Opposition Leader statement on finances

Editor’s note: The following statement by George Town opposition MLA Kurt Tibbetts has been published here in its entirety:

On Friday, 12th June the Leader of Government Business issued a statement setting out what he alleges to be the financial position of the country as advised by the Financial Secretary. Astonishingly, the statement makes assertions which run completely counter to detailed information provided to the PPM Government by the Financial Secretary just two weeks before the General Elections.

The LoGB claims that in the 3 weeks that elapsed between the last briefing given to the Cabinet by the Financial Secretary on 5th May and the swearing in of the new Government on 27th May the financial position of the Cayman Islands Government deteriorated from a projected operational deficit at the end of June of $29M to a figure now expected to be $74M. He also stated that the country’s reserves or ‘cash balances’ are expected to decline from the previously projected $126M to CI$17M at the end of the same period.

The statement made by the LoGB has understandably caused great concern in the community and beyond. As the former Leader of Government Business it has taken me some time to respond to what has been alleged because it has been necessary for us, as the former administration, to carefully analyze what has been said and to investigate the allegations, insofar as that has been possible. As a result of our analysis and investigations we have concluded that much of what has been said by the LoGB in his recent statement grossly misrepresents the actual financial position of the country. We believe that such misrepresentation is deliberate and designed to make the stewardship of the country’s finances by our administration look as bad as possible. And we say this notwithstanding that the Financial Secretary has recently been reported as confirming the allegation that the projected deficit has now been revised upward to the huge sum of $74M.

There is something radically wrong with the picture painted by the LoGB and apparently endorsed by the Financial Secretary. The variance between the previous projections made by the Financial Secretary to the PPM Government and the recent announcement by the LoGB is so great that it defies belief.

No amount of incompetence could possibly have led to projections which were so hopelessly off. There must be another explanation. It is inconceivable that the Financial Secretary has suddenly discovered that the advice and information which he consistently provided to Cabinet over the course of the past year and right up to the eve of the elections was completely wrong. Either the PPM Cabinet was deliberately and consistently misled by the Financial Secretary or the true position is now being misrepresented to paint as bleak a financial picture as possible and to make the former PPM administration appear in the worst possible light.

In view of the gravity of this matter, I call on the Financial Secretary to immediately convene a meeting of Finance Committee in order that the true state of the finances of the country can be properly enquired into and made known to the public. Broad and sweeping statements such as the one made by the LoGB on 12th June, parts of which have been confirmed by the Financial Secretary, are not satisfactory given the Financial Secretary’s previous advice to the PPM Cabinet only two weeks before the elections.

There are issues that demand explanation and questions which require answers by both the LoGB and the Financial Secretary.

When Finance Committee met on 20th March, 2009 the Financial Secretary told members that the Revised Forecast Financial Results for 2008/9 indicated that revenue would be down by approximately $21M from the budgeted sum of $528M and that this, coupled with significant unbudgeted expenditure, would result in a projected operational deficit of $29.4M. The Financial Secretary also advised members at that time that the Government was also expected to have cash or cash equivalents of $126M at the end of the current fiscal year, 30th June, 2009. (The Revised Forecast Financial Results for 2008/9 are posted on the Cayman Islands Government website.)

On 5th May, just two weeks before the General Elections, the Financial Secretary submitted to the Cabinet a ‘Cabinet Note’ dated 30th April, 2009 which together with appendices ran to 37 pages and in which he set out in extensive detail the financial position of the Cayman Islands Government as at 31st March, 2009.

The appendices included documents entitled ‘Cayman Islands Government: Operating Statement – Period to 31st March 2009, Balance Sheet, Cash Flow Statement, Appropriation Statement, Expenditure in Excess of Appropriations, Appropriations Fully Used, Appropriations Not Used, Detailed Notes to Balance Sheet and Aggregate Cash Balances as at 31st March, 2009‘ . Importantly, in his ‘Cabinet Note’ the Financial Secretary represented to the Cabinet that the documents he submitted set out the actual state of government finances as at 31st March, 2009. These were not projections, but the actual numbers.

According to the Cabinet Note and appendices submitted to the Cabinet by the Financial Secretary on 5th May, the actual operational deficit of the government as at 31st March, 2009 was $18.8M. The Cabinet Note also stated that the actual cash balances of the Government as at 31st March, 2009 totaled $110M made up of unrestricted cash of $29.M and restricted cash of $80M. The Financial Secretary also assured Cabinet that the projected operational deficit of $29M and projected cash balances of $126M at the end of June were holding true.

I call upon the Financial Secretary to explain to the country:

1. The basis for the vastly different state of the government’s finances he and the LoGB are now presenting to the country compared to what he told Finance Committee in March and what he told Cabinet in early May of this year.

2. What instructions he has received from the present government regarding the management of government finances.

3. Have these instructions caused him to revise his earlier projections regarding the state of the government’s finances?

4. Have any policy decisions been taken by the present government regarding additional expenditure during the present fiscal year which has negatively impacted the projected operational deficit or cash balances of the government?

5. What is the current undrawn balance of the CI$154M loan facility which was approved by Finance Committee in May of last year for use during the current fiscal year?

6. Is it proposed that the entire approved loan of CI$154M be drawn down and utilized in the present fiscal year?

7. What will be the impact on the government’s finances if the entire loan amount is not drawn down in the current fiscal year?

Answers to these questions must be forthcoming. The fundamentally different positions taken by the Financial Secretary in a matter of mere weeks and the radically different advice that he has given to the former and present governments raises serious issues not only about the state of the finances of the country but also about the competence and integrity of the Financial Secretary and the advice and guidance which is provided to the Cabinet by the Portfolio of Finance and Economics.

There is no question that the LOGB and his government have every interest in painting the stewardship of the country’s finances by the former PPM administration in the worst possible light. I’m afraid that is simply the nature of politics. And there is also no doubt that the global financial crisis over the past year has presented perhaps the most serious challenges to managing government’s finances that the country has ever known. The coming year and indeed the years ahead will also present major issues in this regard. But if we are to meet these challenges effectively, the true state of government’s financial position must be made known. And that position must be presented fairly and objectively and free from bias and political considerations.

For the reasons I have set out above and indeed for a number of others which I have chosen not to raise in this statement, we do not believe the statement made by the LOGB on 12th June truthfully reflects the present financial position of the government. Again, I call on the Financial Secretary to publicly answer the questions I have posed in this statement and to convene a meeting of Finance Committee immediately so that these important issues and others raised by the LOGB in his statement can be properly ventilated and the true state of the government’s finances can be made known.