Shrinking through privatisation

 In the second part of a series on the Miller Commission report into Government spending, Brent Fuller looks at the recommendations made for outsourcing.

The Miller Commission report identified a number of areas where government could ‘shrink’ through privatisation or outsourcing.

The independent review listed six agencies within the public service that were in need of “restructuring”.

“Cayman needs to determine its own model in each case,” Mr. Miller said in response to questions about what that restructuring might mean. “A good starting point is to ask the question ‘does government need to do all of this, part of this, or none of this?’”

In most of the six agencies identified, Mr. Miller said there were opportunities for more private sector involvement, if not outright private sector ownership; evidence of apparent overpayment of staff or over-employment; or the clear need to outsource a significant portion of an agency’s current duties.

“It is common in a number of countries for the governments (both local and national) to have agency structures for the business units and functions such as tourism, inward investment promotion, and trade and business boards,” he said. “It is a question as to what is best for Cayman.”

For instance, in an island chain that depends so heavily on the tourism dollar for its livelihood, Mr. Miller questioned why there wasn’t much more involvement by the private sector in an entity like the Department of Tourism.

“There is no industry logic for all the staff to be central government civil servants,” Mr. Miller said of the department, which his report identified as having 55 employees. “Indeed, the promotion and operation of a commercial activity is best done by the commercial sector.”

Mr. Miller noted that in the UK, private sector representatives often accompany the City of London’s mayor on trips to promote the financial services industry. His Royal Highness Prince Andrew chairs a group of private business interests who promote the UK as a place engage in commerce.

Tourism makes up a far greater percentage of Cayman’s economy than the UK’s.

“The relative importance to Cayman provides even more reason for the private sector to be involved at board level in an independent agency which controls the function of tourism promotion,” Mr. Miller said.

One possible model suggested for the Department of Tourism, as well as the Trade and Business Board and the former Cayman Islands Investment Bureau (now under the Department of Commerce and Investment), would involve creation of boards that would determine which functions of those government agencies should be outsourced or awarded on fixed-term contracts.

“Such contracts would be transparent and subject to investigation by the auditor general and the public accounts committee,” Mr. Miller said. “Scrutiny by the media would further help ensure value-for-money and contract compliance.”

Whether agencies such as the Department of Tourism or the investment bureau should remain on government’s payroll was a question for the Legislative Assembly to decide.
 
Mr. Miller said restructuring within entities like computer services, the pensions office, and Radio Cayman would not necessarily mean job losses, but he indicated it would likely lead to salary reductions.
 
“Staff would only be cut (or possibly redeployed elsewhere) if they are unnecessary or unable to perform the agency’s functions or unwilling to be employed on fair market terms,” he said. “Fairness is an important criteria. All Caymanians employed in government should be able to show that they are doing their job at an appropriate and not excessive pay level.”

The functions of all three functions could be handled in the private sector, Mr. Miller said. Employees there could continue working as private sector employees, or work as independent contractors depending on what is decided.

“Computer services are increasingly being privatised and operated by outside corporations,” he said. “Government normally doesn’t write the software and there is no reason why it has to be operated by government staff.”

The National Pensions Office, he noted, was recently reported as failing to perform its contract with government – largely because the agency wasn’t staffed properly. Government ministers have already suggested moving that office’s regulatory functions into the Cayman Islands Monetary Authority.

As far as the government-owned radio station, Mr. Miller pointed out that the “world is full” of privately owned radio stations that employ their workers based on market condition.

“There is no requirement for a government to have its own radio station and in some countries such control is used to promote an anti-democratic agenda,” Mr. Miller said, adding that the option of selling Radio Cayman was definitely one to consider. 

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