re-affirmed the following Rules from the Manual of Cabinet and Ministry Procedure issued under his signature on December 12, 2000.
Rule 34 of that Manual provides that “A Minister… must perform the duties of his office impartially and uninfluenced by fear or favor or self interest”.
Rule 43 of that Manual provides that “A Minister must not engage in nepotism “and nepotism is defined as the ‘use of his office and power to secure advantages for himself (or) his relatives….’

Mr. Speaker, I say no more on this matter other than: To assert the belief that the term “relatives” would include one’s brother and one’s sister-in-law;” and

There is not enough money in the Public Treasury to deal with the consequences of a public perception that there are two sets of rules—one for the powerful or the connected and one for others.

Thus, when one carefully reviews the Budget from last year within the context of what was promised and what was achieved, there can be no surprise that the Prime Minister has foreshadowed plans to shake up his Cabinet. Clearly on the basis of results, a goodly number of Ministers need to be fired, because the analysis above shows that the most important promises from last year’s Budget simply never happened.

But, Mr. Prime Minister, as you plan your Cabinet shuffle, I urge you to remember that a lot of the reasons for failure to produce lie at your own door-step.

For, after all, it was basically you who made so many promises during the last General Elections Campaign and then failed to have so many of those promises reflected in the first Speech From The Throne.

After all, it was basically you who then failed to have so many of the promises which were outlined in the Speech from The Throne, not reflected in last years Budget.

After all, it remains basically you who continues this disconnect between what you promised during the Campaign and what you are now seeking to deliver. One brief example, What in this Budget is going to reduce the incidence of foreigners buying Bahamian land? In fact, does this Budget not do just the opposite to what you promised during the Campaign in this area – that is, does this Budget not give foreigners more incentives, not less to buy Bahamian land?

Oh, Mr. Prime Minister listening to you helps to recall the words of William Shakespeare -- full of sound and fury but signifying very little, in terms of ever saying what you mean and meaning what you say.
And thus, we approach this new litany of words and schedules of figures called the Budget of 2008/09 and shall explain why an appropriate theme therefore would be – “fool them again man; fool them again.

Fool Them Again

To appreciate the validity of this point, consider a few matters not said by the Rt. Hon. Prime Minister.

Year after year, many persons listen to National Budget Speech for their key words -----“No new taxes”.

This year, like many of these persons, I waited and waited.  Thinking that I had missed it, I have re-read the Budget Speech in search of those three words.  Still not finding them, I went to a FNM friend to borrow the binoculars he used during the last General Election Campaign.  Even with the aide of the binoculars I have not been able to find the three magic words.

So then, I looked at the actual figures, low and behold!  What did I see?  No more! “No New Taxes”.

For under the Summary of Revenues, I saw where Customs Duties are projected to go down by $77,448,672 but there is now a new tax called “Excise Tax”.  This new Excise Tax is foreshadowed to raise $234,000,000 or about $157,000,000 more than the sum by which customs duties are being reduced.

Now to understand, just how dramatic this is, let me point to a few realities:

If one were to combine what we now know as Customs Duties plus this new creature called Excise Tax, the foreshadowed revenues are over $752,300,000.

This compares to $605,800,000 in total revenues budgeted for imports in 2007/08.

Mr. Speaker, a growth to $752,300,000 from $605,800,000 represents an increase of 26% from the same activity—what we now know as Customs Duties - an increase of $146,500,000.

Based on those representations from the Prime Minister – I repeat, these are all his numbers and based on his numbers the following flows just as night follows day:

(a) the Total projected increase in what we now know as Customs Duties -- $146,500,000 is more than what he says is the value of all of the concessions being granted from stamp taxes to the home-owners, under the Nassau Down-town Re-development Act, and the family island development Act all combined, since all of these concessions in total represent tax relief of $131,301,500.   What is particularly amazing about this is that the Prime Minister would have us believe that this 26% increase in  custom duties will take place at a time when the economy is growing at a rate of 2% in real terms.

What seems clear from this budget is that under the guise of modernizing the tax laws the effective rate of duties overall will increase and this explains why the Prime Minister was not able to say the three magic words of “NO NEW TAXES”.   Time has not allowed a proper analysis of the new tariff act but a preliminary review would suggest that automobiles is certainly one area that in effect the tax rate has definitely increased by eliminating the concessionary rate for the import of cars of relatively lower value the government will overall earn more from the import of this single product.

