First District Representative and Former Minister for Education and Culture Hon. Andrew A. Fahie (right) said the 2013 National Budget of $298, 729, 000 announced by Premier and Minister for Finance Dr. The Honourable D. Orlando Smith will need close examination. Premier Smith in turn has accused Hon. Fahie of several mis-statements on the budget speech. Photo: VINO

Former Minister for Education and Culture Hon. Fahie had said the 2013 National Budget of $298, 729, 000 would need close examination because the figures did not seem to add up. Hon. Fahie was also critical of the budget for lacking bold initiatives to stimulate the economy and added also that it was not preparing the people of the Territory for the projected hard economic times ahead.

"I must correct the several misstatements made by the Honourable representative of the first district immediately after I made the annual Budget address last Thursday.  I am glad that he did admit that he needed to check the figures after mentioning that he heard at one time revenue was up and then that there was a deficit.  I certainly hope that he has now found the time to do so, so that he can get it right," Premier Smith stated in a response sent to local media houses today November 19, 2012.

Dr. Smith further stated that he could have only concluded that the representative had prepared his response before listening to his speech as the thrust of his (Hon. Fahie) remarks were about the Protocols for Financial Management "which I believe I mentioned only once in the Address.  Indeed my Address was about this Territory and economic recovery.  The Address was not about the protocols we signed with HMG seven months ago." 

Hon. Fahie had accused Government of continuing to fail to prepare its people for the projected oncoming economic storm ahead as a result of the lack of its ability to stimulate the economy due to certain measures in the Protocol that was signed in the manner it was signed.

“Clearly I am cognizant that we must operate within the confines of what the UK wants in the signed Protocols. Also I fully agree that accountability, transparency, value for money and good governance must be the order of the day and I welcome such but it must be done in a manner that strengthens any government's ability to stimulate its economy. The Budget speech today made it seem as if the financial steps being taken by the NDP government for the upcoming fiscal year are their doings. Contrarily, it is a mandate given to Overseas Territories by the UK, which respectfully will accomplish good in a few areas but have adverse economical effects in other areas,” Hon. Fahie had stated. 

Premier Smith said Hon. Fahie did admit the need for more accountability and transparency, which is indeed what the Protocols for Financial Management, the medium term plan and the revisions to the Public Finance Management act are meant to achieve, so that the public and not just the politicians will have knowledge and be aware of how the country’s money is being spent.

"What was interesting was his insistence that the Protocols for Financial Management were not developed by this government but were handed down by the United Kingdom. Truth be told this government has no issue about the fact that the Framework for Fiscal Responsibility (FFR) was handed down to the past government by the UK!  No issue at all. What we did say was that we negotiated with the UK and agreed changes to that FFR, changes which were significant, and which I have taken pains to discuss with the public. The document which we agreed as a result of those negotiations we call the Protocols for Financial Management," Premier Smith explained.

A further matter addressed by Dr. Smith was the remark by Hon. Fahie's that the airport and cruise port projects are too heavy burdens to be carrying out at this time. "My answer as I have said on more than one occasion is that those projects are essential to the continued recovery and growth of our economy; and especially our tourism economy on which so many of us depend."

On the matter of the funding for the New Hospital whch Hon. Fahie was also critical of, Premier Smith said the reality is that the negotiations for the other funds for the project was negotiated before the then, National Democratic Party (NDP) government left office, but the government that followed took a very long time before they accessed it, using in the meantime monies from the consolidated fund to carry on the project.

"Whether they, the last government returned the money, I am not at this time certain, but the audit which is now being carried out, the results of which will be available shortly will help me to answer that question. The fact that the standing finance committee report, of one year after the NDP government left office, bears evidence that the hospital project was on budget suggests that the price of sixty nine million dollars for which the project was contracted was right," Premier Smith argued. 

On the matter of the tax reduction, Premier Smith said a review is in place to determine its impact on the economy. "The revenue earning measures that have been put in place were as I said in my address carefully selected, to cause minimal strain on the public."

See full story previously posted on criticisms on the 2013 National Budget

2013 Budget figures do not add up-Hon. Fahie

- Says Budget signals more challenges ahead than opportunities; no bold initiatives to stimulate economy

First District Representative and Former Minister for Education and Culture Hon. Andrew A. Fahie said the 2013 National Budget of $298, 729, 000 announced by Premier and Minister for Finance Dr. The Honourable D. Orlando Smith will need close examination because the figures did not seem to add up.

