The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Bahamian people's "insatiable desire" for government benefits is a bigger obstacle to reforming the public finances than economic policy, the Deputy Prime Minister is arguing.

K P Turnquest, in an interview with Tribune Business, suggested that changing the culture and thought-process - both among the civil service bureaucracy and wider public - was critical if the Bahamas is to eliminate its $300 million-plus fiscal deficits and halt its increasing national debt.

He added that the demands for ever-increasing government spending failed to recognise the "costs" this imposed on Bahamian taxpayers to finance it through new and/or higher taxes, burdening the private sector and reducing consumer spending.

"It has more to do with mindset than it has to do with economic policy," Mr Turnquest replied, when asked by Tribune Business how the Government planned to eliminate its fiscal deficits and reduce the $7.5 billion national debt.

"We still have an insatiable desire for spending, and the public has an insatiable desire for benefits irrespective of the cost and what it means."

Mr Turnquest, who is also minister of finance, declined to elaborate further, suggesting that to do so would make it harder for himself and the Government to achieve their fiscal consolidation objectives.

His comments, though, reflect what a senior attorney once told Tribune Business: "The Bahamian people want big government, but they don't want to pay for it." This effectively means that while many enjoy receiving the Government's largesse, they are reluctant to finance this themselves via tax payments, instead preferring that large deficits be run and paid for by greater borrowing - all of which has led to the Bahamas' current fiscal predicament.

It has also resulted in the Government's recurrent (fixed cost) spending on wages, rents and such-like ballooning to a record $2.7 billion for the 2017-2018 fiscal year, forcing the Minnis administration into measures including a 10 per cent across-the-board spending cut in a bid to rationalise the public sector.

Central Bank data for the five months to end-November 2017 showed that the fiscal deficit fell by almost 34 per cent, or $85.8 million, year-over-year to $168.1 million, although the decline was largely due to unfavourable prior year comparatives as a result of Hurricane Matthew.

Mr Turnquest said it was "so far, so good" when it came to the Minnis administration's fiscal objectives, but warned that it had "to continue to hold the line" and preserve "discipline" to maintain the improvement seen to-date.

"We continue to make small steps," he told Tribune Business. "There are any number of issues that exist which can derail us.

"In that vein we're still moving in the right direction, but we have to continue to hold the line and be disciplined in what we do in order to maintain these gains."

Robert Myers, the Organisation for Responsible Governance's (ORG) principal, yesterday warned against becoming excited over "short-term blips" such as the near-$86 million deficit fall, adding that it would likely take a sustained decade-long effort before the Bahamas could feel comfortable that its fiscal position is on the right path.

A noted 'fiscal hawk', he told Tribune Business: "This is a long-distance race. This is not a sprint. We've got to do the right thing over the long haul. Short-term blips are nothing to get excited about because this is a marathon.

"Being first around one corner doesn't mean we're a winner because there are 1,000 corners to be first around to win the marathon. This is about making the right decision and getting the balance right in the long haul.

"It took 40 years to get the country in the state it's in, and we'll not get out of it in five years. It's going to take us at least 10 years to improve to the position where we can feel really strong about our fiscal condition."

Mr Myers added that this required the next administration, from whichever party, to be "financially prudent" and follow the same course as the Minnis administration appears to be setting if the Bahamas is to consolidate any fiscal gains.

"We're changing a culture, a mindset within government and governance," he said, echoing Mr Turnquest. "We can no longer afford this irresponsible and wasteful form of governance. Everybody just needs to keep their heads down, know the objective and go for the long haul.

"It's going to take everybody to make that happen, because the public has to become aware and sensitised to the fact that the current leadership has a great challenge. Their greatest challenge is their own institutions by far."

A government's ability to implement its political agenda, especially wide-reaching reform and change, depends on its ability to make the civil service bureaucracy 'dance to its tune'. This can often be difficult in the UK system of government which the Bahamas has, given that senior civil servants often have their own 'territory' to protect.

Mr Myers, meanwhile, backed the Government's objective of fostering greater private sector growth to absorb some of the jobs lost as it moves to reduce the public sector's size to a level that taxpayers can better sustain.

"We've got to get the inefficiency out of the public sector, and that's critical for any Fiscal Responsibility plan to work," he told Tribune Business. "The recurrent expenditure and inefficiency is what's killing us. The Government is living well beyond its means.

"The delicate balance is increasing GDP and decreasing government expenditure. Stimulate the private sector to expand GDP and cut back on inefficiency in the public sector. Then you have spending and revenues going in the right way because, as you increase GDP, you're going to increase revenues.

"The growth of GDP is going to increase growth in government revenues, so it will narrow the deficit and debt, which puts the Government and country in a much better fiscal condition."