By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government's political opponents yesterday accused it of creating "a remarkable amount of uncertainty" for businesses and workers by back-pedalling over plans to progressively increase NIB contributions.

Michael Pintard, the Free National Movement (FNM) leader, and Dr Duane Sands, the party's chairman, both told Tribune Business it made no sense for the Government to approve just a solitary 1.5 percent rate increase on July 1 when multiple reviews have warned the National Insurance Board's (NIB) $1.5bn reserve fund will be exhausted come 2028 without greater hikes.

The duo, hitting out after the Prime Minister's Office last week asserted that plans to raise the total NIB contribution rate by 1.5 percentage points every two years for the next two decades had not been approved by Cabinet, despite such a strategy being announced just hours earlier, argued that the Government's pull back occurred because it had been "spooked" by negative reaction.

Dr Sands told this newspaper the situation would be "laughable if it wasn't so serious; it would be a big joke", while Mr Pintard said the Government's rapid reversal undermines the "predictability" that companies and commerce require for the smooth and efficient conduct of business. The latter also urged the Davis administration and NIB to crack down on delinquent contribution payers to ease the need for further rises.

The FNM chairman added that the Government "have been playing this game for two-and-a-half years", noting that this was not the first occasion where Philip Davis KC has moved quickly to contradict his Cabinet ministers when it comes to NIB and proposed contribution rate increases.

He pointed to a similar reaction after Myles Laroda, who formerly had responsibility for NIB prior to last year's Cabinet reshuffle, forecast that increased contribution rates were critical to NIB's survival and would need to be raised imminently. Mr Davis quickly came out and said no rate increase had been agreed, while then-press secretary, Clint Watson, branded such a move "the lazy way out".

A similar chain of events occurred last Thursday after Alfred Sears KC, the minister with Cabinet responsibility for NIB, unveiled plans to raise the total contribution rate by 1.5 percentage points every two years over the next two decades through to 2044 with the Prime Minister's Office stating just hours later that this series of phased-in hikes had not been approved or agreed by Cabinet.

"I find it implausible to believe that the minister with responsibility for NIB, Alfred Sears, would speak out of tune off the hymn sheet," Dr Sands told Tribune Business, adding that the minister appeared to have been "thrown under the bus by the Prime Minister who, I think, got spooked by the very loud public push back and response of immediate outrage...

"It's not lost on me that, as he often does, the Prime Minister takes his finger out of his mouth, puts it up in the air and realises it's not going to fly." Tribune Business reported on Friday that the strategy unveiled by Mr Sears, if fully implemented, would mean the all-in NIB contribution rate as a percentage of insurable wages will increase to 26.3 percent by 2044 - a rate equivalent to a developed country's income tax.

Mr Sears and senior NIB officials gave every impression that the contribution rate increase strategy had been approved. Heather Maynard, NIB’s acting director, confirmed to Tribune Business that the series of 11 increases unveiled by Mr Sears in his mid-year Budget presentation would ultimately more than double NIB’s total contribution rate from the present 9.8 percent to 26.3 percent after July 1, 2044.

That would represent a 168.4 percent increase in the contribution rate - spread over a 20-year period - in a bid to ease the financial burden and strain this may impose on both businesses and working Bahamians. Ms Maynard also confirmed that, under this strategy, the contribution rate paid by workers will more than triple - rising from the current 3.9 percent of insurable wages to 12.15 percent.

Bahamian businesses, who presently face a 5.9 percent contribution rate, would see this jump to 14.15 percent by 2044 based on the series of 1.5 percentage point increases all being split evenly between employer and employee - meaning their respective shares will rise by 0.75 percentage points every two years.

Mr Sears, for his part, said: “NIB reform is not a matter of choice but a matter of necessity. We can no longer delay or ignore this issue, as it affects our present and future welfare. We have a collective responsibility to protect and preserve the National Insurance Board.

“Therefore, effective the first Monday of July 2024, the contribution rate for NIB will be increased by 1.5 percent [percentage points] to be shared equally between the employer and the employee, and thereafter a 1.5 percent increase every two years from July 1, 2024 to July 1, 2044. Similarly, the same increase will be applied to self-employed persons and voluntarily insured persons.”

The increases set to take effect on July 1, 2024, will increase the employer and employee contributions by 0.75 percentage points each. The employer contribution will rise to 6.65 percent from the existing 5.9 percent, while that for employees will grow from 3.9 percent to 4.65 percent.

The contribution rates for self-employed and voluntarily insured persons will jump from the present 8.8 percent and 5 percent, respectively, to 10.3 percent and 6.5 percent as part of a strategy to ensure The Bahamas' national social security system survives for the long-term to meet its benefit obligations to all citizens and legitimate persons who qualify for assistance.

However, the July increase will only take the all-in NIB contribution rate for working Bahamians to 11.3 percent - a level that financial studies, known as actuarial reports, state is still too low to ensure the scheme's medium and long-term survival and prevent the $1.5bn reserve fund from being depleted in 2028 as predicted.

"An increase of the contribution rate by 2 percent (over the existing 9.8 percent) every two years starting on July 1, 2022, and ending on July 1, 2036, could restore the short and medium-term financial sustainability of the scheme,” the last NIB actuarial report said.

“Starting in 2029, the required annual contribution rate to pay for all expenditures becomes the pay-as-you-go (PAYG) rate. As an illustration, the contribution rate will have to increase from 9.8 per cent to 16.9 per cent in 2029, and will reach 32.3 per cent in 2078.”

"By their own admission, NIB's path to solvency, even with this increase, will not be attained in 2030," Dr Sands told Tribune Business. "For the Prime Minister to come out after the minister spoke to say they've not agreed to anything beyond the increase in 2024, what they are saying is basically we are prepared to let NIB fail. By their own admission this increase is not going to solve the problem."

Mr Pintard, meanwhile, argued that the Government's NIB back-pedalling has only increased uncertainty for workers (over how much they will lose from their take home pay) and businesses alike. "When I spoke about this months ago I said businesses need predictability," he told Tribune Business.

"It made no sense for them to indicate an increase was coming without saying what it is. Then, after all this time, come and give a figure that is dramatically high over 20 years and, in a matter of hours, back pedal on it. The predictability businesses expect to have, you want the regulators, the policymakers to have some certainty with what they're putting in place and rely on them.

"People want to come into a business environment that is predictable, and we are a country of laws, and not at the whim and fancy of politicians which changes from day to day. Davis and those are creating tremendous uncertainty."