In the very near future, Spending must match Revenue. This will happen either by design - through sound planning and careful long-term management; or by default – in an economic implosion as Revenue stalls and Government gets hit with the same problem that slammed into Barbados. Today, at the Press Conference, the Minister is on record as saying that he does NOT anticipate a balanced Budget by 2018.

(B) Without further borrowing or use of already borrowed funds, and as long as GDP sits under $5,900 million [$5.9bn] with Government’s total tax uptake staying at a high 17% of GDP, Net Spending will fall to a low $850 million.

(C) For Government’s total revenue to rise, GDP must rise. As long as GDP sits under $5.9bn, at a high 17% tax uptake, Government’s total Revenue will stay under $1,000 million [$1.0bn] and Net Spending will float down to under $850 million. Chart Two shows that planned NET spending in 2014/15 is lower than in 2007/08. Chart Two also shows that the Minister projects that NET spending will go even lower, and that by 2016/17, NET spending could be lower than in 2005/06.   

(D) GDP can only rise if on-Island consumer demand rises. On-Island consumer demand can only rise if ResPop rises. ResPop can only rise if more people – Bermudians and/or non-Bermudians - come to live in and work from Bermuda. The Minister has restated and re-emphasised this.

(E) Even a rapid 25% uptick in Tourism revenues [from the $392 million of 2012 to $500 million by 2015] will be insufficient to offset the negative effect of these and near future NET reductions in Government spending [NET spending falling from $1,080 in 2013/14 to $904 million by 2016/17].

(F) The universal arithmetic of Debt has forced Government into trying to run year 2014 Bermuda with year 2006 dollars.

(G) No matter who wins a next election, the universal arithmetic of Debt forces the same quality and style of control of spending. The alternative is an economic implosion as in Barbados… Jamaica… Greece… etc…

The Fix? Grow ResPop. It is Bermuda’s only way up and out of its freshly re-identified and re-described economic hole.

Charts explained. Chart ONE - Figures from Financial Year 2000/01 to 2011/12 are the audited figures. From 2012/13 to 2016/17, the figures are as reported in this 2014/15 Budget Statement. These numbers will be explained later.

Chart TWO - Net annual spending from 2000/01 to 2011/12 is verified by the audited accounts. From 2012/13 to 2016/17, as reported in this Budget Statement.

Government Revenue – Total revenue received by Government in that Financial Year [FY]. All the figures from 2000/01 to 2011/12 are from audited figures. From 2012/13 to 2016/17, from this Budget Statement.

Government Spending– Total spent by Government. Includes all Capital, Current, and Debt Servicing. 2000/01 to 2011/12 are audited figures. 2012/13 to 2016/17 are Budget Statement figures, or based on the Budget Statement, calculations for 2015/16 and 2016/17.

National Debt as Reported – The maximum Debt [Senior Notes and Overdrafts] reported in audited accounts and in this Budget Statement for that FY.  No increase by 2016/17. Paying off $120 million in June [$75m] and December [$45m] of this year.

Total National Debt Service Costs [The Elephant] – TDSC includes all Interest payments and Sinking Fund contributions. KEMHPPP payments as agreed in 2010 in NOT shown or accounted for in this Budget Statement.

Net Government Spending – What Government actually spends IN BERMUDA on Personnel, Operations, and Services.  It is what’s left after meeting TDSC. It is separated and shown, all by itself, in Chart TWO. Net Government Spending shows a rising trend up to 2008/09; then a declining trend from 2009/10. The chart shows that in 2014/15, Government will be spending LESS money [$1,007.8 million] on Personnel and Operations and Services than it spent seven years ago in 2007/08 when $1,041 million was actually spent.

Debt Service as percentage of Revenue– Shows the percentage of every Revenue dollar that must be used to pay TDSC. Thus 2.0% [as in FY 2001/02] means that $2.00 out of every $100.00 was used to pay TDSC, leaving $98.00 to be re-spent as NET Spending. Note that in 2013/14 this has risen to 14%. Note also that is is heading higher and may reach 18% by 2016/17.

Reported and Projected GDP – GDP is Gross Domestic Product.  GDP figures for 2000 to 2012 are as already reported and accepted. The 2013 figure is the Minister for Finance’s estimate. For 2014 - 2016, the Minister’s projection.

Year-on-year change in GDP – Shows year-on-year increase or decrease. From 2000 to 2008, GDP was rising. From 2009 to 2013, GDP was declining. The Minister anticipates only 6% growth by 2016 with a hoped-for 3% growth in each of 2015 and 2016.

Overspend (Deficit/Surplus) – The difference between spending and revenue. If the sum TotRev – TotSpe is negative, then Spending has exceeded Revenue and the result is a Deficit. If the sum TotRev – TotSpe is positive, then Spending has been less than Revenue and the result is a Surplus. The chart shows Surpluses from 2000/01 to 2002/03; then a series of Deficits which are expected to continue into 2016/17.