Balancing Act

Prime Minister Philip Brave Davis has spent his initial weeks in office “managing expectations” and “dismissing” some who think they have claims to entitlement in the wake of the Progressive Liberal Party’s (PLP) September 16 election victory.

“I’ve been around long enough, I understand characters, but there are always some things that surprise you,” said Davis in his first interview with National Review as prime minister.

Though the new prime minister did not expand on the statement, it was a hint that he has had to push back some who viewed the victory as an opportunity for political patronage. 

Davis, who took a phone call at home on the weekend, discussed the challenges he and his colleagues met upon assuming office one month ago. In so doing, he put to rest any concerns or speculation that access to him would be blocked or limited – but the media access issue was not one we raised during our conversation given that it is now clearly moot.

As expected, the immediate challenges and focus of the government have been the COVID-19 pandemic, the fiscal crisis and the economic maelstrom. 

Davis, who is minister of finance, is awaiting a review of the country’s finances and preparing to present a supplemental budget to Parliament, as early as one week from now.

Asked what he has found most surprising since he became prime minister, he said, “I knew that the health system was collapsing, but I didn’t expect it to be as bad as it is. The lack of attention that has been paid to the healthcare system and services being provided has been a shocking discovery for me.

“We anticipated a lot of challenges, but we didn’t expect it to be as bad as it is. That’s been very challenging and there clearly was a lack of leadership attendant to that crisis that we have on our hand because we appreciate nothing is going to be able to get done – although we are trying to balance it all – unless we get our health crisis stabilized and addressed more proactively to normalize the issues that attend to it.”

Resources to shore up the healthcare system remain a serious concern, he acknowledged.

Dr. Michael Darville, the minister of health and wellness, who has been on a tour of the Family Islands, has been discovering the true state of facilities, the prime minister noted.

“Part of the challenge is resources too, because it’s not just the operational services that’s challenging but the infrastructure of the healthcare system has also been collapsed, is in a state of complete disrepair; there is clearly neglect in paying attention to it over the last four years,” Davis said.

“His report on the Family Island visits again exposes the lack of attention that has been paid to the health infrastructure, and so the challenge now is for us to find the financial resources to address all of these concerns.”

Several Family Island communities have in recent days seen an uptick in COVID-19 cases with reports coming in that some people have died because they have been unable to access the care they need.

Just one month after being kicked out of office, former Prime Minister Dr. Hubert Minnis, in his shameless grasp for relevance, has accused the Davis administration of having “a disastrous, incompetent and chaotic” response to the COVID-19 pandemic.

In its supplemental budget, one expects that the new administration will address the need for even greater resources to fund immediate needs.

Darville recently told reporters emergency funding is needed for the public healthcare system as the COVID fight continues.

“We have some of our suppliers as well as individuals involved in the fight who need to be paid and the prime minister has instructed me to find out exactly what is happening on the ground and I have done that,” he said days after the election.

BUDGET

Davis said he could not yet speak to what his government’s “recast” budget will look like “because we are still yet to get answers to a lot of the issues that relate to the dismal state that we find our healthcare system in.”

The prime minister added, “There’s really no plan to address our debt situation and it seems that the only [strategy] was to try to borrow our way out of it, which is not just a lazy way out, but it’s also a very dangerous way out because at the end of the day you’ve got to pay that back, and the only way to be able to do that is to have an economy that could sustain our public services and at the same time repay the debts that we owe.

“Therein lies some of the challenges. We are still trying to get a handle on all of these. We have someone now doing an independent review of the true state of the fiscal situation because we are unable to determine what we’ve met.”

The Fourth Quarter Fiscal Snapshot, released by the Minnis administration less than two weeks before the general election, was sobering, but not surprising.

It showed a $1.3 billion deficit for the 2020-2021 fiscal year. Revenue was down by $226.5 million when compared to the year before, and expenditure increased by $322.7 million.

Government debt at the end of June 2021 was $9.9 billion, 86.3 percent of GDP. The national debt was $10.3 billion.

Gross borrowings in the last fiscal year totaled over $3 billion.

The Minnis administration projected that it would take in $1.8 billion in proceeds from borrowing in 2021-2022.

It also said revenue is expected to increase 35.5 percent in the 2021-2022 fiscal year to $2.247 billion, due to “signs pointing to a global rebound” from the COVID-19 pandemic.

But Davis told National Review the budget passed by the former administration in June “leaves a lot to be desired”.

“And so, we are now in the process of addressing and finding, trying to identify, for example, the basis on which they settled on what the revenues will be; in other words, their revenue numbers in some instances they appear to have been understated and in some instances they appear to be overstated, and again in respect to the expenditures, the expenditures appear likewise to be overstated or understated,” the prime minister said.

