The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Branville McCartney has promised that the Democratic National Alliance (DNA) will pass a Balanced Budget Act if elected to office, and privatise all loss-making government corporations.

The DNA leader, setting out his party’s vision for revitalising the Bahamian economy and government’s finances, pledged that he would “reduce the size of government” and public spending.

Outlining a ‘broad brush’ platform that combined fiscal prudence and government transparency with the elimination of bureaucratic red tape, Mr McCartney also made other promises on issues dear to the private sector’s heart.

Apart from pledging to lower electricity costs, Mr McCartney said a DNA government would reduce the Bahamian Prime interest rate to 2 per cent and initiate a “structured elimination of exchange controls” - measures that are designed to reduce borrowing costs and improve business access to capital.

Mr McCartney was speaking to Tribune Business after this newspaper challenged him to outline the DNA’s alternative to the Government’s imminent Value-Added Tax (VAT), rather than just simply attack the Christie administration’s policies.

“We would manage the Government better with the introduction of a public procurement process,” he told Tribune Business. “We’d ensure there was collection of due taxes, and we’ll promise to privatise BEC, Bahamasair and the Water & Sewerage Corporation.

“We’d significantly reduce the business registration period, and introduce a Code of Conduct for parliamentarians. We would also introduce a Balanced Budget Amendment Act, so we’d be controlled and guided by that.

“And we would reduce the size of government and government spending.”

While there is nothing particularly revolutionary about the platform unveiled by Mr McCartney, and the DNA likely some way from having the chance to implement, his comments will strike a chord with some in the current VAT-dominated environment.

A Balanced Budget Act, as pledged by the DNA leader, would essentially require the Government to balance its books annually. It could not incur a fiscal deficit, or add to the national debt, and would either have to ensure revenues exactly matched spending or generate a surplus.

The only time the ‘Balanced Budget’ condition would likely be waived is in an emergency, such as a major hurricane striking the Bahamas.

Mr McCartney’s suggestion is similar to numerous other proposals, such as a Fiscal Responsibilities Act and/or ‘fiscal rules’. All have the same objective - to prevent unchecked government spending and thus legislate fiscal prudence, ensuring the Bahamas never again finds itself in its current fiscal situation.

A Fiscal Responsibilities Act would force the Government to meet certain criteria that it could only breach with the approval of Parliament, thus boosting transparency and accountability. While so-called ‘fiscal rules’ require the Government to hit pre-set spending and revenue targets.

Yet the Christie administration rejected such advice from its own US consultants, Compass Lexecon, who called for it to establish a debt-to-GDP ratio ‘ceiling’ and also increase the VAT rate if targeted cuts in this ratio were not met. Mr Christie said such ‘rules’ were not practical in the Bahamian context.

But, while Mr McCartney’s ideas may not be new, his pledge to reduce the size of government is likely the first-ever such utterance from a Bahamian political leader.

However, pledges while in Opposition often prove difficult to implement in practice. It is execution, rather than ideas, that separate the political parties in the Bahamian context.

For instance, many governments have shied away from dealing the the likes of Bahamasair and Water & Sewerage due to fears about the political ramifications and potential loss of votes. Yet with both Corporations continuing to eat up a combined $40-$50 million in per annum taxpayer subsidies, their issues can no longer be ignored.

Meanwhile, turning to the ‘ease of doing business’, Mr McCartney promised to tackle barriers that “discriminated against Bahamians” in their own country.

“We must ensure we make business in this country successful. We must move post haste to reduce the cost of electricity, reduce the Prime rate to 2 per cent and reduce the cost of capital through the structured elimination of exchange controls,” Mr McCartney told Tribune Business.

“Because of exchange controls, we are discriminated against as Bahamians. I looked at a hotel the other day that was for sale. I said that property would cost me $5-$7 million.

“I said: ‘I can’t get that money here. I can’t do it, unless I joint venture with a foreign partner’. Yet the foreigner can come here and use his access to the international banking system to do it. We are discriminating against a Bahamian.”

How the DNA would protect the 1:1 peg with the US dollar in the ‘structured elimination’ of exchange controls was not mentioned, but he again touched on issues - such as interest rates - that have been cited as major concerns by the private sector.

“We must diversify our economy. Even if not successful, we must try,” Mr McCartney added. “We must incentivise the small business sector.”

He also called on the Government to give “Bahamians the option to purchase or be joint partners” with foreign entities in the privatisation of state assets, adding that it was unclear whether the Christie administration had done this in the BEC restructuring.

Suggesting that Government inefficiency and mismanagement was costing the Bahamian taxpayer $200 million per annum, Mr McCartney soon returned to the familiar theme of attacking the Christie administration.

Using last week’s Moody’s downgrade of the Bahamas’ sovereign credit rating as his ‘whipping’ stick, the DNA leader told Tribune Business: “There doesn’t seem to be any light at the end of the tunnel with this band of merry men.

“They [Moody’s] have downgraded us to two notches above junk status, which tells us that our economy is not moving. It tells us that our debt still continues to climb, the pay back of our debt remains extremely high, and notwithstanding what the Government said in the 2012-2013 Budget, there has been no such type of improvement in our economy.”

Agreeing with Moody’s that the Bahamian economy has “underperformed” and consistently missed growth projections, Mr McCartney said the Christie administration appeared to have “no plan for growth”.

“This tells us the Government needs to work on finding new industries, ensure the cost of living for the Bahamian people is sustainable, the price of electricity is reduced and, at the end of the day, we repay our national debt,” Mr McCartney added of the Moody’s action.

“It doesn’t look good. It’s quite disheartening for a country this small with so much potential.”

The DNA leader said the FNM and PLP were equally to blame for the Bahamas’ present fiscal predicament, describing them as “two sides of the coin”. He predicted that their past actions would indeed result in the Bahamas losing its ‘investment grade’ credit rating and being demoted to ‘junk’ status.

“They can give all the flowery speeches in the world, and I don’t mean to sound sceptical or cynical, but the facts are the facts,” Mr McCartney told Tribune Business. “It’s not good in the Bahamas at this stage. It’s not been good for some time, and it’s not going to get any better because it seems like the Government is leading this country in the wrong direction.”