Revenue hikes, budget cuts forecast
The Cayman Islands government is planning to cut core expenditure by nearly $15 million over the next three years while boosting revenues more than $100 million beyond what was earned in the 2008/09 budget.
The figures were presented by Premier McKeeva Bush during the presentation of the annual Strategic Policy Statement in Legislative Assembly Wednesday.
According to the estimated actual figures for the fiscal year that ended in June, government took in $487 million in total core government revenue, while spending $537 million on core government.
Forecasts compiled by the Ministry of Finance stated that government targets for the current 2009/10 spending plan included $562 million operating revenues and nearly $532 million in operating expenses. In three years time, by the 2012/13 budget cycle, those figures were forecast to be $590 million in operating revenue and $522 million in operating expenses.
While acknowledging that the Cayman Islands still faced a long road to recovery, Premier Bush told the House that signs were emerging that a prolonged downturn in the world markets would start to reverse itself by the latter half of 2010.
‘While we are not quite out of the storm, we can see ourselves approaching the end of it.’.
Mr. Bush said government would focus on four main areas over the next three years to reverse a budget crisis that saw the country end last year with an $81 million operating deficit, and having to ask the United Kingdom’s permission to borrow more money.
First, the Premier said government intends to reduce core expenses; second, he said the country would implement sustainable revenue measures; third, the leadership would aim to improve financial performance of statutory authorities and government companies; and finally, government would seek to enter private sector partnerships for large scale infrastructure development.
‘We cannot allow the government’s operating expenses to continue to grow at the rates of previous years,’ Mr. Bush said. ‘Over the past four financial years….operating expenses grew from $372 million to $526 million. This is a 41 per cent increase in four years.’
Opposition party members pointed out that the growth of government expenses – particularly personnel costs – have continued to rise over the past decade and wondered whether Premier Bush was being a bit optimistic about his revenue projections.
Opposition Leader Kurt Tibbetts said many of the revenue measures proposed in this year’s budget by Mr. Bush’s government haven’t taken effect as yet.
‘Certainly there must be some type of tracking as to whether these projections [are holding up],’ Mr. Tibbetts said. ‘We are now five months into the fiscal year. If the projections are not realised, where do we go from there with regards to the borrowing limits and everything else?’
‘Those with responsibility…should have some idea.’
Premier Bush responded that government intended to bring many of its major revenue increase proposals, including the customs tariff increase, the new business premises tax, and the work permit fee increases, to the Legislative Assembly in early December. Lawmakers were due to resume meeting on 2 December.
He said Mr. Tibbetts was aware of that fact already, and was simply making statements to stir animosities.
‘It is most difficult at this point and time to project and say that you are definitively right,’ Mr. Bush said. ‘Five months has been spent trying to get a grip on what [the previous administration] have done.
Those people who left the mess is complaining why I’m not mopping so hard,’ Mr. Bush quipped.
An independent study of government taxing options is now under way and is expected to be complete by the end of February. A former budget director for the late US President Ronald Reagan and a former UK Member of Parliament have been picked to lead the independent commission.
Mr. Bush said the earlier timeline for finishing that review, 31 December, was simply unrealistic.
UK Foreign and Commonwealth officials expressed concern on Thursday that pushing back the independent study’s timeline would serve to lessen its impact on budget plans for the 2010/11 fiscal year.
‘I reminded (the premier) of his commitment to our ministers that this should be an independent review, and he has undertaken to make some adjustment to the commission to reflect that,’ said Director for the Overseas Territories Colin Roberts during a Thursday press conference. Precisely what those adjustments might be was not clear.
‘I don’t want to pre-judge the outcome of those processes, but the issue of revenue will be a pretty live issue for the first six months (of 2010),’ Mr. Roberts said.
Also, government is conducting a personnel and services review within the civil service, to be led by Deputy Governor Donovan Ebanks. Mr. Bush said recommendations from that group would be incorporated into the next year’s spending plan.
Mr. Bush said the civil service review team would consider: ‘whether overstaffing exists in particular areas, if management needs improving, if further training is needed, and if processes needed to the be streamlined…or otherwise simplified.’
Another major initiative to be undertaken by government is to reduce borrowing levels, which are now forecast to peak at $504.6 million in next year’s budget. Government’s goal is to reduce that figure to $470 million by the 2012/13 budget.
‘My aim and objective is to bring this debt…way down by 2013,’ Mr. Bush said, adding that no new borrowings were forecast in next year’s budget.
Government members on Wednesday authorised a US$312 million borrowing under the Securities Law, which allows the Cayman Islands to go into the US financial markets to issue securities.
This money will be used to pay off some CI$154 million in bridge loan financing from last year’s budget, and an additional CI$106 million approved for borrowings made this year.
Compass reporter Michael Klein contributed to this story.