Hon. Fahie was also critical of the budget for lacking bold initiatives to stimulate the economy and added also that it was not preparing the people of the Territory for the projected hard economic times ahead.

Premier Smith delivered the Budget Address during the Fourth Sitting of the Second Session of the Second House of Assembly on November 15, 2012. The Budget anticipates operating revenue in the region of two hundred and ninety eight million, seven hundred and twenty nine thousand dollars ($298,729,000) and a net operating expenditure of two hundred and fifty two million, three hundred and ninety seven thousand, six hundred dollars ($252,397,600). Government’s operating expenditure is estimated to be some $252, 397, 600.

Budget Does not add up!

According to Hon. Fahie the contents of the Budget speech was rather a paradox at times, specifically in regards to the finances of the Territory.

“In short something did not gel with the financial aspect of the Budget speech... The figures at one time seem to suggest that within their first year in office they have eliminated all deficits and raised revenue but then that would mean that the past Administration would have to be credited rather than discredited for the competent handling of the finances of the Territory. Clearly this means that the NDP's ongoing claim of how the VIP left the country broke, by their own words in the budget speech today, is totally divorced from the truth. In addition, there was a lack of clear objectives over the next 3-year period in terms of bold initiatives.”

The First District Representative stated that the many financial figures in the Budget speech will be closely analysed because they seem “questionable”.

“The mixed messages by the Government confuse many. When it suits them the figures suggest that the Government is broke, when it benefits them the government in one year has money. They started austerity measures to save money and decided to cut the public servants increment earned the year before and told them to be positive and thankful that they have a job while at the same time hired a significant number of consultants.”

Budget does not address current economic challenges

The Opposition member stated that the economy of the Territory is significantly challenged at this time and claimed that a record number of persons are behind in their bills and for the most part no fault of theirs. He also said a record number of mortgages are behind in payment and homes in foreclosure and families are struggling to make ends meet so it is difficult for them to identify with the glorious economic picture being portrayed in the Budget speech.

Hon. Fahie continued that the ruling National Democratic Party (NDP) government stated that the previous Virgin Islands Party (VIP) government left the country broke but immediately eliminated between 3 to 7 million dollars of Customs revenue to give merchants a break so they could lower prices without Consumer Protection Legislation to ensure that it happens. The result thus far, he said, is that the reduction in prices is not being felt by most families and yet revenue is being lost. No one gives up reneue when claiming broke.”

It was also noted that the Government upon taking office said the last government left the country broke and with cash flow problems when in fact the NDP Administration in 2007 signed a $100M plus hospital project for approximately $65M and only secured a $35M loan from the Social Security Board upon signing the contract.

“The government, through the Treasury, had to carry the rest of millions until the BPPR loan was finally secured years later. This careless and reckless act by the ndp is what created the cash flow problems from then to now because it [money used from public funds] was never paid back to the Treasury.”

The outspoken Member of the Opposition added that even in the questions and answers segment in the House of Assembly the NDP Government has refused to adequately answer to this query of the funds used from then to now from the Treasury on this "eternity" hospital construction project.

Premier Smith, in his Budget address said Government expects outflows of sixty eight million, three hundred and twenty six thousand, four hundred dollars ($68,326,400) for investment activities which include capital acquisitions for  Ministries and  Departments, and development activities such as the road works, the National Sewerage project, and the completion of the New Peebles hospital. Financing for these activities, he said, is anticipated to be thirty three million, nine hundred and ninety five thousand dollars ($33,995,000) and will be funded from loans to the amount of thirty three million dollars ($33M).

“Now we are hearing that more money will be borrowed to complete the hospital and sewerage projects. When will the haemorrhaging of funding this hospital project come to an end? In addition we are also hearing that the controversial ports and airport expansion projects will be loan funded. How will these projects benefit the people during construction and after. This is what we are not being told. Can we afford such projects at this time while our people continue to significantly struggle in this slumping economy? The Budget has failed to address these concerns. Instead the Budget tells us we are going to increase revenue in areas such as fees etcetera, which are being increased significantly one time.’

