Updated: 10 Dec. 2021 19:54
Curtis Dickinson, Minister of Finance, presents 2019-20 Budget Statement (file photo)
Higher-than-expected government revenues this year have been overtaken by spending related to the pandemic, the House of Assembly said today.
Curtis Dickinson, the finance minister, told the House that estimated revenue for the year would be $ 8 million above budget, but spending would be $ 56.9 million above forecast.
But he said he was confident the government could meet the budget deficit target of $ 124.7 million by cutting capital spending.
Mr Dickinson added that $ 92.9 million had been allocated for capital spending, but the Department of Finance proposed a reduction of $ 25 million.
He said capital spending for the year was already lower than forecast due to the impact of Covid-19 on the availability of resources for investment projects.
Mr Dickinson explained: “After taking into account the proposed savings on current and capital spending, income increases and the impact of work underway to further redefine spending priorities, we remain confident that the goal budget deficit of $ 124.7 million can be achieved.
“It is important that we continue to ensure that tax matters are managed in a prudent and thoughtful manner, and that we continue the fiscal discipline necessary to achieve a balanced budget as quickly as possible.
“In this regard, the government is expected to continue its work to make progress in the implementation of government reform initiatives, including the rationalization of all government departments, quangos and services.”
Mr Dickinson added that $ 13 million in savings on current spending had already been identified – most of it coming from a freeze on vacant government posts.
He said: “Steps are also being taken to ensure that overtime is better managed and limited to use only in essential areas.
“In addition, ministries continue to review and reduce lower priority budget spending to ensure that the deficit target is met. “
Mr Dickinson added that the economy grew 3-5% in the first three quarters of the year.
He told MPs: “The majority of key economic indicators, such as employment income, imports, visitor spending, construction activity and retail sales have increased during this period.
“While several of the key economic indicators for 2021 saw positive results, it should be noted that some of these numbers such as imports, construction and tourist arrivals and spending are lower than the numbers for 2019.
“This indicates that the economy is moving in the right direction but has not fully recovered to pre-pandemic levels.”
Mr Dickinson said tariffs were seven percent higher than expected and stamp duty revenue had increased due to an increase in land transport.
But he added that costs related to Covid-19 had increased due to outbreaks throughout the year.
Mr Dickinson said: ‘Based on submissions from ministries coupled with forecasts from the Ministry of Finance, the additional expenditure for Covid-19 is estimated at around $ 21.3 million for this fiscal year.
“These additional expenses related to Covid-19 are directly linked to the impact of the third and fourth waves of Covid-19 which occurred during the periods April / May and August / September.
“The related increase in positive cases has triggered a demand for increased testing, contract research, lab operations, the quarantine warrant, and benefits related to the Temporary Unemployment Benefit program.
“Considering the amounts that have been included in the 2021/22 government budget, the total planned spending for Covid-19 spending is approximately $ 34.8 million for the fiscal year, including unemployment and benefits Additional related amounts are expected to total approximately $ 12.7 million. “
Bermuda Council of Hospitals needed financial support
The government had to offer financial support of $ 11 million to the Bermuda Hospitals Board due to the impact of Covid-19.
Curtis Dickinson told MPs the pandemic had “significantly affected” BHB’s operations and resulted in reduced revenues and increased spending.
As a result, he said BHB needed “additional support in the form of grants” and the increase in the standard health benefit was not enough to close the financial gap.
Mr. Dickinson added: “The increases passed by this Honorable House were not the total amount needed to fill the shortfall as Cabinet decided not to pass all costs on to employees and businesses in order to reduce the magnitude of the increase.
“This additional shortfall of $ 11 million will be funded from the Consolidated Fund to ensure that our hospital can continue operating.”
The 2021 Health Insurance Law Amendment Act to increase compulsory health insurance premiums was approved by the House in September.
Kim Wilson, the Minister of Health, said at the time that the coronavirus pandemic had strained health services and exposed areas that needed improvement.
Ms Wilson warned, “If we do nothing, we could see a health care system crumble in the near future. “
Mr Dickinson added that despite the problems facing the island, the government is committed to supporting the public.
He said: “We recognize that these are extremely difficult times, not only for governments, but also for individuals and businesses.
“We remain cognizant of the continued need to provide appropriate support to our community, while ensuring to implement a credible and sustainable financial and fiscal strategy.
“As we continue our work to properly manage the financial affairs of this country, our goal remains to take action in a way that contributes to a bright future for all. “
Mr Dickinson said the annual cost of servicing the debt was expected to be $ 127.5 million.
But he confirmed that the refinancing talks have started.
Mr Dickinson said: “We have started to have preliminary discussions with a keen eye on interest rates.
“We’re in the early stages, but it will happen in earnest at the start of the new year.”