By KHRISNA RUSSELL
Tribune Chief Reporter
PRIME Minister Philip “Brave” Davis said yesterday there will be no increase in National Insurance Board contributions until his administration is able to arrest the hardships facing Bahamians.
Mr Davis said despite it being a “watershed moment” for NIB, he knows many people are facing difficult times, adding it would be a last resort to place any more financial burden on their backs at this time.
Meanwhile, former Labour and NIB Minister Shane Gibson said yesterday that rescuing the NIB fund would come down to increasing contributions over a period of time in increments.
He said the fund had never been adequately contributed to since inception due to political opponents that viewed NIB as just another tax on Bahamians.
There has been much public discourse regarding the state of the fund this week after State Minister with responsibility for NIB Myles Laroda told The Tribune that the latest actuarial review predicted its depletion by 2028 unless urgent action was taken.
Following this he told reporters on Tuesday that contributions would likely increase within a year to sustain the fund, however he added that the increase had not yet been approved by Cabinet.
With Mr Davis’ outright rejection of this assertion it is not clear what the government intends to do concerning NIB. At the same time, he defended Mr Laroda as simply stating the facts of the 11th actuarial review.
“Let me say, I know what the Bahamian people are experiencing,” Mr Davis said in a video released yesterday by his Press Secretary Clint Watson. “These are difficult times and it would be a last resort for me to put any more burden on their backs.
“The actuaries over the last 10, 15 years have been predicting that the fund is jeopardised because of us not having raised the contributions to NIB.
“Recommendations were being made from 2003, 2004 to raise the contributions. Yes, we are at that watershed moment but I am not going to at this time put any further burden on the Bahamian people.
“We’ll see how we could be innovative and creative to ensure that we do not do or embrace such an initiative until we have brought the relief that is necessary to allow that to happen.”
He continued: “The minister of state in my office was just speaking the facts as what was said in the actuary report. They are recommending and they are urging that we do so and as was his duty he is bringing that report to Cabinet for us to look at and discuss.
“We will consider it but as insofar as what my views are on it, it’s not going to happen, not now, not until we have brought the relief to the Bahamian people and we have put to bed some of the issues that can’t make them sleep when they go to bed.”
When he was contacted yesterday, Mr Gibson said he was not surprised by the latest warning about the fund’s viability.
He said: “We knew from day one that the plan was being underfunded. When they first decided to start National Insurance and when the actuary told them what contributions individuals and employers needed to make to sustain the plan at that time they thought it was too high.
“As you know the Free National Movement at that time viewed it as another form of taxation and they opposed it and so because of all the opposition and them wanting the plan to be accepted, they decided to start at the rate they started at.
“Every single actuarial review if you look at them you’ll see a warning that unless the plan was properly funded that it would run out of money by a certain time. So, this comes as no surprise.”
Mr Gibson said various governments did not want to lose political favour, which was why contributions had not increased until 2010. However he said there must be an increase to sustain it.
“Every time you talk about increasing anything in The Bahamas where it will cause individuals to pay more, it’s a concern for the government,” Mr Gibson said.
“So, obviously you can’t have it in one bite, but you can have it in multiple bites where for instance you decide over the next 20 years it’ll go up one or two percent. I’m not sure but whatever it is you do it gradually over a period of time rather than trying to do it all at once.”
He also said: “If you look at it National Insurance has been the single greatest achievement of any government of The Bahamas. “
Asked about claims from some that NIB had been used as a slush fund over the years, Mr Gibson said: “No. If you look at it, NIB right now is worth $2bn. Where could you find to invest National Insurance funds in the country that would give a decent rate of return?
“National Insurance has so much money they have to put it in non-interest bearing accounts in the Central Bank just to have somewhere to lodge it and so if you look at the returns they’ve gotten over the years from government projects there has been a decent rate of return. In some cases returns as much as eight or nine percent. So any financial advisor who says National Insurance was used as a slush fund, I think you need to check their credibility.
“Now you’ll find the average Bahamian that doesn’t understand the amount of money National Insurance takes in and what they do with it they would probably make those statements.
“That is why years ago the government approved allowing NIB to invest overseas and you know if you do that there is a surplus of 25 percent that you have to pay to Central Bank they waived that because National Insurance had so much money that they didn’t have anywhere to invest it and so government’s investment has been very good for National Insurance over the years,” Mr Gibson said.