The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government will be "shooting themselves in the foot" if they slash civil service salaries, a union chief has warned, arguing that three alternative measures can realise some $150m in savings.

Kimsley Ferguson, the Bahamas Public Services Union's (BPSU) president, told Tribune Business it would be "detrimental" to what remains of the Bahamian economy if the government were to seek across-the-board wage cuts for his roughly 20,000 members as they represent one of the few consumer spending sources left.

While pledging that he would take the government "at its word" over its statements that no public service salary reduction is currently being considered, the Mr Ferguson added: "Where there's smoke, there's fire."

The BPSU, in a position paper seen by this newspaper, is arguing that the government should look to cut unnecessary spending from its budget as a first phase response to its fiscal woes after revenue plummeted by 70 percent due to a combination of the tourism shutdown and national lockdown in response to the COVID-19 pandemic.

The paper argues that the government could save some $60m if it "terminates the contracts for all consultants and special advisers" given that these are usually retirees or persons "paid outside of public service salary scales" whose roles could be performed by civil servants.

The BPSU is also suggesting that the government could save some $40m by "postponing subvention and marketing support payments" to major hotels and other private sector entities that have temporarily laid-off staff in response to the COVID-19 pandemic.

It also suggested that the government could obtain $50m in much-needed extra funds by transferring surplus funds from bodies such as the Nassau Airport Development Company (NAD), the Bahamas Maritime Authority (BMA), Utilities Regulation and Competition Authority (URCA), Securities Commission and Insurance Commission back to the Public Treasury and Consolidated Fund.

These three measures combined, the BPSU paper estimates, would give the government a combined $150m in much-needed fiscal headroom, although not all of the regulators and quasi-governmental entities if references are thought to be so cash-rich. And tourism marketing efforts will have to quickly resume once the pandemic ends.

Referencing previously-denied claims that the government may seek to reduce civil service salaries to achieve a 20 percent spending reduction target, the union added: "Elements of the strategy disclosed to us by ministers appear short-sighted and ill-considered.

"The classic response to a recession is for a government to increase deficit spending to offset the fall in aggregate demand, and the BPSU supports this approach. The proposed approach of the government to dramatically reduce spending - including remuneration to the public service workers - is not supported in modern economic theory and we fear this approach would create more hardship for the Bahamian worker."

Both K Peter Turnquest, deputy prime minister, and Brensil Rolle, minister of national insurance and the public service, last week vehemently denied allegations by Philip Davis, the opposition leader, that the government is mulling civil service salaries as a means to cut spending in response to reduced revenues and ballooning deficits.

While that may currently be the case, the $670m public service wage bill for 2019-2020 and $84m in budgeted allowances combine to make a total $754m, thereby making labour one of the government's highest fixed-cost expenses.

It still remains possible that it may be forced into seeking such cutbacks depending on how long the COVID-19 pandemic lasts and the speed with which the Bahamian economy recovers. Some observers will likely argue that the public sector should also share some of the private sector's pain when it comes to the economic impact inflicted by the virus.

Mr Ferguson, though, argued that there were "a number of areas the government can explore before they give consideration to any reduction in salaries" beyond what was contained in the BPSU's paper. He identified travel allowances, fuel allowances and non-essential capital works projects as issues that could be targeted for savings, as well as eliminating waste, inefficiency and corruption.

"Given that a number of private organisations have laid-off staff it's important money keeps circulating to keep the economy afloat," the BPSU chief argued. "There has to be some spending of some sort, and some circulation of monies, and the benefit of that is the money is going to go back to the Government via VAT, taxes and so forth.

"The public sector can do it. To reduce public service salaries in any particular regard will be detrimental to the economy at this juncture. I don't think we're there to even giving consideration to it. It would be extremely detrimental for the Government to do that. They'd be shooting themselves in the foot.

"The Government is going to have to do some borrowing and get money into the economy and keep it afloat. If the Government reduces public service salaries it will put more people into the [unemployment] benefit lines."

Responding to the Government's salary cut denials, Mr Ferguson added: "For now I'm going to have to take them at their word. Wherever there's smoke there's fire, and the minister of finance [Mr Turnquest] in particular said there was no consideration given to reducing public service salaries."

Acknowledging that economic recovery may be some way off, Mr Ferguson said ministers and MPs would need to "lead by example" and accept matching cuts to their own pay should they ultimately elect to cut civil service wages.

He urged the Government to consult with the BPSU first if it decided to go this route, rather than act first and speak to those affected afterwards. "If we get to the point where there has to be a reduction in salaries, the Government is going to have to put the books on the table and show us what is in the purse," Mr Ferguson told Tribune Business.

"There needs to be a more intimate interaction with unions in this country so they can have a clear understanding and decide along with the Government what is absolutely necessary. We don't need to take their word for it; we need to be able to see for ourselves."