Civil service: Too big to cut?

The civil service has been targeted for some time as one of the causes of the Cayman Islands government’s financial malaise. Not least the Miller Shaw report, commissioned by government in 2009 to assess the country’s fiscal situation after the financial and economic crisis of 2008, pointed at the “crippling”, “excessive” and “unsustainable” government personnel costs as one of the reasons for the financial problems.  

According to the report, government spending grew faster than government revenues and the economy as a whole. Between the budget years 2004/05 and 2008/09 alone, government spending increased by 60 per cent. Among the different elements of spending growth the Miller Shaw report identified government personnel costs as the main culprit for excessive expenditure.  

From 2005/06 to 2008/09 total salaries and wages for civil servants surged by 46.3 per cent from $172.4 million to $252.3 million. Meanwhile the number of civil servants increased by 15 per cent between 2005 and 2007, indicating that not only the number of government employees grew significantly but also their salaries. 

Government has committed to cut the size of the civil service and noted in its Strategic Policy Statement that it has been able to reduce the number of civil servants by 5.5 per cent or 250 employees between 2008 and 2011. 

However, its means of cutting staff are limited, government claimed. “A more aggressive reduction was not pursued as the private sector simply did not have the capacity to absorb any sudden influx of workers transitioning from the public sector. With Caymanians representing close to 75 per cent of public sector workers, the result would simply be a transfer from the annual ‘emoluments bill’ to the annual ‘social assistance bill’,” the policy statement said. 

While it is true that private sector employment dropped after the financial crisis and it could be argued that its capacity to take on former civil servants was diminished, there is no reason to believe that all qualified civil servants would be unable to find a job in the private sector, under Cayman’s work permit regime. 

It is also unclear why a reduction of civil service workers would result in “a simple transfer” from the ‘emoluments bill’ to the ‘social assistance bill’ when even in the most generous social welfare states social assistance is, as it should be, lower than emoluments.  

Yet, what is clear from the statement is the desire to use the civil service to keep unemployment down. 

As a result any reduction in the number of civil service employees has to come from natural attrition. Plans are to reduce the civil service headcount by 360 during a period of five years. About 145 positions that were left unfilled in 2012/13 will count toward that figure. In addition a moratorium on new hires continues. The civil service also committed to cutting a total of $10 million in operational expenditure, including a 3.2 per cent pay cut and subsequent pay freeze for the budget year.  

Speaking at a Chamber of Commerce District Candidates Forum in Bodden Town on 9 April, PPM candidate Wayne Panton said, “I’m pleased to see some of the progress that the Deputy Governor [Franz Manderson] is doing to reduce the size and cost civil service… We’ve got to find ways to migrate civil service jobs into the private sector. That will reduce the cost of government.” Responding to a question on how reduce the cost of living in Cayman, Mr. Panton said, the cost of living is high because of fee increases, such as those on fuel duty, which in turn were prompted by the large size and cost of the civil service. The issue, he said, had to be addressed together with the rollback of the most “egregious” fees. 

As government personnel costs represent nearly half of government’s operating expenditures – between 40 and 47 per cent – civil service staff numbers and salaries are difficult to ignore when attempting to solve government’s financial troubles.  

But when asked by the Chamber magazine what they regard as a national issue only one candidate, independent candidate for George Town Roy McTaggart, even mentioned the civil service. “We must look at new efficiencies in the civil service, collections of revenue that are not being enforced and, quite possibly, the privatisation of those services that the private sector can do more reliably, efficiently and at less cost,” he said.  

When asked directly, many of the current candidates agree the civil service should be cut. But, given that 3,000 Caymanian civil servants equate to 3,000 voters, not counting their family members, candidates are understandably coy about eliminating the jobs of Caymanian civil servants.  

During a March forum at University College of the Cayman Islands, Cabinet minister Mark Scotland, a People’s National Alliance candidate for Bodden Town, said government has both a revenue and expenditure problem. “At present, in the current economic climate it is very difficult to cut Caymanian bodies from the civil service to go find jobs that do not exist in the private sector,” he said. 

West Bay independent Tara Rivers in turn argued there is plenty of waste and inefficiency in the government budget that can be cut without having Caymanians lose their jobs.  

George Town United Democratic Party candidate Jonathan Piercy said he supports “right-sizing” the civil service by enhancing areas of government that bring in revenue and retraining civil servants to fill other roles, for example.  

At the Chamber of Commerce Forum in East End on Monday, 8 April, independent candidate John McLean Jr. said he also supported reducing the civil service. “Definitely, we have this elephant and it’s only getting bigger.” But, he went on, stating a reduction should not apply to locals – it would have to be people on contracts from overseas.  

Arden McLean, independent candidate in East End, retorted saying he believed the number of civil servants who were foreigners was less than 10 per cent. He didn’t see how the civil service could lose employees except through attrition. He supported selling such things as the Turtle Farm. “We need to make government more efficient and introduce more technology,” he said. But civil servants must do their job: “A day’s work for a day’s pay”. 

Speaking at the UCCI candidate forum in March, George Town independent Stefan Baraud said he also in favour of privatising certain money-losing entities to improve government finances. “Government should not be in the business – it should not be in business, period. It’s there to provide a service. It should not be in the business of the Turtle Farm, for example,” Mr. Baraud said. In addition, he supports reviewing the salaries of all ministers. 

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The Government building where many civil servants work. Photo: File
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3 COMMENTS

  1. The public sector is too large. It can only be trimmed by MLA’s. MLA’s are elected by Caymanians, many of which civil servants. No civil servant would vote for a candidate who vows to cut his job. So none of the MLA’s who are elected will cut public sector jobs. Kind of a catch-22 situation, isn’t it?
    I can see two solutions: 1. A binding agreement by all parties and candidates to reduce the civil service’s size by so many % over the next few years. This should happen before election day, and it would keep this issue out of the campaign as no candidate could gain any votes by keeping the goverment’s size.
    2. Given that current public employees’ salaries are only the tip of the iceberg, and that free healthcare and especially their pension benefits will cause a fiscal hurricane for the next generation, a voluntary termination scheme should be put in place. Every government employee who gives up his job could be entitled to an increased severance pay. True, this would cause some additional costs in the short term, but these would be far outweighed by savings in pension payments later on. Remember, the government’s future pension liabilities are not properly accounted for, but can only be estimated. Haven’t I read a figure of nearly 800 million the other day? Am I the only one who is scared?

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  2. One relatively simple cut that could be imposed would be to impose the retirement age limit. The CS is full of people well past retirement age, collecting pension and salary, and blocking advancement and recruitment of younger Caymanians.

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