We need to cut bureaucracy, not add to it

From today’s paper

Mr Simmons also recommended an increase in taxes — including incorporating a value added tax (VAT) on all goods and services.

 

“From everything from dentist visits to restaurants,” he said. “What that does is broaden the tax base from $1 billion to as much as $2 billion. VAT is a more efficient way to tap into economic activity. Shared sacrifice should require people selling goods and services (to) pay.”

 

He also offered the idea of a corporation tax. The model in Bermuda, he explained, is that corporations are taxed on size and type of business, not profits. “That is something (the Government) is going to have to deal with.”

Normally I agree with many of Economist Craig Simmon’s opinions, this time I completely disagree.  A VAT tax would be a disaster, as would a corporation tax.

A VAT tax while nice in theory is incredibly difficult to implement.  Just ask the Bahamas.  They’ve been planning a VAT implementation for some 5+ years and have required the expertise of some of Revenue Canada’s top consultants.  Bermuda doesn’t have 5+ years to figure out how to implement a VAT tax.

A corporation tax?  Wait, the absolute last thing we want to do is actively using taxation to discourage businesses of a certain “size”.   I would however wholly support increased fees or taxes for any non-Bermudian owned “brass plate” entities with no physical presence other than a mailbox.  They do far more damage to our reputation and good and we could at least look to these as a source of revenue.

If we want to cut government size and costs we need to cut bureaucracy, not add to it.  One thing we could be doing is simplifying the duty system into either a fair tax or a vastly simplified tier system.  It is far too complex with a great many concessions which don’t make a great deal of sense.

PR train wreck in slow motion… revisited

When reading present Immigration Minister Fahy’s comments in the paper from a short while ago I’m reminded of some words of a now departed friend.  Julian Hall once deemed then Immigration Minister Colonel Burch a “PR train wreck in slow motion” because of his approach to handling issues.  It would seem Minister Fahy is at risk of following in his predecessors footsteps.

I said it of the UBP and I think it holds true for the OBA, they’re great at policy, bad at politics.  The combative approach of Colonel Burch certainly didn’t do the PLP any favors when it came to managing public perceptions.

Don’t get me wrong, I agree with and support many of the policy moves Minister Fahy is making, I just don’t agree with how he’s going about it.

Senator Fahy said he “will not back down” on Throne Speech promises, even unpopular ones.

Mr. Fahy is the Minister and it’s his right to decide how he wants to handle things, but I think these sorts of statements will land him and his party in a lot of hot water.  It makes him come across as defensive, stubborn and arrogant and having met Senator Fahy in person, I doubt that’s his intention.

One of the big things many people were fed up with about the PLP was their absolute refusal to change course despite all evidence that we were headed down the wrong path.  They were stubborn and arrogant at times and it cost them in the end.  There’s nothing wrong with going through with a decision that you feel is right even if it’s unpopular.  There are undoubtedly many times when this may be the case.  There is something wrong with not being willing to always consider alternative points of view, being willing to revise your stance based upon new information and admit you’re wrong.  I think that’s what many had hoped to see different about the OBA’s style of governance and we’re not seeing that in the approach to immigration.  Certainly, do what you believe is necessary, just don’t be so stubborn as to imply you’ll ram it down our throats with no willingness to revise your stance if new and contrary information arises.

“I have got broad shoulders — I can take it,” he added.

Minister Fahy might say so, but he’s getting overly defensive and combative which suggests that he’s struggling with it.  It reminds me of my days as a bouncer when I learned that most people are all talk.  They’ll get right up in your face, yell and do what they can to provoke you but most are just putting on a show trying to look tough.  Often times I could stand my ground, nose to nose, and calmly but firmly explain the situation, explain my understanding of their point of view and then explain the point of view of the club.  It’s hard for you to make a case justifying your actions because someone disrespected you when you willingly disrespect the establishment.  Most often I could talk someone out of the club rather than physically having to throw them out.  Mind you, these were back in the days when it was unheard of for someone to try to smuggle a knife or a machete into the club, but I digress.

I get a sense that Minister Fahy means well, but he’s allowing the wealth of negative feedback and pushback he’s getting to get the best of him, kind of like those bouncers who would resort to violence when someone got in their face.  There’s definitely merit to that approach in some cases as sometimes people are unreasonable.  In other cases it can be valuable to establish a sense of respect between you and your clientèle because that way you’re more likely to avoid an issue the next time that person looks to visit your establishment.  It simply isn’t worth having people develop grudges, anger and resentment with the intention to settle scores with you.  That’s how you end up with discontent which can flourish and ruin your establishment.