“So, we are now in a process of having each of the ministries put in a submission and I hope to be able to have our supplemental budget when we go back to Parliament on the 27th.”

He said the 2021-2022 budget will be realigned to match his administration’s priorities.

We wondered whether the new administration has found hundreds of millions of dollars in unbudgeted commitments – as the Minnis administration claimed it found when it took office in 2017.

“I’m not here to blame anyone for where we are and I’m trying to move the country forward,” said Davis in response.

“This is not a blame game. Governance is about choices and priorities and clearly, they made their choices and their priorities and we can criticize them and say we would have done something differently, but that is their choice and priorities.

“At the appropriate time, we will make a complete statement on how we met the country and then we will leave it there in the public domain and we will move on to pursue our goals and plans and priorities as set out in our economic plan and blueprint.”

A key pledge in both the PLP’s economic plan, released in March, and its “Blueprint for Change”, released in August, is its promise to reduce value-added tax (VAT) from 12 percent to 10 percent.

The PLP said the cut will be for 12 months after which time it will be reviewed.

The current projected VAT for 2022-2023 is $993.5 million. A cut in the 12 percent top line rate would be equal to a 16.3 percent drop in the yield.

That would equate to a $162 million cut in revenue

Davis said the amendment bill to effect the VAT reduction will be among the first pieces of legislation his administration will bring to Parliament.

We asked him about his confidence in slashing $160 million of the revenue intake, and the ability to make it up elsewhere.

“Who says it’s going to be $160 million?” the prime minister responded.

“Again, we have to understand the factors that gave the previous government the confidence to project the numbers that they have. When I spoke about revenue, they have a number there for VAT but we don’t know how they arrived at that number, what factors.”

Projecting confidence, Davis added, “We believe that will increase consumer spending and that will make up for any shortfall. We also believe that by shoring up our collections and enforcement of revenues where fallen off, we will make up any revenue that may be lost by the cut … We still believe that by allowing more money to remain in the consumers’ pockets and they are spending, [that] will make up any shortfall that will come from the cut, coupled with our enhanced collections and enforcements.”

Deputy Prime Minister Chester Cooper, while in opposition, estimated that a Davis administration would actually be able to increase revenue intake by $200 million, even with the tax cut.

PRIORITIZING

In addition to the VAT Amendment Bill, Davis said his administration plans to introduce proposed legislation as early as next week to replace the emergency order.

The state of emergency will end on November 13. 

“Instructions have already been given to the law reform commissioner to review how best we can implement what I call the tools for the fight, so that ordinary legislation [will replace the emergency order] and that is now in train, and hopefully we will have a response before the expiration of the emergency order,” the prime minister said.

Davis was, however, noncommittal on the timing of legislation to establish a promised medicinal marijuana industry.

“We are trying to grow the economy and the way to grow the economy is to identify industries that can grow to ensure that we have new sources of revenues,” he told us. “Insofar as priorities and timelines are concerned, we would look at that in that context.”

We also asked Davis whether he intends to take up the issue of renewing oil drilling licenses, given his previously stated position to National Review when he was leader of the opposition that he would not be opposed to it as long as the necessary environmental safeguards are in place.

On the issue, the prime minister said, “It is on my radar and we are reviewing the policy in respect to this, particularly in light of what’s happening.”

Davis plans to attend the 2021 United Nations Climate Change Conference, COP26, in Glasgow, Scotland, later this month.

“And the issue of oil drilling will be discussed, no doubt, and we have carbon sinks that are being impacted by emissions from around the world, and one of the things I will be pursuing is how we monetize our sinks with the purposes of accessing some revenue … through the climate fund; but the oil drilling will be taken into context in what comes out of the meeting we go to in Glasgow.”

It will be interesting to see what policy position the new administration takes on this issue, given that it was not discussed in the lead up to the recent election.

The nature of governance is such that there are any number of issues at play, critical matters that need addressing, and considerations that must be made.

The PLP made many significant promises: two new hospitals, expanded National Health Insurance, a revitalized national economy, an increased minimum wage, increased pensions for seniors, and a reduction in electricity costs, are just a few.

Prioritizing it all can be a difficult endeavor, especially given the abysmal state of public finances.  

We anxiously await the start of the parliamentary session in earnest. We eagerly await the presentation of the promised supplemental budget, we admit with some degree of trepidation, and the roll out of the Davis administration’s plans as it settles further into governance in the weeks ahead.

We hope Davis recognizes his party had no clear election mandate, and that goodwill can swiftly evaporate, never to be regained.

We trust the new government will resist the urge to overly focus attention on the Minnis administration’s failings, but to show clearly what it is doing, and remain communicative and humble in managing our affairs.

Our country would only benefit from such an approach. 

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