Increased revenue measures just a reversed form of taxation

Premier Smith announced that Government has decided to institute a number of revenue generation measures in the coming years- 2013 to 2015 and these include changing the current work permit structure where fees will be based on occupation type with consideration given to average income by occupation type; Increasing trade license fees to ensure that they at least cover the cost of administration; Increasing court fees to be more in line with the cost of the services being solicited ; Introducing a general Environmental Levy also used to fund environmental protection and preservation programmes. The levy will be collected at the ports of departure (air and sea) from every person leaving the Territory; Collecting a  fixed  percentage of the revenue of the Telecommunications Regulatory Commission annually; Undertake a comprehensive review of central government fee structure with the objective of raising additional revenue; and adopt a more aggressive approach to the collection of current taxes and fees and arrears reviewing current legislation to give revenue collecting agencies greater authority to enforce compliance.

The collective projected increase in revenues based on these plans, Premier Smith said, hover in the region of $7,400,000) in 2013, and $15,900,000 in 2014 and 2015 respectively.

“Who has to pay these fees? We the same people who are struggling now are the ones who have to pay these fees. All this is about is a reverse form of taxation. I urge the government to start to prepare the people for what is ahead, economic hard times, due to no other actions and future plans other than theirs. This new Budget and some of the future plans of the Government in their current form will pose more challenges for the people of this Territory than opportunities. We have and will continue during this budget debate to bring our ideas to the table, ideas that we strongly feel will build this Territory with the people and by the people.”

Govt failing to prepare its people for projected economic hard times

Hon. Fahie also accused Government of continuing to fail to prepare its people for the projected oncoming economic storm ahead as a result of the lack of its ability to stimulate the economy due to certain measures in the Protocol that was signed in the manner it was signed.

The Protocols for Effective Financial Management was signed on April 23, 2012 between the Virgin Islands and the United Kingdom and the VI is expected to be in full compliance with it by 2015. One of the mandates for full compliance is that an estimated $65M be placed in the Reserve Fund by 2015. One of the criticisms of this mandate is that Government would not be able to pump money into the economy like they would want.

Premier Smith in the Budget address said Government anticipates a transfer of twelve million dollars ($12,000,000) to the Reserve Fund. “By the end of 2013, we anticipate a balance in the reserve fund in excess of thirty seven million dollars,” Premier Smith declared.

“Clearly I am cognizant that we must operate within the confines of what the UK wants in the signed Protocols. Also I fully agree that accountability, transparency, value for money and good governance must be the order of the day and I welcome such but it must be done in a manner that strengthens any government's ability to stimulate its economy. The Budget speech today made it seem as if the financial steps being taken by the NDP government for the upcoming fiscal year are their doings. Contrarily, it is a mandate given to Overseas Territories by the UK, which respectfully will accomplish good in a few areas but have adverse economical effects in other areas.” 

Hon. Fahie concluded that the issues highlighted, among other areas, lend to the lack of flow and financial substance in many parts of the Budget speech. “I strongly feel that these factors add to my concerns that the technical support of the Premier is not as thorough as they should be. This is extremely evident with some of the answers to questions by the Premier in the House of Assembly in relation to any fiances of the Territory. Nevertheless, our duty as the Opposition is to analyse what comes before us and offer viable solutions. We have done this and will continue to do it over the daily process of analysing the budget over the next month.”

Premier had remarked during the budget address that the secret to the success of the Virgin Islands was not rooted in its ability to attract inward investment or run high per capita fiscal balances or even to provide jobs or fiscal resources to its citizens even as critically vital and important as those things were.

He added that the success story of the VI rests on a more fundamental principle of high standards of integrity, hard work, camaraderie and compassion for its fellow man, resourcefulness and ingenuity.

“These principles allowed those who stood before us to survive in the most trying of times and to thrive whenever opportunity presented itself.  Success was shared and as a result we all prospered, and societal disparity and strife was minimized. The future for the sustainable success of the British Virgin Islands therefore lies in the ability of us today to instil these very same fundamental building block principles in the generations that follow us. If we succeed at this task, we can be assured that whatever the squall that crosses our shores the BVI will be able to weather them and continue forward,” Premier Smith stated.”