The initial stages of a government initiative to address the high cost of living in Cayman have begun.
Leader of Government Business Kurt Tibbetts said the initiative begins with research by a consulting company.
‘There has to be a short period of information gathering, which will occur very shortly,’ he said. ‘Once we have the information from the various sub-sectors, we will know where to target and how to target it.’
Mr. Tibbetts refrained from going into details of the possible actions government could take to address the high cost of living in the Cayman Islands.
One thing that would not be on the table is offering Caribbean Utilities Company reduced import duty on oil to run its generators so that there could be a trickle-down effect into various other economic sectors.
Over the last year CUC’s high fuel factor, which is a cost passed directly on to the consumer, has raised electricity bills considerably.
Cabinet Minister Arden McLean said CUC already pays less duty on the diesel oil it imports for its generators than what consumers pay.
‘There have been some breaks given for the generation of electricity,’ he said.
Mr. McLean said any further reductions in duty would have to be balanced in the budget.
‘If we take [duty] off CUC, we’ll have to put it elsewhere,’ he said. ‘It’s a Catch-22, really.’
Mr. McLean said any actions taken to address the cost of living would have to be revenue neutral for the government.
With regard to giving CUC a cut in the import duty rate on diesel fuel, Mr. Tibbetts said there was no legal mechanism in place that would guarantee CUC passed any cost savings on to the consumer, or, even if they did, that other businesses would pass on savings from lower electricity rates to their customers.
Mr. Tibbetts said it was the government’s experience that when companies have costs lowered, they do not pass them on, and that if government gave CUC a reduced duty on oil, it would not necessarily benefit the consumer.
Mr. McLean agreed with Mr. Tibbetts.
‘When there are [overhead] cost increases, everyone justifies increasing their prices on that basis,’ he said, adding that cost decreases do not always lead to price reductions.
Pointing to one example, Mr. McLean noted that CUC’s fuel factor had gone down in recent months but that there had been no corresponding reduction in the price of foodstuffs at the supermarkets because their electricity bills had gone down.
Regardless of the difficulties, Mr. Tibbetts said the government would address the cost of living issue after the fact-finding exercise.
‘I know there has been constant harping from the public about [the high cost of living],’ he said. ‘But we’re not equipped to do anything at all without the proper information.’