The Tribune

• Ex-minister hits back at ‘$1bn difference’

• Law: Include only bills/invoices received

• Deloitte report may offer complete picture

By NEIL HARTNELL

and YOURI KEMP

Tribune Business Reporters

ykemp@tribunemedia.net

A former Cabinet minister yesterday hit back at the Prime Minister’s assertion of a “$1bn” fiscal omission by the Minnis administration, saying: “Not every liability must be disclosed.”

Kwasi Thompson, minister of state for finance at the time the Pre-Election Fiscal and Economic Update was released, told the House of Assembly that the law only required the then-government to list unpaid arrears for which bills and invoices had been received - meaning they were now due for payment.

Disputing Philip Davis’s assertion that there was a “$1bn difference” between the report’s figures and the “truth” of The Bahamas’ fiscal reality, Mr Thompson implied that the newly-elected administration’s calculation includes future spending commitments and liabilities that have not been actioned, and for which bills and invoices have yet to be received.

The east Grand Bahama MP argued that the Fiscal Responsibility Act does not mandate the inclusion of such commitments in the Pre-Election Fiscal Report, meaning that the Deloitte & Touche review initiated by the new administration is effectively comparing apples and oranges, and the notion of a “$1bn difference” does not apply.

“The law under the Fiscal Responsibility Act is very clear on what is to be included in the pre-election report,” Mr Thompson said. “I am advised that the law does not require the disclosure of every liability.

“The pre-election report requires the Government to list the arrears. The arrears represent those matters that have been invoiced. This is stated quite clearly in the pre-election report itself.” However, he acknowledged that the issue will not be laid to rest until Deloitte & Touche’s report is publicly disclosed.

The Pre-Election Report itself appears to back Mr Thompson’s case as, quoting from the Fiscal Responsibility Act’s Third Schedule, it states that the update only need include “the outstanding stock of arrears for all government entities, including showing separately all new unpaid invoices since the stock of arrears was last reported”.

That suggests the law requires only those arrears for which bills and invoices have been presented need be included. Mr Thompson accused the Prime Minister of headline-grabbing with his $1bn assertion, and added: “In my view it was completely wrong and inappropriate to make such an allegation in this place without providing the report that provides the evidence of such a claim.”

One source, speaking on condition of anonymity, argued that it was wrong for the Davis administration to have made such allegations given that the Fiscal Responsibility Act was clear on what needed to be included in the Pre-Election Fiscal Report and there was no mandate to include all “the liabilities” it appears to be focusing on.

“It’s very clear in the legislation what is required,” they argued. “If the legislation was ambiguous on what is included I could understand it, but the legislation says arrears and unpaid invoices. If something came due the day after the report and crystallised, then there’s no obligation to include it.

“To make the statement that some truth was held was misleading. You cannot claim that the report is misleading if it did not include things which had never come up for payment before the report, and were not in the remit of the report. That’s where the rubber hits the road.

“If they want to do an exercise to determine the full liabilities of the Government, then that’s fine, but to say the former administration did not include that in the report is heavily misleading because it is not a part of what the report requires.”

One person yesterday suggested that the Government and Opposition positions were akin to a situation where the former is saying that “a pizza bought a year from now” must be accounted for, while the latter is saying only the “pizza bought today” be included.

Underlying the dispute is the difference between cash-based and accrual-based accounting. The Government presently uses the former system, as reflected by the Pre-Election Report, while the Davis administration appears to be employing the latter method to get a handle on all future spending commitments and liabilities before they come due.

Thus the Deloitte & Touche report may provide a more accurate picture of the Government’s financial position, although the latter is now supposed to be in the process of transitioning to accrual-based methods.

The “$1bn difference” provoked a row in the House of Assembly between Mr Thompson and Chester Cooper, deputy prime minister and minister of tourism, investments and aviation. The latter argued that the ex-minister of state was in no position to challenge the Davis administration given failures to meet the statutory deadlines for releasing the Fiscal Strategy and Fiscal Responsibility Council.

As to the Pre-Election Report, Mr Cooper said: “I would invite the member to acquaint himself with this piece of legislation passed by the previous administration. The purpose of the legislation was to paint a picture as to what the current state of the fiscal affairs of the country is before going in to an election.

“This member, who was the minister of state for finance, to come here and talk about the Fiscal Responsibility Act, when they completely ignored the requirements of this act.”

Mr Cooper added that the Fiscal Responsibility Council never had the “enabling framework” for it to be empowered to do its work as required by law. “This member, as a part of the Cabinet, was complicit in breaking the law,” Mr Cooper also said.

Mr Thompson retorted: “He said this member broke the law. He must provide evidence that this member broke the law or withdraw.” He also argued that the Pre-Election Fiscal Report was being conflated with that of the Council when they were two separate documents.

The former state finance minister also slammed the Government’s imminent move to eliminate the ‘VAT-free’ status enjoyed by so-called food “breadbasket” items and prescription/over-the-counter medications, suggesting low income Bahamians were “getting swing” having voted the Progressive Liberal Party (PLP) into office.

“There is no easy way to say this; it cannot be glossed over or explained away,” Mr Thompson said. “The Government has increased the cost on bread, baby food, grits and milk.

“You will make it more expensive for children and the elderly to buy medication, including prescription medication and most over-the-counter-drugs. But this is a new day; it’s just not the one people were expecting.”

Research, though, has suggested that a broad-based, low rate VAT with few exemptions will prove the best model for The Bahamas in terms of simplifying administrative complexity, increasing government revenues and eliminating fraud and loopholes. The Government plans to ease the burden on lower income families via increased social security assistance.