Would UK bail us out of debt? No!

WEDNESDAY, AUGUST 8: The UK Government would not be responsible for the island’s debts if Bermuda went belly-up, Governor George Fergusson has said.

He told us: “Her Majesty’s Government does not reckon that there is a legal liability for Bermuda’s debts — though there would be a reputational concern at the least, given Bermuda’s status as an Overseas Territory.”

Mr Fergusson spoke out after The Royal Gazette reported that OBA shadow Finance Minister Bob Richards had warned that Bermuda should watch what was happening in the Cayman Islands, where the government was introducing a payroll tax on expatriate workers for the first time.

Employees from overseas earning more than KY$20,000 ($24,691) will have to pay ten per cent of their salary in tax. Employers will not have to contribute to the payroll tax bill.

Caymanian employers will also no longer be required by government to pay five per cent towards expatriate workers’ pensions.

Caymans Premier McKeeva Bush, according to the Caymanian Compass newspaper, blamed the move on British insistence that the island act to cut its debts and achieve a more sustainable budget.

Mr Fergusson said that the constitutions of the Overseas Territories varied, and Cayman, among others, required UK approval for their annual budgets, while some, like Bermuda and Gibraltar, do not.

And he added that, under the current constitutional arrangements, the UK could not step in if Bermuda’s debt reached crisis levels.

Mr Fergusson said: “If it thought there was a real problem there is scope to offer advice, which might become firmer if circumstances required.”

Mr Richards was not available for comment, but OBA shadow Attorney General Trevor Moniz said: “In strict legal terms, there is no UK  liability for Bermuda’s debts or approval or disapproval of Budgets.

“There is, at the end of the day and in extremis, by Orders in Council, the power for the UK to do anything in Bermuda they want, as they did in Turks and Caicos.”

Intervention

The UK government imposed direct rule in the Caribbean islands in 2009 by an Order in Council after a string of corruption scandals, with the Governor exercising the powers of the suspended House of Assembly.

Mr Moniz added: “There is no recent history of Britain intervening with a heavy hand, other than where it was called for, like Turks and Caicos.

“But we never thought we would be in the circumstances we are today, with a massive debt and with very little to show for it as opposed to having huge credits in the bank.”