Economic prosperity is not a default setting

Recent headlines read ‘Britain will shed 610,000 public sector workers over the next five years as the coalition government implements the deepest spending squeeze since World War II.’

Prime Minister, David Cameron, was also quoted saying “Britain’s past prosperity does not guarantee a prosperous future and the UK must ‘reboot and rebuild’ its economy.”

He went on to say that “It is vital to cut the deficit now to avoid the situation worsening.”

This is the response of a leading nation in the world’s economy. The UK Government, after only a few weeks in power, is slamming on the breaks of spending and throwing the country into reverse gear as a matter of urgency. This is not a matter of chops instead of steak, this is a matter of can we be sure there will be food on the table. We are not facing a private recession; we are part of a global economic crisis that needs immediate attention from all of us.

Here in the Cayman Islands, the Government has put together a three year plan, ratified by the FCO and approved in the Legislative Assembly in June, and at last we are hearing some assurance that the reversal of the government’s deficit position is a “national imperative”. 

This is reflected in the five key strategies that the Government has committed to implementing over the medium term: (public sector reform, limits on new borrowing, broadening the revenue base of government, reducing operating expenditures and creating public/private finance initiatives.) The Chamber recommended these and other strategies during talks with the Premier in September 2009.

These same strategies are also supported by the findings of the Miller/Shaw report which was released in February 2010.

The private sector began its journey in cost cutting and streamlining many months ago and has taken numerous measures in order that we may successfully endure the economic transformation before us, but what many of us are facing are fee increase upon fee increase as Government looks for revenue at the expense of our bottom line.

We support the Premier’s statement that one of the key tenets upon which government policy would revolve during fiscal year 2010/11 is the minimisation of any new revenue measures on businesses, especially when it becomes a burden. It is our fear, however, that with so many of the fee increases already in place, in particular, work permit fees, port fees and import duties, that the impact on many small businesses is already a burden and these businesses need immediate relief from these recently imposed costs.

The import duty adjustment on fuel of 25 cents per gallon, whilst generating an estimated CI$10.3 million in additional revenue for Government, is another significant burden that will drain the resources of many local businesses and the community at large.

As the largest representative of private businesses in the Cayman Islands we are strongly opposed to any additional revenue measures which would further increase the cost of doing business. The majority of Chamber members are small businesses and through a recent State of Business Survey and the BE INFORMED series on Immigration we heard first-hand the very real concerns that they are facing today. Medium and long term plans are absolutely necessary but we know that many of our members are looking for some immediate reprieve in order that they may remain in business.

Our country is facing new challenges, along with rest of the world. It is time to wake up to the reality that things have changed. This is not an economic hiccup; this is an economic crisis that will not get better by itself. We can bail out banks, we can create economic stimulus, we can heap fees on private businesses, but the bottom line is unless we start to live within our means we will never climb out of the hole we’re in.

Economic prosperity is not a default setting for this or any other country. These are new times and a successful past does not guarantee a successful future. This is not merely a difficult time we find ourselves in but more of a fork in the road; one way leading to cuts and prudency and the other to an almost certain economic disaster. We need to act now, much like the British Government, and change the way we operate our Public Sector, take the burden off our Private Sector and prepare our investment environment for a brighter future. One cannot work without the other.

With the best will in the world, we cannot guarantee when or even if we will ever enjoy the same rewards of the past decades, but one thing is for sure, unless we clean house and get our own affairs in order, we will lessen that probability. Cuts first, reform second and investment third.

The cutting of public sector salaries by 3.2% is a start, and will save the government up to $9 million. But with the coming financial year’s budget forecasting at a deficit of more than $31 million, following borrowing of $155 million, in addition to the previous amount of over $350 million borrowed last year, this is clearly a drop in the ocean.

We should, however, be encouraged by the ongoing reviews of the various Government departments. The completed reviews, that involved both the Chamber and members of the civil service, have netted savings of approximately $17 million from the Department of Tourism, Public Works Department, Prison Department and CINICO. We look forward to assisting Government with further reviews to apply this same cost cutting initiative right across the board of the Public Sector. It is estimated that if similar savings can be found, this could lead to a $100 million drop in expenditure. Now we’re talking.

In summary, cost cutting, reform and the development of a long term economic strategy must continue, but from this we must emerge with a new mindset. We must learn to live within our means and manage our resources in an effective and prudent manner.
The time to act is now.