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Fiscal Responsibility: 'More Teeth' Needed

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Fiscal Responsibility Bill needs "more teeth" against governments that consistently breach its targets, an anti-corruption watchdog argued yesterday.

Lemarque Campbell, of Citizens for a Better Bahamas, the local Transparency International representative, told Tribune Business that it was examining whether greater enforcement powers and tougher sanctions should be incorporated into the legislation.

He suggested that the five-member Fiscal Responsibility Council, which currently has just an oversight and advisory role, could play a greater role in enforcing the Government's compliance with the Bill's targets - as opposed to the "inadequately resourced" Public Accounts Committee (PAC).

Praising the Bill as a "proactive step forward" in releasing information to the Bahamian people, Mr Campbell said The Bahamas could not afford for the legislation to suffer the same fate as the Public Disclosures Act and other anti-corruption laws.

He warned that Fiscal Responsibility's effectiveness depended on the Bill's full implementation, otherwise it would become yet another law "placed on the shelf and gathering dust, with nothing becoming of it".

And Mr Campbell stressed that, once passed into law, "the onus is on us, the people" to use the Fiscal Responsibility Act as a tool to hold current and future administrations accountable.

He said the Bill and its objectives will fail without such public participation, adding that its "most significant principal" was the realisation that future Bahamian generations will be burdened by fiscal mismanagement that occurs today.

While all civil society groups are still reviewing the Bill, Mr Campbell told Tribune Business: "One aspect we'll be looking at is to see where there can be more teeth in the Bill."

The present draft merely requires the Minister of Finance to appear before Parliament's Public Accounts Committee and "explain the cause" of any breach of fiscal targets, responsibility objectives and adjustment plans.

If the Committee is dissatisfied with the Minister's explanation, and proposed corrective action, it can only "recommend that Parliament consider a resolution" requiring either that "action" be taken to improve the situation or additional progress reports.

The Committee can recommend to the Minister of Finance that "a financial or other penalty" be levied against public officials who breach the Fiscal Responsibility Act, but given the fiscal profligacy of successive administrations, many are likely to agree that the enforcement powers need to be 'beefed up".

Mr Campbell yesterday suggested the Fiscal Responsibility Council, featuring persons nominated by the Bahamas Bar Association; Bahamas Institute of Chartered Accountants (BICA); Chamber of Commerce; Financial Analysts' Society; and University of the Bahamas, be given an enhanced enforcement role.

The Bill currently limits the Council to an advisory/oversight role, and Mr Campbell said: "We're still looking at different avenues when it comes to enforcement recommendations, and we want to see if this independent body [the Council] can have more teeth, and initiate some proceedings against governments that do not comply.

"Instead of having Government rely on themselves to police their compliance, maybe the Fiscal Responsibility Council can have more say in that." He added that "inadequate resources" meant the Public Accounts Committee was struggling to fill its existing mandate when it came to scrutinising the Government's finances, raising doubts over whether it can fulfill its extra responsibilities.

And, while describing the Bill as "a good step in building trust between the Government and citizens", Mr Campbell warned: "That's only if the Act is enforced and implemented to the full extent.

"Some aspects of anti-corruption laws, like the Public Disclosures Act, are not enforced or implemented to the full extent. This [Bill], as a means to promote accountability and transparency, can only work if implemented and enforced to the fullest extent.

"It's one thing to write laws, but they can be placed on the shelf and gather dust, and nothing becomes of them. If we can get this enforced, that will definitely be to our advantage. Everyone will win."

Mr Campbell agreed with the International Monetary Fund's (IMF) assessment that the Fiscal Responsibility Bill will not solve the Bahamas' fiscal woes by itself.

The Fund, in its recent Article IV report, warned that the Bill needed to be accompanied by improved public financial management practices - something the Government is aiming to enhance through an Inter-American Development Bank-funded initiative - and cross-party political will that continues when administrations change.

"Rules-based frameworks put a premium on the availability of timely, exhaustive and accurate fiscal information to efficiently guide policies," the IMF said. "In addition, strong expenditure controls and credible budgets are essential, as policy makers need to have a tight handle over fiscal outcomes to ensure compliance with the rule.

"Frequent and large ex-post revisions of budget plans and outcomes could put the credibility of the fiscal rule framework in jeopardy. Finally, a strong technical forecasting capacity is also required to credibly inform policy planning."

It added: "The proposed rules would fill an important gap in the Bahamas' policy framework. The lack of an effective fiscal anchor and framework has, in part, allowed rapid increases in spending and in public debt. The proposed framework, if implemented effectively, should help anchor fiscal policy. However, political will remains a critical ingredient in ensuring sustainable public finances."

Mr Campbell yesterday said the active involvement of Bahamians was another such 'critical ingredient'. He explained: "It's one thing for them to be transparent, but the onus is on us, the public, to be responsible citizens and hold them accountable.

"This Bill is just the tool. It's up to us now to hold them accountable going forward." With a near-$8 billion debt that is still growing, and annual deficits that exceed $300 million, the Government's accumulated 'red ink' threatens to burden future generations of Bahamians for decades to come.

Mr Campbell said he drew great encouragement from the Bill's recognition of this, adding: "The most significant principal that stands out to me in the Bill is that the Government's management of fiscal policy should take into account the impact on the welfare of not only the current population, but also future generations.

"The Government should not be given carte blanche control over public funds, without any accountability, as this affects both present and future tax payers. We all suffer as public debt increases coupled with higher borrowing costs.

"On this basis, the pre-election provision in the Bill is key, as it's a detrimental effect on our economy for the government to use public funds to issue padded contracts to party supporters or increase the civil service for votes - these are all forms of bribery. This is evident in our recent corruption barometer survey, where 41 per cent of Bahamians felt that voters are always bribed during elections."

Mr Campbell told Tribune Business that as-yet unborn Bahamians will be "footing the bill" if the Government's present profligacy continued for another 10-15 years, turning this nation into another Greece or Puerto Rico.

"It we can mitigate or contain this now with greater transparency and accountability through this Fiscal Responsibility Bill, we can see some positive impacts and future generations will not have to bear the brunt," he told Tribune Business.

"What's important is that every spending initiative they [the Government] propose has to be qualified so that it fits with the purpose, the spirit of the Bill... This is important because we cannot have the Government operating under a veil of secrecy, as it has been in the past.

"Once we have more transparency, that leads into accountability. These words have been used, but we are seeing some action towards that with this Bill so that it's not just political rhetoric. Governments can't have a free rein on spending. Governments can be irresponsible in the way they spend the people's money."

Acknowledging the Government's "aggressive timeline" as it bids to implement the Fiscal Responsibility Bill this fiscal year, Mr Campbell added: "For too long Bahamians have questioned how and where tax dollars have been spent by the Government, prompting for calls for more transparency and accountability.

"This Bill essentially provides some comfort in knowing that the Government would have to develop and report on a fiscal strategy, based on prudent objectives and principles."

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