More cuts ahead for civil service

The
Cayman Islands’ upcoming budget won’t be the last cost-cutting exercise
government workers will have to go through.

In
fact, the 3.2 per cent pay cut as of 1 July appears to be just the tip of the
iceberg, according to a three-year budget forecast presented to the UK government
earlier this year.

The
medium-term plan was ordered by the UK’s Foreign and Commonwealth Office, in
part to prove Cayman was serious about cost-cutting and bringing its
deficit-riddled budget back into line with legally required financial
standards.

In
addition to the pay cut, an initial request for $14.6 million worth of positions
within the civil service for the 2010/11 budget year was reduced to $4 million
– meaning government won’t be able to make nearly as many new hires or fill as
many vacant positions as they come up.

Cuts
in civil servant allowances of between 50 and 75 per cent were anticipated to
save government some $6 million this year. But it doesn’t stop there.

The
three-year plan envisages a total personnel cost reduction of 7 per cent in the
2011/12 budget year and a further 3 per cent cut in the 2012/13 year.

“These
targets will be achieved through a combination of divestment or restructuring
of department as well as through discussions between the governor…and the civil
service,” the report states.

Non-personnel
related costs will be cut a total of 10 per cent between July 2011 and June
2013. This will be achieved partly by lowering rent costs for government office
space by moving into the new administration building on Elgin Avenue.

Further
reductions will be made through what Premier McKeeva Bush has described as a
comprehensive reform of the public sector. This includes implementing the recommendations
contained in the Miller Commission report that was released earlier this year.
The report recommended the privatisation of many government services and
outsourcing the job functions of others. The three-year plan also calls for
severe limits on the construction of new government facilities. Cayman will
seek to limit new capital expenditures to $25 million each year for the next
three budget cycles.

This
limitation does not include certain government projects already under way,
including the construction of two new high schools on Grand Cayman and the
completion of the government office accommodation project, which is due to be
completed in January.

The
three-year plan includes an extensive list of capital projects. However, the UK
did not agree to the full amount of borrowing Cayman Islands officials asked
for. That initial sum – $208 million – was reduced to $155 million by the UK,
which basically forbade Cayman from borrowing any further in the coming year.

According
to government estimates, personnel costs are expected to drop from $228.6
million in the 2010/11 budget year to $206.2 million in the 2012/13 fiscal
year. Overall expenses during that time are forecast to drop from $508.4
million to $462.3 million.

UK
Foreign Office Minister Henry Bellingham called the goals set out in the
three-year plan “ambitious”.

“The
measures contained within the three-year plan must be fully implemented,” Mr.
Bellingham wrote in a 10 June letter to the premier, adding that Cayman should
seek to restructure existing loans and make efforts to pay off its debts.

Mr. Bellingham said
the foreign office remains “concerned” over Cayman’s current level of
borrowing.

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