Gov’tgoes from bad to worse

Inklings of budget problems the Cayman Islands government would face began to appear as early as 2007, but in 2009 the bill came due.

The announcement of a projected $29 million operating deficit was made in late March during a Legislative Assembly Finance Committee hearing.

The ruling government at the time blamed the deficit on a faltering world economy that had caused Cayman government revenues to plummet, as well as some unforeseen expenses – many of which were foisted upon the Cayman Islands by the United Kingdom.

Former Leader of Government Business Kurt Tibbetts said some $6.1 million was spent on matters related to an investigation of alleged police corruption here and that another $1.44 million was set aside for a tribunal against a suspended Grand Court judge.

‘We were obviously overruled by a higher authority,’ Mr. Tibbetts said in March, referring to the United Kingdom. ‘We simply have to bite the bullet and move on.’

Then-Opposition Leader McKeeva Bush, who had frequently criticised government spending during 2007 and 2008, said Mr. Tibbetts was merely making excuses for a budget that overestimated revenues in the first place.

‘It was more a fidget than a budget,’ Mr. Bush said. ‘Over projections were made in order to make the budget look good.’

“The government is still partying and now it has to cut back on vital areas,’ Mr. Bush said.

The party was definitely over on 12 June, following a statement from Financial Secretary Kenneth Jefferson, that government was actually running a $74 million operating deficit in the budget year that was to end on 30 June.

Mr. Bush, then the newly-elected leader of government business, said the country had also incurred a ‘record-level’ of public debt, some $590 million in total, and was expected to end the year on 30 June with only a $17 million ‘cash balance.’

‘As a result of the former administration’s failure to comply with the principles of responsible financial management that are stipulated in the (Public Management and Finance Law), the Cayman Islands government must now seek the explicit approval of the [UK] Foreign and Commonwealth Office before incurring further borrowings,’ Mr. Bush’s said at the time.

The former government, now the opposition, reacted with surprise about the extent of the budget mess.

‘No amount of incompetence could possibly have led to projections which were so hopelessly off,’ Mr. Tibbetts said in late June. ‘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…was completely wrong.”

At the end of the budget year, the operating deficit was $81 million.

It was later revealed that the financial secretary had told the previous government in February about projections of a $68 million deficit – prior to the announcement in March’s finance committee that the deficit was only $29 million.

However, previous government members argued that they had proposed a budget cutting plan in late February and early March that was essentially not followed by the civil service.

Attempting to rescue the situation, Mr. Bush – soon to become the Cayman Islands first premier – proposed a bevy of new taxes and fees. Most of the new charges take effect in January, and are expected to raise about $95 million for the Cayman Islands government in the current budget year.

A study of government revenues also got under way in November and was due to consider, among other issues, the possibility of direct taxation in the Cayman Islands.