Take another example, import of fuel.  The government would have us believe that it is making a major initiative for providing relief against the increasing cost of fuel as a result of changing how much tax B.E.C. would have to pay for the next 2 years.  What the Prime Minister has not said is that the higher the cost of fuel goes the more revenue the government gets because the import tax on fuel is calculated on a percentage of the overseas costs and not as a flat sum per gallon.

Referring back to the projected increase in customs duties of $146,500,000, what is also clear is that fewer and fewer persons and businesses are being asked to pay them, precisely because of the other concessions provided for in the budget.  Specifically, persons who own homes or businesses in communities outside of the city of Nassau and persons on certain Family Islands can be expected on average to contribute more significantly to government revenues which is another way of saying to suffer a larger tax burden.  Unfortunately, for a large percentage of the constituents of St. Thomas More, this Budget is terrible news for you.

Also, regretfully, while this Budget is asking you to pay more taxes, it is among other things, making no similar demand of many others such as the operators of casinos. Look at the line in the Revenue Budget and then go and explain that to all of the home-owners in South Beach, and Carmichael and Blue Hills, just to name a few.

This is just an example of why I say the theme of this Budget could well be “fool them again man, fool them again”.  Amazing!  From a Government which fourteen (14) months ago was touting “It’s a Matter of Trust”.  Well now, once again, I present the evidence to the Bahamian people to assert that it is really a matter of truth because its truth which builds trust.

Before concluding my remarks I wish to offer a few comments on the core aspects of the Budget for 2008/09.

Firstly, on the reintroduction of the stamp duty for first time homeowners, thank heaven the Government has seen the error of its prior judgment to have allowed this policy to lapse as at December 31, 2007.  That decision was unwise and created unnecessary suffering for many from January 1, 2008 to date.   In the totality of the circumstances, it is almost unconscionable to the government to have caused certain persons to have to pay taxes from new homes acquired from January 1, 2008 simply because they believed the word of the Prime Minister when they allowed the homeowner exemption to expire at December 31st, 2007.

I also advise the Rt. Hon. Prime Minister that his statements this morning are in direct contravention of what persons in his ministry are telling members of the public.  He confirmed this morning that persons can get this benefit the homeowner’s exemption benefit on any transaction that concludes July 1, 2008.   His ministry is telling the public that that is not so and that the benefit would only be operative on agreements entered into after July 1, 2008.  This reaffirms my earlier point that confusion and problems arise when government is by a one man band.  Particularly one who has a record of not saying what he means and meaning what he says.

But what do we learn from it?

We learned that this Government remains so partisan, so focused on “one-upmanship” that it is in fact rudderless.

After all, it was just a matter of months when the Prime Minister and several of his surrogates were all over the air waves and print media explaining why the Government could not afford to continue the stamp duty exemption and/or why in fact it was not a good idea.  The Prime Minister brought figures which he said, showed that the policy was of no effect.

Now today, the talk is all the reverse.

What has changed? – nothing, other than time for the FNM to take the same idea and sort of repackage it so that somehow it becomes “an FNM idea” and not “a PLP idea”.

In fact, a real tragedy of this Budget is that it is void of any idea which the PLP had not initiated and which is being repackaged for one reason or another.
For example,
Re-introduce the home-owners exemption but the PLP had promised to increase it to $400,000, let us make it $500,000.
Let’s redevelop the Port, but anywhere except Clifton because that is where the PLP wanted it.
Let’s redevelop the straw market but anywhere other than its original site because that is where the PLP was placing it.
This is really tragic.  Even at the human level in everyday life this is not a healthy way to run a country. This is No way to build a country.

The PLP had placed a ceiling on the value of houses which were subject to real property taxes.  The ceiling was $3,500,000.00.  this budget removes that ceiling.  Senselessly so.  After all any person who can afford a house with a value in excess of $3,500,000.00 is precisely the type of individual we seek to attract to the Bahamas.  Why do something like lift the ceiling to discourage them from coming.  Surely it must be clear, people in this category do not just bring fortune but fame and that fame has additional value for the country.  One small example of that fact the world class singer Ms. Mariah Carey  recently purchased a home in The Bahamas, this has been widely reported throughout the international media bringing benefit to the country far beyond the traditional press coverage. Why do something like this to discourage people like the late Harry More from building a house at Lyford Cay.  When Mr. More used his many international contacts to raise millions of dollars for worthy causes in The Bahamas.

Somehow, someway the FNM has to come to understand that it has no monopoly on common sense and that the best chance for sustainable national development is to be more forthright in accepting that the PLP is in fact full of progressive  ideas.

