The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government’s failure to deliver on any of its Fiscal Responsibility targets has prompted the Chamber of Commerce’s chairman to warn: “Don’t promise what you can’t deliver.”

Gowon Bowe told Tribune Business that a sense of “disillusionment” was likely to grip the private sector, after the Christie administration failed to meet its own summer 2015 target for publishing a policy paper on fiscal responsibility-type legislation for the Bahamas.

This has also meant the administration failing to submit recommendations on the issue to Cabinet by year-end, and Mr Bowe suggested the situation would spark business community concerns over whether the Government was ever intending to discuss fiscal transparency to begin with.

The Chamber chairman said the issue highlighted a common dilemma for Bahamian governments and politicians, namely “the difference between lip service-type promises and things that can actually be executed”.

“One of the biggest challenges we have as country,” Mr Bowe told Tribune Business, “is that we are certainly capable of promising the sky, but we have significant deficiencies in execution.

“If you’re not going to be delivering, you shouldn’t be promising. With Fiscal Responsibility, the the Government must have listened to the VAT debate and, subsequently, to the private sector discussion about it, where we said we respected the need for tax reform, but fiscal reform was the wider issue and we’d like to see the Government take a step in the right direction.”

Value-Added Tax’s (VAT) implementation prompted private sector calls for greater fiscal transparency and accountability, and for the Government to disclose how its net $300-$350 million annual revenue increase is being spent.

This was seen as the Government’s side of the ‘fiscal bargain’ that needed to be implemented in return for the private sector agreeing to VAT.

Responding directly to this pressure, the Prime Minister announced the Government’s fiscal responsibility ‘policy paper’ proposal some 10 months ago.

He said during February’s mid-year Budget: “In light of the gravity of this matter from a public policy perspective, and in order to enlighten the debate in a Bahamian context, the Government will commission the preparation of a policy paper on the issue of fiscal responsibility legislation.

“This will allow informed discussion on whether this type of legislation is appropriate for the Bahamas at its current stage of development and, if it is deemed to be appropriate, which of the many models of fiscal responsibility legislation would be the most appropriate for our country.

“It is hoped that this paper can be completed and published by the summer of this year, with any final recommendation on whether legislation is appropriate in the Bahamian context to be presented to Cabinet by the end of this calendar year.”

None of these steps or targets have been achieved, and many in the private sector will likely interpret this as evidence that the Government was never serious about improving fiscal responsibility and transparency.

They are also likely to view the Prime Minister’s February statement as an effort to merely ‘dampen down’ the increasing concerns over how the Government planned to use its VAT revenues.

Mr Bowe told Tribune Business that there is “not going to be tolerance and forgiveness for promises given that remain unfulfilled”.

He added that the private sector response to the Government’s missed Fiscal Responsibility targets was likely to be “disillusionment”, rather than disappointment.

“It becomes disillusionment,” the Chamber chairman said. “I think this one will be more the case of: Did people believe it was ever going to happen?

“By not taking place, was there ever the intention it was going to happen? I don’t think people are disappointed; it’s more a case of being disillusioned. People start to lose faith in your ability to execute when there are high expectations that fail to materialise.”

Mr Bowe confirmed the Chamber was unaware of the Government taking any steps to translate Mr Christie’s Fiscal Responsibility pledge into action since February’s mid-year Budget statement.

“If the leader of the country makes that type of promise, he has to hold those beneath him who are responsible for execution to account for failing to do so,” he added.

“We would have expected his junior minister [Michael Halkitis] or the Ministry of Finance team to have done a lot more to move the policy process forward.”

The Government has received mixed advice on the subject from its own consultants, including over whether it should adopt so-called ‘fiscal rules’ or settle for Fiscal Responsibilities legislation.

Fiscal rules’ commonly set numerical targets and restraints on government spending, “so as to ensure fiscal responsibility and debt sustainability”. Such rules often seek to limit the government’s debt to a certain percentage of GDP, or involve ‘balanced budget’ requirements that prevent or restrain deficit spending.

The IMF’s Caribbean Regional Technical Assistance Centre (CARTAC) has argued that the Bahamas cannot implement ‘fiscal rules’ now because the Government’s financial management systems are simply unable to cope.

And the Government also previously rejected advice from its own US consultants, Compass Lexecon, that it should adopt a ‘fiscal rule’ to boost credibility with the international rating agencies and capital markets.

The Chamber’s Coalition for Responsible Taxation, though, had been seeking a Fiscal Responsibilities Act, rather than the ‘hard and fast’ fiscal rule that CARTAC and Compass Lexecon focused on.

Such legislation would bolster Government transparency and accountability for how the public finances are managed, requiring it to return to Parliament and obtain approval for any extra spending over what was approved in the Budget.