By NEIL HARTNELL
Tribune Business Editor
The deputy prime minister yesterday admitted there is a "trust deficit" between the government and Bahamian people that he hopes to close with the Fiscal Responsibility Bill's passage.
KP Turnquest told Tribune Business that poor fiscal management, broken promises and a lack of transparency and accountability by previous governments had created a divide that the proposed legislation will help bridge when it becomes law "as soon as possible".
He revealed that consultation on the draft bill will close this week, amid hopes it can be brought to cabinet next week and then tabled in Parliament "at the earliest opportunity".
Confirming that several changes had already been made, Mr Turnquest said he was targeting the bill's passage through Parliament and into law prior to its summer recess or break, given that it would boost business and taxpayer confidence that the government intends to deliver on its fiscal consolidation strategy.
He described the bill's enhanced fiscal governance and reporting mechanisms, together with deficit, spending and debt targets it must meet by law, as "a critical control feature" to ensure that the current and future governments do not repeat the wasteful expenditure and borrowing habits of the past.
"We're about to close off the consultation on that this week," the deputy prime minister told Tribune Business of the Fiscal Responsibility Bill. "Next week, hopefully, I will bring it to cabinet, and then it will be laid in the House at the next earliest opportunity. After that, I'm hoping [it will pass] next month, hopefully before Parliament breaks. If not, as soon as we return."
The timetable laid out by Mr Turnquest will likely reassure fiscal governance reformers, as well as a private sector and taxpayers taken by surprise by the 60 per cent VAT rate hike, that the Fiscal Responsibility Bill remains a legislative priority for a Government that recognises it needs to deliver on its consolidation targets and promises.
Mr Turnquest yesterday described the Bill as a "vital" check on fiscal irresponsibility by future governments, adding that the Minnis administration was "very cognisant" that the legislation's passage into law would provide greater comfort for businesses and consumers now being called upon to make an even greater sacrifice through higher taxes.
"It's critical. It forms a part of the overall control features in the Budget, and it builds in the confidence for the public that we're going to do what we say we're going to do with respect to the strategies outlined in the Budget," he told Tribune Business.
"It's a critical component of the overall path, and we want to get it done as soon as possible..... We recognise there is a trust deficit that has built up over the years between the public and governments.
"We recognise that we have to build in this kind of information and control legacy that helps to rebuild that trust. We're committed to being open with the results, and communicate with the public on a regular basis, so they help to keep us compliant, spot trends, and ensure we take corrective action on a timely basis."
Mr Turnquest did not identify any specific actions that contributed to the "trust deficit", although he likely had in mind the former Christie administration's failure to use its VAT revenue windfall for the stated objectives - eliminating the fiscal deficit and paying down the near-$8 billion national debt.
Instead, the former government added some $2.2 billion to the national debt over a five-year period despite receiving some $1.1 billion in gross VAT revenues during the tax's first two calendar years, much to the unhappiness of the private sector which had bought into the previously-announced goals.
Both Robert Myers, the Organisation for Responsible Governance's (ORG) principal, and Carey Leonard, the former Grand Bahama Port Authority (GBPA) in-house attorney, last week urged the Government to prioritise the Fiscal Responsibility Bill's passage to give Bahamians confidence their VAT sacrifice is not in vain.
Mr Myers, in particular, said the Bill will introduce checks to prevent misuse of the targeted $400m VAT revenue windfall. He called for it to be "passed in months", something the Deputy Prime Minister yesterday confirmed it intends to do, given the need for increased accountability and transparency to match the government's ever-expanding tax take.
"It's absolutely critical. This Fiscal Responsibility Bill, that has to happen," Mr Myers told this newspaper last week. "They [the government] need to be on that like white on rice. That has to happen in months; they need to get that passed in months."
Mr Leonard added: "The government really needs to get its Fiscal Responsibility Bill through sooner rather than later. That needs to be passed along with the Budget.
"What worried some people is that when VAT was increased more, they thought there would already be Fiscal Responsibility, and there isn't. It would give more people, especially in the business community, more confidence by passing the Fiscal Responsibility Bill."
The Deputy Prime Minister, meanwhile, yesterday disclosed that the Government had already made "some amendments in response" to feedback already provided on the draft Fiscal Responsibility Bill.
"We are making several adjustments in respect of the feedback we've gotten, although I couldn't say what they are right off," Mr Turnquest said.
Civil society groups, such as ORG and Citizens for a Better Bahamas, have called for the Fiscal Responsibility Bill to be given "more teeth" in terms of sanctions and penalties that can be levied against governments, ministers and senior officials for repeatedly breaching its targets and mandates.
ORG, in particular, warned that the legislation could be "ineffective" without tougher sanctions due to "The Bahamas' poor history of non-compliance with similar laws". It described its main concern as the "lack of codified penalties [and] sanctions" for governments that breached its targets, or "incentives" that encouraged compliance.
It also called for the independent, five-member Fiscal Responsibility Council that currently has just an oversight and advisory role to have more power to "proactively contribute to fiscal strategy and decisions, and enforce its advice, recommendations and decisions".
"Throughout the Bill there is a noticeable lack of reference to penalties or incentives to encourage compliance and rectify behaviour in the implementation of fiscal responsibility and discipline processes," ORG said. "Where there is mention of penalty, said penalties are not defined or codified and are left to Ministerial discretion, allowing room for uneven or unfair application, or the perception thereof....
"Given the Bahamas' poor history of compliance with similar reporting laws, such as Public Disclosure, there is concern that without methods of enforcement there is a risk that the Fiscal Responsibility Bill could ultimately be ineffective despite its thorough reporting mandates and methodically outlined goals."
The Fiscal Responsibility Bill's key targets require the Government to slash the fiscal deficit to 0.5 per cent from 2020-2021 onwards, cutting it from a sum equivalent to 5.8 per cent of GDP in the 2016-2017 Budget year. This means reducing it from near $700 million to around $54 million over a four-year period.
The Bill's 'first schedule' sets out a 'glide path' or 'road map' for achieving this, acknowledging - as the IMF stated - that "significant fiscal adjustments" are needed over the next two Budget years to hit this objective.
To enable the public sector and wider Bahamian economy "to achieve the fiscal objective in an orderly manner", and avoid unnecessary shocks, the Bill calls for 2018-2019 and 2019-2020 deficits that "shall not exceed" 1.8 per cent and 1 per cent of GDP, respectively. The first target is what the Government is going for this coming fiscal year, aided by the VAT hike.
The Bill also sets out a "long-term" target of reducing the Government's direct debt-to-GDP ratio from the current 58 per cent to "no more than 50 per cent". The year by which this target is to be achieved has to be set out in the Government's 'fiscal strategy report', which must be submitted to Parliament no later than the third week of November each year.