With this background, I wish to draw the Government’s attention to a matter on which this Budget is silent, to the detriment of an important sector of our society.

When the FNM was last in office, it caused a law to be posed which abolished the practice of dower-rights.  For those who are too young to remember, this was a practice where a wife received an interest in real estate owned by the husband when the husband died.  For years this has not had much adverse consequences because the Chief Justice had issued an opinion that this “right: continued for marriages which were entered into before the FNM Government caused the law to be changed.”

Relatively recently, a Supreme Court Judge has actually ruled otherwise- specifically, even for women who were married before the FNM abolished the entire practice of dower-rights, there is now no right to an interest in any real estate owned by the husband not even the matrimonial home. As a consequence, there are many women in our society today who are facing the harsh realities, which flow from the recent Supreme Court ruling.

The Prime Minister’s contribution this morning further complicated the situation because for the purposes of the inheritance act, conceived and passed when the FNM were last in office , specifically says that for the purposes of property what the husband has is his and what the wife has is hers.   But this morning, we heard just the opposite for purposes of the stamp act for now the Two (2) shall be one until such time as there are Two (2).

Firstly, the Government, in general, and the Minister of State for Social Services in particular ought to be condemned for not having at least brought this matter to the public’s attention.  I serve notice that we in the Official Opposition shall be taking some initiative to help focus public concern on this matter.

Earlier, I made reference to the question asked just this week by the Government appointed Chairman of The Crime Commission.

For emphasis I repeat the question – whether there is the presence of a self-serving Colonial mindset?

It is interesting that the question should be put just days before the country celebrates the 35th Anniversary of political Independence. For it serves to remind us all that it was the same question asked of leaders of The Free National Movement when they opposed Political Independence and Sovereignty.  It was the same question asked of the leaders of The Free National Movement when they opposed the creation of The Royal Bahamas Defense Force.

It was the same question asked of the leaders of The Free National Movement when they opposed the introduction of National Insurance.

It was the same question asked of leaders of the Free National Movement when they opposed the introduction of National Youth Service.

And as evidence that a leopard does not change its spots, it was the same question being asked a year or so ago of leaders of The Free National Movement as they initially acted to dismantle Urban Renewal.

And today the same question can be asked of leaders of The Free National Movement as crafters of The Budget.

After all there is not one mention of National Health Insurance.  Must our people forever be at the mercy of cook-outs to raise money for health care?

There is not one mention of old age pensioners. Must we really force these people to continue to choose between buying medicine and buying food?

There is not one mention about Pension Reform. Do we not appreciate that our population is aging and we must do more to prepare for the full implications thereof?

There is not one mention of one strategy to dramatically expand capital markets in the country. Does the FNM Government not appreciate that after they left The Bahamas International Stock Exchange to fend for itself or die, the Progressive Liberal Party helped to save it because it is indeed an important vehicle for national development.

There is not one mention about on strategy to strengthen the financial services sector; must the Government be so blatant in ignoring the voices of leaders from that industry who publicly question whether there is the political will to really help that Sector after the FNM dismantled the Ministry of Financial Services?

There is not one mention about Agricultural Development, even at a time when all over the world the need for more food production is of such wide concern. Must the Government as a whole be so dismissive of their own Minister of Agriculture who in last year’s debate flatly said that his Budget allocation “is not sufficient for what I would like to see done in years to come but that will have to do…”
No Minister.  I urge you to do not simply accept this attitude that what they give you “will have to do”. Stand Up. Stand up for the farmers and the fishermen of this country. After all, you would, no doubt, know that very recently no less a figure than the Secretary General of The United Nations personally urged all nations, large and small, to seize what he called an “historic opportunity to revitalize agriculture “as a way of tackling the food crisis which mandates that food production rise by 50% by the year 2030 to meet global demand.

Worst of all, Mr. Speaker, this Budget does not specifically address the matter of better monitoring and enforcement of the conduct of Ministers, regardless of the drink they sell or the drink their brother sells or the drink their sister-in-law sells.

Mr. Speaker, in ending my remarks I speak directly to those persons in our country who see themselves as being “independent” in terms of not being a firm supporter of either Party.

I invite you to compare the ideas of the PLP and the FNM. This Budget helps to prove that the PLP is a Party of Bigger Bolder Ideas for a Better Bahamas.

And so, I encourage all to listen beyond the noise in the market; look beyond the gimmicks and see why we say the country is better with the PLP all the way.