By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamasair's new fleet could "blow another hole" in the 2017-2018 Budget unless the Government can delay a $35 million principal repayment on the loan that financed their acquisition.

K P Turnquest, the minister of finance, revealed that Bahamasair's subsidy could increase beyond the budgeted $14.9 million unless Dionisio D'Aguilar, minister of tourism, was unable to successfully "intervene" with the ATR planes' financier.

He warned that this could "blow a hole again" in the Budget and require the Government to find another $35 million, saying: "We've been delaying the principal, and only paying the interest.

"Now that principal is coming home. We've got to pay, and will have to make a decision about that. You can only roll the ball up the hill so far before you've got to pay.....We're going to do something about it; we're going to fix it."

Mr Turnquest's Bahamasair revelation came as he revealed that taxpayer subsidies to 25 state-owned enterprises had increased by $79 million, or 22.6 per cent, to $429 million in the 2017-2018 fiscal year.

He said the majority of the increase related to National Health Insurance (NHI), and described the initiative as a prime example of the "path we've been on" - where the former government added new social programmes without knowing how they would be funded, and without any regard for the impact on the deficit and $7 billion-plus national debt.

Mr Turnquest said initiatives such as NHI "created goodwill" and a feeling among Bahamians that the Government would always take care of them, without determining whether there was "a better way" and how - and if - the taxpayer could afford it.

The Public Hospitals Authority (PHA), as traditionally, will receive $213.8 million or almost 50 per cent of state-owned enterprise (SOE) subsidies in 2017-2018. Behind it is the NHI Authority at $48 million; the University of the Bahamas (UoB) at $34.5 million; the Water & Sewerage Corporation at $30 million; the new Civil Aviation Authority at $17.1 million; and then Bahamasair with its initial $14.9 million.

"Taken together, these six entities account for total subventions of $358 million, or 83 per cent of aggregate subventions," Mr Turnquest said. "There are other entities that have under-performed and not provided any benefits, or static benefits, to the state.'

He pointed to Bank of the Bahamas, which had cost the Government "over $200 million and counting" in its ongoing bail-out and restructuring, plus the Nassau Airport Development Company (NAD) and the Bahamas Electricity Corporation (BEC) - both of which have failed to provide the Treasury with a dividend for 10 and 20 years, respectively.

Warning that 'business as usual' could be tolerated no longer, Mr Turnquest warned that all state-owned enterprises will be assessed to sure they are operating efficiently and "in accordance with best practices", in a bid to reduce the drain on Bahamian taxpayers.

He added that the Government would have to "figure out how to pay for them", with persons either charged a direct fee or via specific taxation. The Minister described the present situation as "unacceptable and not sustainable the way we've been doing it", and added: "That's just cold reality."

Expanding on the initiatives planned to dig the Bahamas out of its fiscal hole, Mr Turnquest said "more taxes are not the answer to the fiscal mess we inherited".

Revenue-side efforts will focus on improved administration, collection and enforcement, with the Minister confirming that the "primary efforts will be to contain the growth of recurrent expenditure".

He emphasised: "We will not place on the backs of the Bahamian people costs they cannot bear for political expediency..... The Government of the Bahamas will not put more on the Bahamian people than the revenue we generate can bear."

Mr Turnquest said that while the Government would seek to avoid laying-off civil servants, it would insist on efficiency in the public sector and improved service delivery, adding: "We cannot continue as if there is fat and plenty."

He indicated that a key focus will be the Inter-American Development Bank (IDB) funded plan to improve the Government's financial management and reporting systems, describing the existing system as completely inadequate for evidence-based policymaking.

"The information is of limited quality, difficult to access and not widely used for evidence-based policy and decision-making," Mr Turnquest told the House of Assembly. "The system does not seem to be able to tell us in any central agency or spot what the full amount of spending commitments are.

"Every day we have someone popping up saying they have a commitment for this, a contract for that. It is absolutely stunning to me as a businessman that there's no place where all agencies must report, what the Government's committed to and what it owes..... Tourism is an interesting one; they have all kinds of commitments out there."

Mr Turnquest said the Government needed to move to accrual-based accounting, as the Public Treasury's continuing reliance on a cash-based system was incompatible with modern governance and the Bahamas' needs.

The IDB project is designed to improve efficiency in the Government's financial management and use of resources, while also providing benchmarks to measure its performance.

Mr Turnquest, meanwhile, also outlined "a comprehensive and all-encompassing" review of every government spending initiative, in a bid to determine whether all were necessary, were delivering 'value for money', and if they could be performed better by the private or voluntary sectors.

"Many of the programmes and services that are delivered by the Government have been in existence for a very long time indeed and, as might be expected, seen as simply something the Government does, year after year," he said.

The Government also plans to create a Public Procurement Board to oversee the bidding and awarding of all government contracts. The Board will feature a non-public service chair; the financial secretary; a permanent secretary; and two other persons from the private sector, with a mandate to advise the Government on regulation and policy for this activity.

A Procurement Review Tribunal will also be created to hear complaints, and determine disputes, relating to government contracts.

Shedding more light on planned Fiscal Responsibility legislation, Mr Turnquest said it would focus on achieving an annual GFS balance (deficit elimination) and maintenance of a "sustainable" debt-to-GDP ratio as its core objectives.

The Minister of Finance would be required to detail the assumptions underpinning Budget forecasts; detail long-term fiscal goals; explain why annual outturns had differed from targets; and explain how and when any deficits would be eliminated. Mr Turnquest also held out the promise of greater consultation with the public and private sectors in the formulation of the Government's annual Budget.

On the revenue side, Mr Turnquest said the Government planned to eliminate the "inconsistency" in enforcement and collection measures between different taxes.

He added that this would help to create "a level playing field for tax compliant businesses", as well as provide the private sector with greater certainty when it came to collecting taxes.