The Chamber of Commerce has urged the government to use fiscal restraint in the upcoming budget.
Speaking at the Legislative Luncheon last week, COC President James Tibbetts said maintaining a budget in surplus and building up cash reserves was of crucial importance.
‘Government must exercise caution and avoid unnecessary spending at this time when the global economy may be entering a period of recession,’ he said.
‘The budget should be kept in surplus and if there is any prospect that a deficit may occur, the shortfall must be made up by reducing public spending.
‘Raising fees would be an unacceptable approach to maintaining a budget surplus.’
Mr. Tibbetts outlined a number of external economic factors that put Cayman’s economy at risk.
‘Our islands are vulnerable to global shock waves, particularly as they impact our neighbours to the north, who we rely on to provide nearly 80 per cent of our overnight and cruise visitors and a sizable portion of our financial services business each year.’
Mr. Tibbetts said it made sense when determining the national budget to carefully examine global conditions.
‘The United States’ economy is teetering on the brink of a recession…,’ he said. ‘US consumer spending is expected to decline as a result.
‘Additionally, Americans go to the polls this year to elect new leadership in the White House. This is a period when Americans refrain from travel as they wait for the outcome of the elections.’
Mr. Tibbetts also mentioned high oil prices and the possible changes to the world’s financial regulatory practices because of the recently announced US$7 billion loss of French bank Societale Generale at the hands of a rogue investment trader.
In addition, Mr. Tibbetts pointed out that Florida’s Tax and Budget Reform Commission is considering whether a proposal to repeal the state’s export sales tax exemption should be put on the voter ballot this coming November. If the measure passes, the cost of goods coming from Florida – from where Cayman receives a vast majority of its consumer goods – could increase between six and seven per cent.
All of the factors could add up to hurt Cayman’s economy, particularly small businesses, which make up most of the country’s enterprise.
‘These businesses are most at risk to these external forces and we must do everything within our power this year to minimise additional pressures that may increase costs,’ he said. ‘We urge government to carefully consider any legislative action this year that could place additional financial or regulatory pressures on these small business owners.’
In particular, Mr. Tibbetts pointed to proposed amendments to the Customs Bill; the Tobacco Bill; the Employment Law; the National Pensions Law and a Minimum Wage Bill.
‘Higher costs will harm small businesses and will drive up the cost of living for all of us,’ he said. ‘We urge our legislators to carefully evaluate in close consultation with the private sector the financial costs of these legislative changes.
‘We should avoid imposing additional fees and reporting requirements during a time of recession.’
Mr. Tibbetts also suggested government examine privatization of some non-essential services as a way of reducing its spending.
Leader of Government Business Kurt Tibbetts responded to the Chamber president’s address by saying fiscal restraint is the cornerstone of every budget the government presents to the Legislative Assembly, not just for the upcoming budget period.
‘It is very important for everyone to know that, by law, the government is required to prepare and present its annual budget in a fiscally responsible manner,’ he said.
Mr. Tibbetts also responded to the Chamber’s call to avoid unnecessary spending.
‘Let me say that this government avoids unnecessary spending at all times; not just now.’
Mr. Tibbetts said his government had achieved surpluses each year since it was elected.
‘Indeed, the Strategic Policy Statement in respect of government’s financial year that will start on 1 July indicates that government aims to have a surplus of approximately $50 million.’
With regard to the Chamber’s call not to raise fees as a way of attaining a surplus, Mr. Tibbetts said the government did not intend to increase fees for the upcoming financial year.
Although he did not address the Chamber’s call for the privatisation of non-essential services at the luncheon, Mr. Tibbetts did speak about the topic when asked at the Cabinet press briefing the next day.
‘From time to time we look at it, and there are areas where we are still looking at it,’ he said, using as an example the waste-to-energy proposal as a way of dealing with solid waste disposal.
Minister of Infrastructure Arden McLean noted, however, that the privatisation of waste disposal could end up costing consumers more because the government significantly subsidises the cost of waste collection and disposal, where a private company would not.