Opposition party proposals to
spread the Cayman Islands’ budget deficit over the next three to four years are
based on a risky assumption, according to Premier McKeeva Bush.
That assumption, basically, is that
the United Kingdom will give its overseas territory a break.
“The PPM (People’s Progressive
Movement) would have us build a budget based on the belief that the UK
government is going to say ‘yes’ to the change,” Premier Bush said at a Tuesday
night public meeting in George Town.
The “change” referenced by Mr. Bush
means that the UK’s Foreign and Commonwealth Office would agree to relax restrictions
set on the amount the Cayman Islands can borrow and how much the Islands can
pay toward that debt each year.
Currently, Cayman can only pay off
its public sector debt at the rate of 10 percent of core government revenues.
So if Cayman has $500 million revenues, it can only pay up to $50 million in
that year toward its debts.
The idea behind the restrictions
contained in the country’s Public Management and Finance Law is to make sure
Cayman doesn’t get itself into a debt spiral, continuously borrowing more money
that it eventually will not be able to pay off.
As an overseas territory, Cayman
has to stay within the six principles of responsible financial management or
the UK can act to restrict its territory’s borrowing capacity.
Opposition party members have
previously proposed increasing the 10 per cent debt payment ceiling.
Mr. Bush said he would discuss
matters with the UK when he meets with the foreign office next month.
However, the Premier said Cayman
couldn’t be naïve going into those talks.
“My government does not have any
evidence before it to indicate the UK government’s willingness to deviate from
the requirements of the (Public Management and Finance) Law,” Mr. Bush said.
“In the preparation of the present budget, the government received six
different letters from the FCO (Foreign and Commonwealth Office). Not one of
those six letters gave any hint that the UK government would entertain a
deviation from the law.”
In fact, UK Parliamentary
Undersecretary of State Chris Bryant has consistently urged Cayman to adopt a
more predictable revenue stream – i.e. property and/or income taxes – to ensure
it can meet its obligations.
“Don’t come now and make believe
that the UK is all ready to give us three or four years of deficits,” Mr. Bush
said. “If we agree on income tax or property tax, they might allow us to spread
the deficit over two or three years.”
“But again that is if we introduce
those taxes. Is that what the PPM want?”
Opposition Leader Kurt Tibbetts has
said that his party would not support direct taxation in the Cayman Islands.
In that case, Mr. Bush said, “the
evidence is not there to support the PPM’s position.”
The government ended the last
financial year with an operational deficit of CI $81.1 million. This year, that
gap could become even larger unless the government can sell certain assets to
help balance the books.
Mr. Bush said, by law, the
government is required to produce a balanced budget each year – which means the
spending plan must contain adequate revenues to meet its expenses.
“They (the opposition party) expect
my government to present a budget to the house on this blind – or good faith –
belief. The government does not agree to that approach.
“We must not be naïve enough to
believe that the UK government is bound to our request to say ‘yes’ for our
deficit simply because the UK government at the moment practices deficit
The government expects to present
its budget to the Cayman Islands Legislative Assembly on 30 April.