The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government is using alleged commitments left behind by the former Ingraham administration as “cover for its reckless, crazy” spending since the May 2012 general election, an ex-FNM finance minister has charged.

Zhivargo Laing, who was the former administration’s minister of state for finance, said it would have been “impossible” for Ministry of Finance officials not to brief the incoming Christie team on all the Government’s existing spending commitments during the three weeks between the general election and 2012-2013 Budget unveiling.

Suggesting that the Government must have been “asleep at the wheel” if it now needed to borrow more money to cover those commitments, Mr Laing told Tribune Business that the Christie administration had already benefited “to the tune of $100 million” from revenue enhancing measures taken by its predecessor.

This, he explained, stemmed from Excise Tax revenues coming in some $130 million above 2011-2012 Budget forecasts, an achievement that had prompted the Christie administration to predict it would collect some $358 million from this source during the current financial year.

And, in a further swipe at the Government’s fiscal planning, Mr Laing said that when himself and former Prime Minister, Hubert Ingraham, held office the Bahamian people got “two ministers for the price of four” - a reference to the fact that four Cabinet ministers are now covering their former areas of responsibility.

And he also slammed the Ministry for Grand Bahamas as “a waste of money”, calling it “the Ministry of Interference, the Ministry of Meetings”.

Responding to comments made in the House of Assembly last week by Michael Halkitis, current minister of state for finance, his predecessor accused both he and Prime Ministerr Perry Christie (also the minister of finance) of failing to address “the issue at hand”.

Mr Halkitis had described additional government borrowings during the Mid-Year Budget as ‘nothing unusual’, noting this had occurred frequently in the recent past to meet unexpected bills and spending commitments incurred by previous administrations.

However, Mr Laing countered that the Ingraham administration only undertook supplementary borrowings to meet “exigencies” or unplanned events/costs, indicating it knew at all times what the Government’s pre-existing spending commitments were.

“They have suggested they have overlooked as much as $200 million in expenditure,” Mr Laing told Tribune Business. “An admission like that is mind boggling, to the extent anyone hearing that has to find the entire Budget suspect. You can’t make that admission and expect the world to trust every single Budget you present.”

If true, he said this showed “significant incompetence in the preparation of the Budget”. But, if this was not the case, Mr Laing said it indicated the Government was using the former administration and alleged ‘unknown spending commitments’ “as cover for what I suspect is the real story.

“Which is they have been reckless in their expenditure, and that the planned $550 million deficit has been breached and it is in excess of that. This is for a country whose credit rating has been downgraded, and is in enormous problems. They are using that as an excuse; the bills we left behind.”

Whichever explanation for the anticipated borrowing increase was true, Mr Laing added of the Government: “This is a no-win situation for them. Either way, they look awful. The Bahamas looks like a Banana Republic, and neither situation is palatable for the Bahamas to be in given the very tenuous economic situation it’s in.

“I think it’s time for Mr Halkitis and the Prime Minister to own up to the fact they went crazy in the six months following the election...... I was in the Ministry of Finance. I participated in the preparation of five Budgets. I can tell you that Ministry of Finance officials are not going to mislead the political directorate up to the tune of $200 million of expenditure. That does not happen in the Ministry of Finance, at least the one we left in place.

“If you’re asleep at the wheel, not paying attention to what should go in the Budget, that can happen.”

It remains to be seen whether the Mid-Year Budget figures will provide a more detailed explanation for any further 2012-2013 increase in government borrowing. Mr Halkitis has not denied that further debt financing will be raised; it only remains to be seen how much.

The heated political exchanges over the Government’s finances were sparked by comments from James Smith, a former minister of state for finance and now key Ministry of Finance consultant, who suggested the Christie administration may need to borrow another $100-$150 million to make ends meet. This, if correct, would take the 2012-2013 deficit into the $650 million to $700 million range - an unheard of amount.

But Mr Smith’s comments largely appeared to be based on the Critical Care Block expansion at the Princess Margaret Hospital (PMH), a project that has already been financed by a $55 million Royal Bank of Canada (RBC) loan rather than taxpayer monies.

The former Ingraham government was also set to finance the new facility’s technology, equipment and medicines via the NIB medical branch, rather than the Treasury’s Consolidated Fund.

Suggesting that the Government was “making all kinds of excuses”, Mr Laing called on it to provide an itemised list of bills/spending commitments it was unaware of, their value and when they were incurred. He suggested it was strange that it had chosen not to do so to-date, as this would “have ended the whole debate”, although Mr Halkitis has promised to do this.

The former FNM minister of state for finance instead suggested that the real reason for further borrowings was to cover the enormous costs created by additional public sector hirings since May 2012, plus contracts handed out to relatives, friends and PLP supporters.

Mr Laing said the re-hiring of police and Customs officers let go by the former Ingraham administration, for example, created an immediate salary and benefits (pensions, insurance) burden on the public purse that had to be financed from cash reserves.

He also criticised decisions such as holding a full Cabinet meeting in Abaco, and ministers “flying up and down the world” with large entourages, as wasteful and imposing a drain on Bahamian taxpayers.

And Mr Laing added that he and Mr Ingraham were able to the jobs of four PLP Cabinet ministers - Mr Christie, Mr Halkitis, Khaalis Rolle, minister of state for investments, and Ryan Pinder, minister of financial services. He implied that this saved taxpayers money, although the real issue is whether Messrs Rolle and Pinder will generate ‘added value’ for the Bahamas if they successfully perform their roles.

And, hitting at the Ministry of Grand Bahama, an entity that has cost taxpayers $5 million to form, Mr Laing told Tribune Business: “People are now coming up to me and saying: ‘This is the Ministry of Interference, the Ministry of Meetings’. It is a waste of money.”

Regardless, both FNM and PLP governments are responsible for where the public finances are today. Mr Laing told Tribune Business it was no surprise that government revenues vastly underperformed forecasts at the recession’s height, adding: “Revenue forecasting is no science; at best, it’s an educated guess.

“If you look at the entire history of Bahamian Budgets, very seldom do you make revenue forecasts. Sometimes they’re above, most times they’re below. You monitor that and try to check it against the one thing you can control, expenditure. That is one thing this administration is not doing.”

He added that the then-government’s revenue enhancement measures generated $130 million in new monies, as shown by Excise Tax revenues hitting $340 million in the 2011-2012 Budget - some $130 million higher than the $210 million forecast. This had led the Christie administration to forecast a further rise to $358 million in Excise Tax revenues this current Budget year.

Turning to the Government’s accusations that the former Ingraham administration “maxed out” all short-term credit facilities, Mr Laing responded that “in the worst of times” this was what the private sector did - use all available financing options if income was impaired.

And he retorted that during what the Christie administration refers to as “the best of times”, its period in office between 2002-2007, it also had used up the Government’s short-term credit facilities.