Minister Fahy is new and is taking on a great many unenviable challenges and a great deal of hard work.  He certainly deserves some leeway as he finds his own.  I just hope he comes to realise that a combative approach will breed resentment, distrust and anger which will just lead to worse situations when the next issue arises.

 

Treating symptoms

The recent Bermuda budget gets a lukewarm rating from this writer.  Overall it was positive and a step in the right direction but it could have gone further.  One of the concerns I have is that the budget aims to alleviate symptoms of our problems rather than root causes.  I fear it relies far too much on the prospect that a global recovery will save us rather than recognizing that we need to save ourselves.

A good example is the removal of employer tax for the first 2 years of non-Bermudian hires.  The perceived problem?  A significant number of unemployed Bermudians.  Thus with the symptom identified they’ve attacked it head on.  This is clearly a well intentioned move but I fear that it may have unforeseen consequences much like many of the PLP’s well intentioned moves.

What impact could this move have?  Its aim is to encourage companies to hire Bermudians.  That’s positive.  However, why would an approximately 8.5% rebate do all that much?  If a company was choosing between a qualified foreigner and an unqualified Bermudian, the difference wouldn’t matter.  They’d need someone qualified for the job.  It reduces costs a bit, but not really a tremendous deal more.  It does help the bottom line of a business, but does it contribute to a business hiring more people or investing significantly more in the community?  I’m rather unconvinced.  I suspect it won’t tilt things all that greatly in the favor of economic improvement.  It certainly helps, just I fear the benefits may be overestimated.

For a party that seems to herald the notion of “trickle down economics” I’m rather mystified by this approach.  My thought is that what would be far more valuable to our economy and creating jobs is to inject as much more disposable income into the economy as possible.  That stimulates spending, helps people pay bills, adds to demand and ultimately helps grow the economy and create jobs.  Given the choice between the equivalent amount of lost revenue from a rebate for hiring Bermudians and an across the board cut in payroll taxes (or even just a cut for Bermudians) I would have thought a payroll tax cut would have been preferable.   I’m rather surprised that the OBA didn’t stick to the UBP’s concept of cutting taxes for those earning under 50k, even though I didn’t directly agree with that specific implementation of tax cut measures.  That would have seemed more fitting to boost spending.

I’m also left to wonder about the various consequences that arise from this approach.  We’re already seeing some of them.  The opposition and numerous Bermudians are expressing dismay that the OBA seems focused on helping business rather than helping Bermudians.  One could reasonably see the argument that by helping business, they are indirectly helping Bermudians by trying to inspire job creation but this reality could understandably be missed by many.   Beyond that there are other notable consequences such as the added complexity of implementing such a change.  Rather than simplifying our bureaucracy we’re adding to it.  We’ll need even more people in government to manage yet another change to administering our tax laws.  I’m left thinking we’ve taken a step in the wrong direction.

Overall the budget was a positive step forwards and I honestly doubt we would have seen the same realism and pragmatism from the PLP had they won the election.  I am however dismayed in my feeling that we just haven’t gone far enough.  I fear that the OBA, much like the PLP before them are relying far too much on the fantasy that a global recovery will alleviate our problems and that we just need to bide our time.  I’m rather sorry to say that I have a rather pessimistic view that I believe we dug our own hole long before the global recession and it was simply the catalyst rather than the cause to our woes.  Waiting around for a global recovery to dig ourselves out of our own mess could well be a mistake because we’ve dug ourselves so deep we might be the only ones who can get us out.

Better, but not there yet

The OBA improved on their handling of immigration PR recently, but they’ve still got a ways to go.

They aimed for consultation this time around and published a “final draft” of proposed work permit modifications.   This was a far preferrable move to no consultation and it’s an improvement.  They can still do better though as this approach garnered a hell of a lot of blow back including a pretty terrible headline in today’s paper: “Govt backs down on teen work proposal”

This isn’t the kind of PR they want.  They want “Gov’t hears citizen’s concerns” or “Gov’t revises draft based upon public input”.  The thing is, the papers are biased, they’ll sensationalize anything that sells papers.  Effectively the government did do these things but the perception management wasn’t where it needed to be.

