Premier: $592 million budget sent to UK

Payroll tax included, revenues increased

Cayman Islands Premier McKeeva Bush said Wednesday that his government has sent details of a $592 million spending plan to the United Kingdom’s Foreign and Commonwealth 
Office for approval.  

Mr. Bush said he hoped UK overseas territories minister Henry Bellingham, who has overall responsibility for the Caribbean territories, would have a “favourable response” to the proposal – possibly 
by today (Friday).  

“The government can do no more,” Mr. Bush told a crowd of hundreds at West Bay’s Sir John Cumber Primary School Wednesday night. “We have done all that is humanly possible, but we have also done what is humanely possible.” According to figures produced for the current draft budget proposal, government anticipates $661.9 million in revenues with the 10 per cent payroll tax on work permit holders making more than $36,000 per year. The government was anticipated to spend $592.3 million for the year, which stretches between 1 July, 2012, and 30 June, 2013. Mr. Bush said that would lead to a net budget surplus of $69.6 million.  

The Premier said the initial budget “frame” provided by the UK Foreign and Commonwealth Office sought an operating surplus of around $76 million and also insisted government’s capital expenditure for things like public construction projects should be no more than $50 million for the year.  

There would be no long term borrowing measures within the government’s budget for the 2012/13 year, Mr. Bush said. However, there would be an additional $23 million in ‘equity investments’ and $33 million in capital expenditures. A level Mr. Bush said was “a historic low” in capital spending for the government.  

“This is a great achievement for the government,” Mr. Bush said.  

If the proposal receives a positive review from the UK foreign office, Mr. Bush said it was his intention to bring a budget to the Cayman Islands Legislative Assembly on 9 August – next Thursday. Cayman’s two-month temporary budget will expire on 31 August, giving lawmakers a total of 16 working days to study, debate and vote on the spending plan. Mr. Bush said his government had “not ruled out” a potential alternative to the proposed payroll tax, as long as it met the UK budget requirements.  

“But we can’t get rid of debt overnight and more so it need to be understood that this debt has resulted in the Cayman Islands government owning assets that we cannot afford,” Mr. Bush said, referring to two new government high schools now under construction and the new government administration building on Elgin Avenue in George Town.  

In addition, Mr. Bush revealed that the UK foreign office wished to see the government budget surplus in each year continue to grow beyond the proposed $69.6 million in 2012/13.  

“They want that [surplus] the next year and the next year and the next year,” Mr. Bush said “These are the stipulations the UK has on us.”  

One of the reasons for wanting the extra budget cushion is so that Cayman can fund public projects without having to resort to debt.  

Until Cayman can readjust its budget surplus and debt figures to within acceptable levels, according to the country’s Public Management and Finance Law, the UK government will have the final say on whether its overseas territory can borrow any additional monies in the future. According to information presented by Mr. Bush Wednesday night, it won’t be until the end of the 2015/16 budget – four years from now – that Cayman’s cash reserves are expected to get back into line.  

McKeeva Bush

Mr. Bush – Photo: File

1 COMMENT

  1. Is it possible to see the actual proposal the Premier sent to the UK? I’d be interested especially to see if the anticipated surplus was going to be used to pay down the debt.

  2. Here is an excerpt from the Premier’s Budget Address to the Legislative Assembly on Tuesday, 15 June 2010. It’s on page 16 if anyone cares to look.

    CAYMAN ISLANDS
    LEGISLATIVE ASSEMBLY
    OFFICIAL HANSARD REPORT
    Electronic Version
    2010/11 SESSION
    FIRST SECOND MEETINGS
    15 June 15 September 2010

    We are cognisant of the narrow nature of the current revenue base. The Government has considered the introduction of direct taxes, such as payroll, income and property tax, but aided by the analysis contained within the Miller Commission Report, we have concluded that introducing these forms of taxes would be very damaging for the Cayman Islands economy. That is why I say, Madam Speaker, that we are not going to introduce any of them. We have told the United Kingdom that, and they have understood that.

    Here is the link, but this may not come through due to restrictions on input characters in the comment section of the Compass.

    http://www.legislativeassembly.ky/pls/portal/docs/PAGE/LGLHOME/BUSINESS/PUBLICATIONS/2010-2011%20OFFICIAL%20HANSARD%20REPORT%20ELECTRONIC%20VERSION%20(JS).PDF

  3. I wonder if the government is taking into account the severe drop in property transfer stamp duty , reduced import duty revenue and less fees from work permits. As a resident and investor, I have now put my property purchases on hold and am considering liquidating what i have. There are many thinking the same way. This market cannot take another loss of population like was experienced over the last few years which will happen with this income tax introduction. Imagine 2 to 3 thousand units coming on the market for rental with no one to rent them. This course of action is financial suicide for the island as many articles throughout the world,(that investor’s read by the way!) have pointed out. I belive it was widely felt that finally with the positives of the Shetty Hospital, Cayman Enterprise city and other projects we were finally going to move forward towards prospertity. Many people including myself now feel that we will be going back to hard economic times on this island for the foresable future.Such a shame!

  4. The United States is in recession and faces significant economic issues due to over spending. The United States government spends less than 20% of their GDP.

    Bush’s spending plan is roughly more than 26% of Cayman’s GDP.

    The level of expenditure is unsustainable. Increased taxes are not a viable solution. Expenditure must be cut.

  5. Hello!
    Straight form the horses mouth not 7 weeks ago as per Completely Baffled below:

    The Government has considered the introduction of direct taxes, such as payroll, income and property tax, but aided by the analysis contained within the Miller Commission Report, we have concluded that introducing these forms of taxes would be very damaging for the Cayman Islands economy. That is why I say, Madam Speaker, that we are not going to introduce any of them. We have told the United Kingdom that, and they have understood that.

  6. This information is from the Premier’s 3 year budget forecast presented to the Foreign and Commonwealth Office on 24 May 2010. Note that he had been in office for one year at that time.

    Year 2010/2011 Revenue 509,609,000 Expenses 508,404,000
    Year 2011/2012 Revenue 529,762,000 Expenses 479,265,000
    Year 2012/2013 Revenue 564,602,000 Expenses 462,362,000

    And this is what he just sent to the FCO
    Year 2012/2013 Revenue 661,900,000 Expenses 592,000,000

    Instead of arguing over what to tax to increase revenue, the Premier needs to explain to everyone why he is unable to live by the agreement he signed two years ago, and why expenses have gone up by 28 percent or some 130 million dollars, and the snake that the PPM handed him does not cut the mustard.