While Minister of Finance and Acting Prime Minister Peter Turnquest insisted yesterday that the government’s Fiscal Responsibility Bill will bring an end to reckless government spending, irresponsible fiscal management and unbridled deficit financing and debt build-up, Exumas and Ragged Island MP Chester Cooper argued that there is nothing in the bill that prevents the government from breaching its fiscal targets and approving new expenditure.
“The law will force our government to achieve the deficit objectives that it set out,” said Turnquest, who led debate on the bill in Parliament.
“Clearly, the stringent fiscal requirements of this legislation are groundbreaking in the affairs of our nation, but are necessary to ensure that no government, including our own, ever repeats the disastrous fiscal experience of the previous administration.
“And it will prevent any future government from undoing what we will have achieved during our term in office.”
However, Cooper, who supported the bill, questioned what in the legislation actually prevents the government from doing whatever it wants outside of the approved budget.
He gave the government’s recent acquisition of the Grand Lucayan resort as an example.
“This administration, that talks about fiscal responsibility; that will ultimately spend millions of dollars of taxpayers’ money on a hotel with no appraisal, no engineering report; that will pay more than what the property was appraised at before a massive hurricane; that will craft a sloppy deal that allows the buyer to dispute ownership of cars and golf carts; that will see the previous owners take the inventory and toilet tissue and soap, has no ground to stand on,” Cooper said.
He added that if the government truly wishes to put in a system of rules to guide its behavior it would entrench the changes into the constitution like the Financial Administration and Audit Act.
He questioned whether the bill was “for show” to “earn points” with the Bahamian people.
“The bill talks about doing many things without consequences for not doing so,” Cooper said.
He continued, “Whilst the attempts to create independent public review in the form of the Fiscal Responsibility Council are laudable, proposing that the Fiscal Responsibility Council (FRC) is to only come into force in July 2019, the legislation is effectively delaying any action which would cause the government to reconsider its current ill-considered fiscal policies under the advice of the FRC.”
Once passed, the government intends for the fiscal responsibly legislation to come into force on October 1.
The proposed Fiscal Responsibility Council, however, would come into force on July 1, 2019, “in time for the council to review and assess the 2019/2020 budget”, according to Turnquest.
According to the minister, while successive governments have talked about the need to curtail and eventually eliminate the deficit and reduce the debt burden, these goals have failed to materialize, and as a result the fiscal position of the nation has declined to unsustainable levels.
He said, “The fiscal plan laid out in the 2018/2019 budget communication contains the concrete measures needed to secure the elimination of the fiscal deficit by 2020/21 and to put the debt burden on a clear downward track to more sustainable levels.”
The Fiscal Responsibility Bill, which was circulated for public feedback in May, has outlined targets for government deficits over the next three years to try to achieve a significant reduction in debt and deficits.
The government wants that deficit number be no higher than 0.5 percent of GDP by the end of 2020/2021 fiscal year.
The legislation would cap the deficit for this fiscal year at a maximum of 1.8 percent.
The target deficit for the 2019/2020 fiscal year is no more than one percent of GDP.
The deficit was 5.8 percent of GDP in the 2017/2018 fiscal year.
The government can, however, provide explanation in the form of a fiscal adjustment plan, in the event those targets are not met.
The government does not have to present an adjustment plan if it remains within the compliance margins outlined — 0.5 percent of GDP — in the legislation.
The bill also dictates that a Fiscal Strategy Report be presented annually.
The independent five-member Fiscal Responsibility Council is comprised of members of civil society with specific areas of expertise in law, business, economics, accounting and finance. The council is expected to review the Fiscal Strategy Report before it goes to Parliament.
Additionally, a pre-election economic and fiscal update must be presented no earlier than 30 working days and no later than 20 working days before polling day.
Yesterday, Cooper said the Public Accounts Committee, which he insisted has been rendered toothless and needs institutional support, should have a role in enforcing the legislation.
He also asked why the government has not provided an independent economic analysis to show the legislation would not be detrimental to the economy.
Ultimately, the Exumas and Ragged Island MP said while certain principles of the legislation can be endorsed, “the bill will not address the issues espoused”.
Yesterday, Turnquest said the government has begun drafting the Public Fiscal Management bill and intends to circulate it this fiscal year.
“The Fiscal Responsibility Bill strives to provide a strong, depoliticized institutional framework for fiscal policy, so as to ensure that no future government ever again engages in flagrantly irresponsible fiscal policies that could once more threaten the future prosperity of our nation,” he said.