An even better approach next time around would be do avoid announcing something as a “final draft”.  It gets perceived as very “final” and frames public opinion as if government is already decided on it and puts people on the defensive.  It also doesn’t give you any room to move or shift your stance based upon the feedback.  Instead, announce what you take to the public as a “preliminary draft” regardless of the official state on the basis that you want feedback from the public.

If, as with blogging, you get no feedback then it means you’ve done a good job.  If you get feedback, it’s likely criticism and something you need to re-evaluate to figure out whether you made your argument clear enough or if you the concept needs revision.  That way it seems less like its set in stone and more like you’re keen for feedback, that way it’s easy to back-paddle based upon negative feedback while saving face.

I think the OBA does deserve credit that compared to no consultation this at least was a leap forward.  Hopefully they’ll continue moving things forward and improving their overall approach.

Americans renouncing citizenship

A number of recent articles covering the prospect of Americans renouncing their citizenship has caught my attention and left me wondering.  Bermuda could be ideally placed to capitalize on the these sorts of moves if it were more open to a Monaco style residency model.

Would it enable us to attract wealthy individuals, their business and investment while offering possibly one of the best locals for continued access to the United States?  What impact would it have on getting our economy back on track?

Now is the right time to resign

I agree with Jonathan over at Catch a Fire that when a member of parliament is elected under one banner and decides to join a different party or go independent they should resign and re-contest their seat.

Terry Lister, who recently announced he would leave the PLP to stand as an independent should resign his seat and re-contest it.  Now would be a great time to do it as he could capitalize on the malaise felt by the public towards the PLP and the disappointment felt towards the OBA.  It would enable the voters in his constituency to clearly send a message to both parties without disrupting the present course of things.  If he instead waits for the next election and stands as an independent it is likely this will be his last term as an MP.

Improvement

Much of the tone and presentation of the throne speech marks a significant improvement in the performance of the OBA vs the last few weeks.  The Royal Gazette’s editorial summed things up quite well that they hit all the right buttons but there is still much work to be done.  Sadly the opposition missed the mark with rather weak arguments like proclaiming there was not enough of a focus on sport after they themselves threw many millions at sport with limited result.

The announcement of a public forum on term limits & work permits is a welcome step.  It would have been desirable to have had it prior to the announcement of scrapping term limits, however it at least will give people the chance to hear a variety of views on the topic as well the the opportunity to give their own feedback.  As suggested previously, making the people feel like they have a say and can feed heard is important.

Finally, the airline subsidies have got to go.  We simply can’t keep throwing money at problems hoping that things will magically be resolved.  There isn’t a strong case that this money was well spent in that air based tourist arrivals have not significantly improved.  Worse, now we’ve got a case where the two airlines on the Toronto route are both flying reduced schedules and are competing with each other on nearly the same days when previously we had daily flights.

It has been said before, we cannot compete in the discount tourism market.  We simply do not have the volume or capacity to do so.  What we need to do is increase the quality of our product and stop worrying that Bermuda is ‘too expensive’ and start worrying that our product isn’t worth the money.  That’s our real tourism problem.

 

Thoughts on the term limits assessment

Jonathan has asked for my thoughts on the term limits assessment.  The overall summary is that I don’t find it made nearly as compelling of an argument as it could have and that too much faith is placed in term limits as a solution to get our economy on track.  Far more drastic measures will be necessary.

My first thought is why didn’t the OBA follow the recommendations on communications?

  • Rather than jump to announce the elimination of term limits, they could have taken a couple weeks and likely mitigated much of the fallout (planning)
  • Clearly communicate that based upon the assessment eliminating term limits is a crucial pillar in getting our economy back on track (reasoning)
  • Openly publish the assessment document (transparency)
  • Hold a public forum to explain your stance and take feedback (inclusion)
  • Announce your conclusion that in order to get the economy back on track it is necessary to eliminate term limits (conclusion)

I think the primary concern expressed by the community assessment misses the mark but the rest is spot on.

The primary concern by some Bermudians is that the termination of the term limit policy would encourage long-term residency and lead to gentrification of the community.

 

Let me be absolutely clear here: Most people don’t understand the distinction between work permits and term limits.  Politics is about managing perceptions, not reality.  The OBA made the mistake of directly addressing the issue of the above concerns but did not adequately address the misconception between the two.  I would be willing to bet that the primary concern of most Bermudians is the opportunity for and welfare of Bermudians.  That should have been the focus, not long term residency.  Most people are concerned about jobs, the high cost of living and social issues.  If every Bermudian was made rich by welcoming expats rather than being made to feel like second class citizens in their own home I’d bet we’d have a great deal fewer complaints.

