Today’s Editorial for October 30: Budget scalpels and hatchets

During the United States presidential campaign, the two candidates have debated whether it is better to use a scalpel or a hatchet in effort to balance the American budget.

The Cayman Islands Government weighed in on Cayman’s version of this debate Tuesday by saying it would hatchet the budget six per cent across the board to offset a predicted $15 million shortfall in previously estimated revenues.

We applaud the fact the government has recognised revenue will not reach the figures predicted in last year’s Strategic Policy Statement.

The predicted $15 million revenue shortfall is in addition to a shortfall of $20-$25 million recognised in late April before the tabling of the 2008/09 budget.

Prior to the tabling of that budget, the government had to make some cuts to its planned capital expenditures. Apparently unwilling to delay those capital projects any further, Government has decided to instruct the chief officers of ministries and portfolios to reduce their approved expenditures for the 2008/09 financial year by six per cent.

The government cannot be blamed for the global financial crisis, which is centred in the United States, Cayman’s primary trading partner and supplier of the vast majority of its tourists.

However, the sub-prime meltdown situation and its potential effects on the global economy have been in the news all year. In February, Leader of the Opposition McKeeva Bush brought a Private Member’s Motion to the house calling for the Government to reconsider its two-year spending and borrowing plans because of the economic situation. In particular, the Mr. Bush warned about a shortfall in government revenues.

The Government roundly rejected the motion in the ensuing debate. Leader of Government Business Kurt Tibbetts said he could not accept the motion ‘even on the kindest of mornings’.

Some eight months later, the government is now faced with having to hatchet the budget because it ignored the warnings. Had they not, perhaps they could have put some of their capital projects on hold rather than entering into enforceable agreements with contractors that simply spread the expense out over an additional year.

Had they used a scalpel to eliminate non-essential spending, we would not be faced with an across-the-board six-per cent budget axing that includes essential public safety organisations like the police, fire and immigration services. Certainly, it must be better to prioritise the budget cuts.

Perhaps even more worrying is the fact that if the economic situation deteriorates any further, the revenue shortfall could be more than expected now. What will the government do at that point? Will it hatchet the approved budget by another cross-the-board percentage or scalpel out some non-essential spending? We hope it will be the latter.

BREAKOUT

Some eight months later, the government is now faced with having to hatchet the budget because it ignored the warnings. Had they not, perhaps they could have put some of their capital projects on hold rather than entering into enforceable agreements with contractors that simply spread the expense out over an additional year.

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