Beyond the funk
With 12 percent value-added tax (VAT) now a reality, we are facing a new normal.
The Minnis administration, already suffering from eroded trust and a devaluation of political currency, experienced a further loss of goodwill since the tax hike was announced in Parliament 35 days ago.
In its first year, it managed to rapidly cause the loss of public confidence due to complete reversals of positions taken in opposition, multiple gaffes and its failure to meet expectations that were set high ahead of the 2017 general election.
Consider, for instance, the Public Domain survey we reported on June 13. It reflects the dramatic depletion in support. While the FNM won 57 percent of the votes in the election, only 20 percent of those polled said they would vote FNM if an election were held tomorrow.
The results were not surprising.
That survey reflected the mood as it existed in the first week of June – just days after the highly unpopular budget communication delivered by Peter Turnquest, the finance minister, om May 30.
At the time it was taken, 32 percent of respondents expressed overall satisfaction in the government.
The previous survey, taken in April, showed overall satisfaction in the Minnis administration at 44 percent.
The government’s signing of a highly controversial deal with Oban Energies for an oil refinery and storage facility in East Grand Bahama in February also dealt a black eye to the administration.
By the time the prime minister tried to do damage control, his administration had already suffered substantial credibility loss.
There is an expectation that the deeper an administration gets into its term, the more unpopular it becomes.
Many governments experience “mid-term blues”, but the current government appears to be hemorrhaging goodwill at an alarming pace.
It has squandered the deposit made into its political bank on May 10, 2017.
The government has timed its target to balance the budget in three years with the next election season.
While ministers recognize the hit they took with the increase in VAT from 7.5 percent to 12 percent, they expect that, ahead of the next general election, the economy will be on a roll and fiscal targets will be met.
They are banking on delayed buy-in from the public. It is a gamble, for sure. But they seem to believe it will pay off.
While the prime minister has said he would prefer to lose the next general election than “lose the country”, it is obviously not his intention to serve just one term in office.
The burdensome tax hike has, to date, caused the most significant hit to the Minnis administration, but the government had already become significantly unpopular in its first year, before the tax increase was announced.
What’s challenging for the Minnis administration is that a number of steps it has made and a number of positions it has taken represent a complete reversal of its stance in opposition on various issues.
We have fleshed them out over many weeks. The FNM has adopted new positions on issues including Baha Mar, the ‘spy bill’ and VAT.
Many in the electorate actually do feel they were lied to.
If it has not experienced it already, the Minnis administration will find that it is difficult to reverse perceptions once they take hold.
When members of the public feel they have been deceived, they tend to respond a certain way.
When governments lose the people, it is difficult to win them back.
There were many factors that culminated in the election loss for the Progressive Liberal Party last year, but it lost the people early on.
Its undoing was its decision to ignore the will of the people as expressed in the 2013 gambling referendum.
The failure of the former government to properly account for the VAT revenue collected since the tax was introduced in 2015 also angered voters.
Many voters felt deceived. Worse than that, many actually believed their money was stolen.
Perceptions are powerful in politics as astute politicians and political observers know; and while a strong economy is a significant determinant in what voters do, it is not always the most important factor in how they vote.
In 2007, unemployment was at 7.8 percent.
The 2006 Labour Force Survey reflected the lowest level of joblessness since 2001.
This major boost in employment came from construction; financial services; and community, social and personal services, according to the Department of Statistics.
The economy grew by 3.4 percent in 2006, and by 4.5 percent in 2007.
Government debt in 2006 was a comfortable 30 percent of GDP.
But the PLP did not hold onto the government.
Voters were fed up with persistent scandals and Prime Minister Perry Christie’s perceived weak leadership.
The PLP thought that, notwithstanding its challenges with those scandals, voters would look past all that and reelect the party.
The FNM claimed 23 of the 41 seats in the House in 2007.
Perry Christie became the first Bahamian prime minister to be kicked out of office after one term.
The lesson there is that voters do not have an appetite for scandals, weak leadership and chaotic governance.
Christie and the PLP had a much more disastrous run in their most recent time in office.
The economy failed to record any appreciable growth in five years.
At the end of 2017, the Central Bank noted, The Bahamas’ national debt was almost $8 billion, sitting at a dangerous 67.8 percent of GDP.
The Minnis administration has introduced the higher VAT rate to address fiscal pressures.
In explaining the reason for the increased tax, Minnis said last week, “I do not believe you can tax yourself out of a problem. I am not a believer in that. The only way you can get out of a problem is you must grow your economy.”
Growing the national economy must today be the FNM administration’s greatest priority, even if it does not guarantee another election win.
A prosperous nation has a better chance at addressing social ills.
There are better and more resources for education, health and national security.
