The United Kingdom has given conditional assent to Cayman’s 2012/13 budget, clearing the way for the spending plan’s passage by the Legislative Assembly this week.
However, that assent came with some serious strings attached – measures that will give the overseas territory’s Mother Country much more control over current and future budget cycles and proposals.
Cayman Islands Premier McKeeva Bush hailed the agreement on Friday, saying it validated his government’s decision to carry the budget process forward even though the UK Foreign and Commonwealth Office and Overseas Territories Minister Henry Bellingham hadn’t given formal approval of Cayman’s $567 million spending plan.
“If we had followed the thinking of the opposition and independent members of the House and other critics to wait for formal notification, where would we be today?” Mr. Bush asked during a Friday afternoon news conference at the Legislative Assembly building.* “We would have had to scramble [this] week to meet the deadline for passage of the Appropriations Bill. The course that we have taken in making significant progress in the legislative phase of this budget process was the correct decision.”
It may have worked for Cayman in the short term; however, Opposition Leader Alden McLaughlin questioned what effects the stipulations agreed with the UK would have on Cayman in future years.
“These financial requirements are very strict and it’s going to be a real challenge,” Mr. McLaughlin said.
He also noted a major shift in governance responsibilities away from the elected government.
“Essentially, what the UK has done is transfer one of the principle functions of the minister of finance away from that person and given it to an appointed board,” Mr. McLaughlin said.
Mr. Bush said he was well aware of the agreement’s requirements and blamed the previous People’s Progressive Movement government, of which Mr. McLaughlin was a part, for putting him in a position where he was forced to accept.
“I’ve never appreciated the boot on my neck,” he said. “I certainly don’t appreciate the government that left us in this situation.”
Although he lamented that Cayman had lost its “economic sovereignty” to the UK in the 2012/13 budget, Mr. Bush said the four-year plan for Cayman’s finances would put the country back on “sound economic footing”.
Mr. McLaughlin wondered where Mr. Bush’s government had been the last three-and-a-half years.
“These problems that we had were all addressable,” the opposition leader said. “This government has not taken the necessary steps to get expenditure and borrowing under control.”
Minister Bellingham was expected to send a formal letter assenting to the Cayman Islands budget and setting out the conditions under which that budget would be agreed with the UK this week.
There are four major conditions set forth by the UK.
First, the government must pass the Framework for Fiscal Responsibility into law by next month.
The framework was an agreement signed between the Cayman Islands and UK governments last year that sets out a number of spending restrictions, management and audit requirements, as well as bidding processes for the government to follow. It’s believed the conditions of the framework will be imbedded into the territory’s Public Management and Finance Law.
Second, there can be no supplementary budget during the 2012/13 budget year, unless it is to fund recovery from natural disasters.
It was not immediately clear whether this requirement had been extended to other budget years. In the previous budget, 2011/12, Cayman added $49 million in additional spending just a few months before the end of the financial year on 30 June.
Third, the Cayman Islands government agreed to assist the UK’s appointed economic adviser in periodic budgetary reviews during the fiscal year, of which there can be as many as four. These are expected to be quarterly reviews. Whether the UK would be required to report the results of its findings to the public was unknown at press time. Cayman Islands Governor Duncan Taylor made no comments regarding the budget agreement or UK conditions Friday.
Finally, a “budget board” will be established, to be led by Cayman Islands Deputy Governor Franz Manderson and to consist of an unknown number of members.
The members can include certain representatives from the private sector. The board will assist government in setting longer-term fiscal plans and policies between now and 30 June, 2016. It was the formation of this “budget board” that most concerned Mr. McLaughlin, who noted it was possible the board would continue to be in existence even if Mr. Bush’s United Democratic Party government did not get elected to a second term.
“It’s a retrograde step,” Mr. McLaughlin said. “[The 2009 Constitution] gave responsibility to financial matters to a locally elected minister of finance for the first time; this was something the UK wanted to include.”
Also, the oversight of a UK-appointed economic adviser threw into question the role of Cayman Islands financial secretary – a role not specifically defined within the 2009 Constitution.
Contacted Friday, Financial Secretary Ken Jefferson said he did not wish to comment on the budget conditions.