In a brief letter sent to Cayman
Islands Premier McKeeva Bush, United Kingdom Foreign and Commonwealth Office
members indicate that Cayman has agreed to provide the UK details of a three-year plan to
fix public finances.
That plan – expected to be
contained within the Cayman Islands budget proposal for the upcoming fiscal
year – is due to be presented to UK officials by the end of this
month. That’s one month earlier than the proposal will come to the Legislative
Assembly and the general public on 30 April.
The timeline gives the impression
that the United Kingdom
is seeking more input into – even control over – Cayman’s budget decisions in
next year’s spending plan.
“We will be happy to discuss your
borrowing requirements once we are satisfied that you have a credible and
deliverable plan to balance public finances within the next three years that
can be presented through your budget in April,” wrote Foreign office Director
Colin Roberts in the letter, which was dated 12 March.
Director Roberts also said UK officials found it “disappointing” that a recent
independent review of Cayman’s financial position – dubbed the Miller Commission
report – did not provide a “robust, quantified assessment” of potential new
revenue measures in the Cayman Islands.
The United Kingdom has been pushing its
overseas territory since last year to implement some form of direct taxation –
property or income tax – to help support its public sector budget. Premier Bush
has steadfastly refused to do so.
Mr. Roberts stated that the UK
remains firm in its belief that Cayman’s budget plan for the 2010/11 fiscal
year – which begins 1 July – must include “careful consideration” of new
revenue-raising measures, as well as cuts to public spending.
“The poor performance of revenues
relative to forecast this year further reinforces the case for action to be
taken to diversify the revenue base and improve forecasting performance for
years to come,” Mr. Roberts wrote in his letter.
“The (FCO) Minister would be
surprised if new (revenue) measures are not brought forward as part of your
plan,” Mr. Roberts added.
Mr. Bush has repeatedly stated that
direct taxation would have a harmful effect on Cayman’s future as an offshore
finance centre. He has instead proposed a number indirect revenue measures –
mainly targeted at the finance industry – as well as some cost-cutting plans
and proposals to sell or divest certain government assets.
The UK has previously not spoken in
support of such public-private partnership measures, and Mr. Roberts’ 12 March
letter was no exception.
“Such initiatives, if not carefully
handled, risk becoming a long-term liability to the Cayman
Islands,” Mr. Roberts wrote, “further increasing the gap between
operating revenues and expenditure, and further reducing flexibility over
expenditure in future years.
Cayman’s operating deficit in its
current budget is projected to be CI $56 million by 30 June – the end of the
current fiscal year.
Government officials have proposed
a number of options, including cutting civil servants salaries, and cutting
government department budgets by 15 per cent or more to help lessen the gap.
However, even those measures were not expected to balance Cayman’s operating