In his recent budget communication, Turnquest said with the level of unemployment in The Bahamas and the annual rate of increase of its labor force, “It is critically important that we succeed in boosting the rate of growth of our economy”.
He said the government is focused on improving the ease of doing business.
He noted that in the latest 2018 rankings, which are based on data as of mid-2017, The Bahamas placed 119th out of 190 countries, with its worst showing in respect of registering property.
“Improving the ease of doing business in this country is, therefore, a core component of our strategy to bolster Bahamian entrepreneurship, investment and economic growth,” Turnquest said.
The government has also touted the Commercial Enterprises Act as an important driver of new business to The Bahamas.
It has also committed $25 million over five years for micro loans, small business loans, grants and guarantee facilities for medium-sized enterprises in The Bahamas.
In the budget communication, the minister said expectations are for continued strengthening of the economic momentum underway, with further gains by the tourism sector on the basis of sustained expansion in the U.S. and other key source markets.
Various foreign investment projects are expected to continue to buoy the domestic construction sector. As well, the full opening of Baha Mar should add to the more buoyant growth impetus, he said. “We can thus anticipate further improvements in labor market conditions in the period ahead,” Turnquest added.
How important is image?
For the Minnis administration, a focus on the economy is critical, but the FNM and the government must simultaneously engage in image rehabilitation.
They ought to take steps to slow the further erosion of political capital.
Perhaps they are mindful of this.
The new budget contains a sizeable increase for “advertisement and media supplements”.
According to the budget, $3.7 million has been allocated for this purpose, a jump from the $1.2 million allocated in 2017/2018.
In the 2016/2017 budget, just over $3 million was spent on advertisement and media supplements in the Office of the Prime Minister.
It seems the government is about to embark upon a significant public relations exercise.
Effective communications are important for governments, but communications alone won’t tackle the bruising this administration has been getting from the many gaffes by the prime minister and his oftentimes tone-deaf Cabinet.
Upon coming to office last year, the prime minister appointed a press secretary and promised to have quarterly press conferences to engage the media.
No such press conferences have happened, although Minnis has been open to questions from reporters on the sidelines of various public events or after leaving Parliament.
His performances in these instances have often been regretful and inelegant.
When asked by a reporter why someone had to die before more signange and reflectors were placed on Munnings Road (which is no longer a through road), the prime minister said, “That road has been addressed on numerous occasions, so I have nothing else to say about that, okay? I’m going to go for lunch.”
The remark was widely shared on social media and made the PM appear insensitive.
There have been many other moments like that one.
The answer some of the prime minister’s handlers and advisers may have to avoiding such blunders in the future is for him to avoid talking to the media, but that would make him appear secretive and undemocratic, which would also be harmful to his image and that of his government.
Better government communications would be helpful to the Minnis administration, but it cannot compensate for a leader of government who himself finds it difficult to explain and convey what it is his government is seeking to do and its wider vision to move the nation ahead.
The Minnis administration today lacks cohesion and focus.
The country is already in an anti-FNM mood, 13 months after handing the party a convincing victory at the polls.
There is not a sense that Bahamians are in the mood for the PLP either, as reflected in the results of the last Public Domain survey, which showed the PLP’s support (at 12 percent) even lower than the support for the governing party.
Currently, we are experiencing a lack of energy and vitality over our national prospects.
The government titled its new budget “The People’s Budget”, but that turned out to be a catchy marketing phrase with little substance to support it.
Only seven percent of those surveyed by Public Domain last month agreed with the government’s characterization of its new budget as “The People’s Budget”.
While the government hoped the higher tax would foster hope for fiscal and economic stability, it has fueled widespread fears and deep anxieties from people whose buying power was already limited, and who found it difficult to meet their monthly obligations.
In May, the Central Bank of The Bahamas released the results of its Financial Literacy Survey 2018.
When respondents were asked to reflect on the last 12 months and indicate whether their income was generally sufficient to make ends meet each month, 47 percent stated that their earnings were usually insufficient to cover their living expenses.
An analysis by gender showed that this was the case for 41 percent of men and 52 percent of women.
Viewed from the perspective of age, about half of all people ages 16 to 54, and 39 percent of those 55 and over gave this response.
With the VAT increase, they will have a more difficult time surving.
The coming weeks and months will give us all a clearer indication of the impact the new measure is having on people.
If the cost of living becomes overly burdensome, more would likely turn against the government they once supported.
If people do not see clearly what their leaders are doing with the extra $400 million they expect to rake in every year, anger would likely build.
Economic and fiscal gains made over time might not be enough to reverse the fallout that has resulted from decisions to date.
While the government should not make decisions based on popularity, expediency and political gain, governing parties would be foolish to ignore the importance of bringing people onboard with the actions they are taking.
No political party exists to be in opposition, and governing in an environment where the trust has been significantly eroded is in no one’s interest.