Policy considerations

The greater the number of people with Bermudian status or permanent residence, the greater population and potential overcrowding concern becomes (sic).

I think this can be misinterpreted.  More people can mean more “concern”, but as mentioned by a point further below in the document to this one, we need to grow our population.  Anyone who has studied our demographics will know that we’re facing the same decline faced by other nations.  We need to increase the size of our working class in order to be able to support our aging boomers.  Long term contributors to our island who actively participate in making it a better place through getting involved in causes and other positive activities are net positives for our island.  Our island is only overcrowded because we’ve refused to go up, specifically in the city.

The normal work permit policies and procedures continue to apply.  The employer will continue to be required to advertise the position and hire qualified Bermudians where identified.

The normal work permit policies are utterly broken for both parties.  The process is cumbersome and inefficient.  My suggestions:

  • Establish a register of able bodied Bermudians noting their skills, qualifications and employment status.  All new jobs should be compared against this register.  Advertising in the paper does not work.  Bermudians are kept out of the loop of real opportunities until usually a foreigner has been found and International Business is kept of the loop in able bodied qualified Bermudians they’d like to find.  Companies also shouldn’t be bogged down with considering completely unqualified people.
  • Streamline the work permit system to determine skill points similar to the Australian immigration points system to identify skilled roles and compare them against the ability of Bermudians to fill those roles and fast track work permit applications accordingly.  Higher points + few Bermudians should be a nearly instant rubber stamp approval.  Low points + many Bermudians should be more scrutiny.
  • Encourage medium and large sized companies to provide career development programs not just “training” for all employees.  One of the large problems Bermuda faces is that due to a largely transient workforce, companies can tend to rely on only hiring the skill they need without focusing on how to progress people within their organization.  This can be why many Bermudians are left behind, because they remain in this environment while expats come and go.

Impact assessment

I think the Economic assessment is largely wishful thinking.  This is a case of closing the stable after the horse is gone.  Eliminating term limits won’t create a raft of jobs.  Instead what it will do is help limit the outflow.  Other more drastic measures will be needed to kickstart the economy again.

I found the the analysis of the problem to be entirely qualitative and largely subjective with almost zero quantitative substance.  Regular readers of this blog will know that I often like to look at the hard statistics to get to the root of an issue.  More could have been done in this regard and I am hopeful that the new government recognizes this and will make more raw data and statistics available to the public in a consumable form.

Overall I don’t think the assessment made that compelling of an argument to quell those who believe the term limits policy should continue.  I certainly would have liked to have been a greater focus on evidence of the decline in jobs and more talking points from the various stakeholders.  This likely would have helped make things more clear.  Ultimately, regardless of the assessment’s conclusion, I think it is very important that it be understood that eliminating term limits its a panacea solution.  It plugs a leak but won’t bail out our sinking ship.  We’re going to need to do a lot more to get our economy and island back on track.

 

Jumped the gun?

Today’s paper quotes a government statement regarding Jonathan’s sit-in

The Ministry of Home Affairs advised that Work Permit Policy documents are in the final stages of review and will be released in the coming weeks to specific stakeholder groups.

 

Why was a decision made on term limits if policy documents are in the “final stages of review”?  Also, why are they combining “Work Permit Policy” with term limit policy?  Are they not two distinct policies?

 

Inexperience

Jonathan from over at Catch a Fire was nearly arrested today for attempting a sit in over demands to see the Term Limits report.  This doesn’t bode well and could well prove to turn into yet another PR nightmare for the OBA.

I can’t say I agree with Jonathans approach as it seems like a rather extreme first step vs. exhausing other options.  It reminds me of the union’s strike first, negotiate later policy which I also don’t agree with.  However, having 9 police officers or even any police officers at all deal with this issue seems like an equally extreme response.  Jonathan can afford to be overzealous, the OBA doesn’t have that luxury.

I think one of the things really rising to the surface of late is that this group is largely very inexperienced and tasked with tackling a near impossible job.  Rather than working to build the trust of the people they’re discrediting themselves and demonstrating that perhaps they aren’t able to deliver on their promise of a new and different era of politics in Bermuda.  They need to fix this fast and focus on ways to be more inclusive and proactive rather than alienating and reactive.

I really hope this is the low point and things improve from here.  I really hope they regain their footing and are able to get our island back on the right track.  If not we don’t have much hope.