The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas was yesterday urged to "bail like hell to rescue the ship" after it was revealed that the Christie government's $570 million spending spree dwarfed the VAT-led revenue rise.

K P Turnquest, the Deputy Prime Minister, told Parliament there was a $228 million 'deficit' between the spending and revenue increases generated during the former administration's last two years in office.

While revenues, led by Value-Added Tax's (VAT) implementation, grew by a combined $342 million during the 2015-2016 and 2016-2017 fiscal years, the Government's recurrent (fixed cost) spending rose by $570 million - more than half a billion dollars - over that same period.

Mr Turnquest branded as "astounding" the 38 per cent recurrent spending increase during those 24 months, and argued that the Bahamas had "absolutely nothing to show" for all the 'red ink' that was incurred.

Addressing the House of Assembly, he said government revenues rose by a net $261 million during the 2015-2016 fiscal year - the first full year of VAT. Yet recurrent spending, representing the Government's fixed costs such as salaries and rents, continued to expand at an even faster rate - increasing by $302 million that same year.

"Rather than utilising these new-found monies to reduce debt, they proceeded to spend it all and then spend some more," Mr Turnquest said. "In that fiscal year alone, the Government actually ramped up its spending on programmes and services, its so-called discretionary or primary recurrent spending, by $302 million."

He revealed that the gap between revenue and spending increases widened further during the 2016-2017 fiscal year, which was impacted by a combination of Hurricane Matthew and the Christie administration's pre-election spending binge.

While revenues rose by a further $81 million, recurrent spending increased by a "whopping" $268 million over the same period. Opposition MPs argued that a significant chunk of the spending increase represented the $150 million in 'emergency borrowing' post-Matthew, but Mr Turnquest retorted that even allowing for this there was a $118 million rise.

"You didn't spend $150 million because we're still paying off some of those bills," the Deputy Prime Minister said, adding that Bahamians "cannot see what they spent the money on". "All this money spent and you have absolutely nothing to show for it," he argued. "Our government is still picking up the pieces from that inexcusable pre-election splurge in spending and the overhang of unpaid commitments that they left in their wake.

"As a result of their actions, in their final year in office, primary recurrent expenditure was $570 million higher than it had been only two years earlier, an astounding 38 per cent increase. For their part, revenues over those two years rose by an appreciable $342 million."

Robert Myers, the Organisation for Responsible Governance's (ORG) principal, told Tribune Business that the data confirmed the former Christie administration had broken its promise to the private sector over how the VAT revenues will be used.

The then-government's VAT 'White Paper', and numerous ministerial pledges, all promised that the revenues generated by the new tax would be used to narrow, then eliminate, annual fiscal deficits then running at between $300 million to $500 million.

Mr Myers, one of the leaders in negotiations with the Government, as then-chair of the Chamber of Commerce and Coalition for Taxation Reform, said the figures revealed yesterday further confirmed that the Christie administration had instead squandered VAT's potential benefits to finance an ever-expanding government and its social programmes.

Describing the situation as "an outrage", he told Tribune Business: "We need to do everything in our power to get to a balanced Budget. We need to get it into line. They're going to sink the ship.

"The side of the boat is already too close to the water. We don't have room to take on any more water. The boat is full of water, and we need to be bailing like hell. We need to know we have people in positions of leadership that will get the boat buoyant again. The country does not have time for anyone not focused on that."

Mr Myers echoed Mr Turnquest's comments over where the former Christie administration had spent the extra $570 million, arguing that little to none of this was visible or had resulted in improved infrastructure/public services.

"How the hell do you spend that kind of money?" he asked. "I don't understand. What did they do? On what? How much can we claw back? My big question is where has the public seen the benefit of that - a half-a-billion dollar increase in recurrent expenditure? What services have improved?

"If that increase is seen to be a waste, how are we going to claw that back in order to eliminate the deficit? That's what has to happen."

Mr Myers then pointed to the Christie administration's broken VAT promises, adding: "How do you justify increasing recurrent spending by half-a-billion dollars because that sure as hell wasn't what we were told in the White Paper. It [VAT] was to pay down the debt and eliminate the deficit, but you took it all and grew recurrent expenditure."

He challenged Philip Davis, Opposition leader and deputy prime minister in the former administration, to its fiscal policies and suggested that "numerous skeletons are now coming out of the closet".

"Let them speak up," Mr Myers said of the Opposition. "One of them is the ex-deputy prime minister. Let's hear what he has to say about it, how that's justified and how he thinks it's in compliance with the White Paper on VAT. Why does he think we should trust him?

"There's a lot of skeletons in the closet, and those skeletons have now come out the closet. The ex-deputy prime minister should be held to account to explain those skeletons. It was his party in power when we were fed the line: 'This is what VAT is going to be used for' and, clearly, that was absolute rubbish. I'd be very interested to hear what the Opposition has to say about that."

Mr Myers said this also act as a warning to the current Government and its MPs, and the need to hold them accountable for their fiscal management.

Mr Turnquest, meanwhile, accused the former administration of having a "seemingly insatiable appetite for spending" that could not be quenched by the VAT-led revenue increase, resulting in a "ballooning" of direct government debt by $2.6 billion - or $529 million per year - during its five years in office.

"Our Government is still picking up the pieces from that inexcusable pre-election splurge in spending, and the overhang of unpaid commitments that they left in their wake," the Deputy Prime Minister added.

He said the former government "ate up" the $1.5 billion VAT revenues in addition to borrowing $2.6 billion, and added: "That's why you can't find the VAT money. It's gone."