By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The government will spark "social unrest" if it cuts public spending too rapidly and deeply, the deputy prime minister has warned, as he attacked "ridiculous" pre-election job contracts.

K Peter Turnquest, addressing the Rotary Club of Old Fort on Wednesday evening, conceded that the government was stuck with an "inflated" civil service wage bill in the short-term given that extensive cuts would lead to massive unemployment and a "tremendous economic shock".

With the civil service wage bill at around $750m, and health insurance and pension contributions adding a further $65m and $100m, respectively, the public sector's human resources presently cost taxpayers over $900m.

Mr Turnquest conceded there was "more we need to do", and that the cost of government is "too high" and must be brought down to a sustainable level. He said much of that cost revolves around various fixed commitments such as rent and the public sector wage bill.

"We have to bring that down, but how do you do that without causing significant dislocation, hardship, political crisis and all the rest of it?" he asked. "We implemented a hiring freeze last year - except for essential hiring - which helped but we still have a long ways to go.

"We terminated some of the ridiculous employment contracts that had been put in place just prior to the elections, but it's still not enough. There is more that we need to do. Again, it is impossible to do that in the short-term.

"We are stuck basically in the short-term with this inflated wage bill that we hope to bring down over time by getting people off the government pay roll through natural attrition and creative processes by empowering them through training."

The Deputy Prime Minister said during his 2018-2019 Budget communication that the Government's wage bill had expanded by some $226 million since the 2011-2012 Budget year, representing an unsustainable drain on the Bahamian taxpayer.

Mr Turnquest added on Wednesday night: "We got it down as far as we could without drastic cuts in the civil service, without causing tremendous economic shock and disrupting services to the public.

"There are other things we can do, but it's difficult to do them in the short-term because Bahamians have become accustomed to those things, and if we yank them away overnight it's going to cause social unrest."

Mr Turnquest said a "mind shift" among Bahamians is needed for government to make the changes necessary, a likely reference to the need to reduce dependency on government. Many have got used to cut-price public services offered 'below cost', and other social and welfare benefits without having to worry about paying for them.

The IMF has urged the Government to slash the civil service wage bill by almost $70 million. In its full Article IV report on the Bahamas, it revealed that the Government could save taxpayers more than $200 million annually through a combination of public service downsizing and pension reform, plus reduced subsidies to state-owned corporations.

It recommended reducing the civil service wage bill to 2015-2016 levels "at most", arguing that this would result in savings equivalent to 0.8 per cent of Bahamian gross domestic product (GDP).