Premier McKeeva Bush said the United Kingdom has agreed to review the Cayman Islands’ borrowing guidelines, with an eye toward relaxing the current restrictions.
The concession came during three days of meetings in London during the Overseas Territories Consultative Council with representatives of the United Kingdom government, including Parliamentary Under Secretary of State Chris Bryant.
Mr. Bush said the concession came after the Cayman delegation pushed the UK on the issue of contingent liability.
The issue of the UK’s contingent liability with regard to its Overseas Territories was the subject of a report by its National Audit Office in 1997 and referenced in the White Paper of 1999, which set out the UK’s policies for the Overseas Territories. The UK has suggested in the past that it could be subjected to contingent liabilities relating to its overseas territories, which is one reason it requires the territories to adhere to strict financial management guidelines.
However, Mr. Bush said the the UK has now agreed it does not have any real contingent financial liabilities with regard to the Overseas Territories.
‘They said they have political and moral contingent liabilities,’ Mr. Bush said. ‘We said ‘if you only have moral and political liabilities, then you have to show us where that affects your budget’. They couldn’t show us.
‘If the UK doesn’t have any contingent financial liability, then they shouldn’t be able to stop us from borrowing when there’s a need to.’
Mr. Bush said the UK is going to conduct a review of the White Paper, which sets policies for all of its Overseas Territories. However, with regard to the review of Cayman’s borrowing limits, Mr. Bush said the UK had agreed to do this as soon as possible.
The Public Management and Finance Law requires Cayman to adhere to six principles of responsible financial management. Two of those principles impact borrowing.
One principle states the combined amount of debt expenses – like interest – plus principle should not exceed 10 per cent of core government revenue. The other principle states that net debt should not exceed 80 per cent of core government revenue.
Mr. Bush said the UK has agreed to review both of those principles. If the UK agreed, legislators could amend the Public Management and Finance Law to reflect less stringent borrowing guidelines.
The borrowing limits became a big issue this year when the Cayman Islands government, as a result of inaccurate financial projects in the 2008/09 budget, sought permission from the UK to borrow more money, beyond the allowed sums.
The UK allowed some of that borrowing, with several conditions, one of which was that Cayman agreed to undertake as independent assessment of potential new revenue sources, including direct taxation. Another condition was that Cayman conducted a review of its public service, focusing first on major spending departments.
Mr. Bush said the UK was not pleased with the way the latter review has been undertaken, particularly because the Cayman Islands civil service will be conducting the review on itself.
‘I can tell you they weren’t happy with that,’ Mr. Bush said. ‘They said that in no uncertain terms.
‘They said they wanted a more objective review.’
All in all, however, Mr. Bush said he thought the meetings were productive and that he saw it as a victory that the UK had agreed to review the borrowing guidelines.
Mr. Bush said he did not have any specific percentage figures in mind as to what he’d like to see the borrowing limits changed to.
‘I’m mindful that there are certain parameters we can’t go beyond.’