McLaughlin: ‘Austerity has not worked’

PPM leader wants to negotiate fiscal plans with UK

Following the election success, the leader of the People’s Progressive Movement Alden McLaughlin has laid out his party’s priorities.  

He foresees an almost immediate meeting with the UK Foreign and Commonwealth Office to present a plan to bring Cayman back on a path to prosperity and to speak about the rebuilding of the relationship between the Cayman Islands government and the UK government. 

Rather than focus on just the next budget, Mr. McLaughlin said he wants to look at a period 
of at least four years. “There are challenges that are there now and there are challenges that are going to be there for quite some time, given the state of the global economy and given the state of the Cayman Islands government’s finances,” he said. 

“So none of this is going to be easy and we are not going to be able to fix anything by the snap of a finger. And we are certainly not going to make promises about turning the economy around in 90 days.” 

Asked whether he would demand more fiscal flexibility outside of the parameters set by the UK government, Mr. McLaughlin said he would hesitate to use the word “demands”.  

“But that is certainly something that we want to look at because austerity has not worked in Europe.” 

“I think even its strongest proponents have now to acknowledge the tremendous damage that has been done to the economies of certain countries in Europe and to people’s lives by unrealistic austerity measures,” he said. 

Mr. McLaughlin said the main priority is to restore trust and confidence.  

“We have said from the very start the most important task for any new administration is to restore confidence in government and in the Cayman Islands as a whole, because nothing else is possible without that.  

“All the things that we need to do to get the economy moving again and getting people jobs depend upon that cornerstone,” he said. 

Austerity measures, such as cutting the size of the civil service, would undermine this confidence.  

“We certainly don’t want to go down the road of having the civil service to worry again about being sent home or salaries being cut and that sort of thing. That just undermines confidence and they spend less in the economy,” Mr. McLaughlin said. 

“We can’t tax ourselves out of the recession and we certainly are not going to get ourselves out of the recession by taking measures, which cause the population and investors to be concerned about whether they’ll spend.” 

Much more developed and broader based economies than the Cayman Islands are struggling, he said.  

“Given the fact that we rely so heavily on inward investment and the confidence of people overseas who utilise our financial services, we have to bear all of that in mind. 

“There are no quick fixes,” he said.  

0
0

21 COMMENTS

  1. Alden…

    Be very careful with your rhetoric that has no basis in reality.

    Why don’t you come and live in England…or continental Europe for even just 3 months before talking about ‘austerity’ measures.

    Don’t take Europe’s conditions as any measure of Cayman’s situation;the two economic models don’t compare.

    Britain’s economy and social heirarchy is strictly government regulated and controlled, as is the rest of Europe…Cayman is a free-market economy, as is the USA’s.

    Your views of austerity measures is a very limited one and has no bearing on Cayman’s economy unless Europe is one of Cayman’s main source of economic sustenance, which it isn’t.

    Britain’s and Europe’s economic system is based on heavy government subsidy and control of the population’s economic and social life eg. health and welfare benefits funded by heavy taxation as a major pillar of the economy…with employment as a balancing factor, not as a foundation pillar.

    Cayman does not want to even think about going down that road.

    You’re not even sworn in as Cayman’s next premiere as yet and you are speaking in terms of what got Cayman in the huge debt crises that your last PPM Govt. left Cayman in…and lost you the last election.

    Cutting the spending of Cayman’s civil service and demanding efficient services is a long way off from what austerity means in Europe…and is the only route that your government should be thinking of continuing on.

    You will find that the UK and FCO will agree; they will NOT allow you to build up Cayman’s public debt to the measures that you did when you were last in power.

    Your government has 3 main tasks ahead of it…these are…

    Build a cruise berthing facility.

    Create a workable waste management system and fix Mount Thrashmore.

    Kick-start Cayman’s economy and get people back to work.

    These should keep you and your government quite busy for the next 4 years.

    0

    0
  2. Austerity measures, such as cutting the size of the civil service, would undermine this confidence. OMG! I can’t believe what I am reading here! Big government has never solved any problems in any country. But only created more of them. Does Mr. McLaughlin seriously think that inflating the still overstaffed civil service, spending more and wasting ever more millions will solve any problems? How does he want to finance new spending? How does he want to repay the loan that comes due in a few years’ time? By introducing new taxes? Does he seriously think this would strengthen confidence in the government? Or boost the economy? The only road back to prosperity is curbing excess spending. There are enough possibilities: Cayman Airways, the Turtle Farm, CINICO, NBF… And, of course, investing in the Islands’ future: cruise ship terminal, airport runway extension, incinerator…

    0

    0
  3. The comment, Austerity has not worked concerns me.
    I call out to the members of the PPM to alert their new leader to the realities of the country’s finances and that spending with reckless abandon is NOT the solution to Cayman’s problems.

    0

    0
  4. In other words thanks for voting me in. I will work hard to keep you all in Caymans welfare program and make sure everyone else still pays for it. Please hold on to your gas cards my people.

    0

    0
  5. Dontwant2come3caymananymore…

    You have to forgive Mr. McLaughlin sometimes, after all…he is a lawyer.

    And lawyers are well known for their over-use of words…add to that, he is a politician…

    And the problem compounds 100-fold.

    My advice to Alden…

    Choose a qualified person as your minister of finance…Roy McTaggart maybe ?

    And have him explain to your cabinet the difference of ‘austerity’ in the European case, as you’ve blabbed off about..

    And limiting government spending to get value for money, as in Cayman’s case.

    Please don’t elect your self as minister of finance, as the last one did…

    You, like him, obviously, don’t have a clue in matters of global economic and financial issues.

    0

    0
  6. As expected, these kind of comments will result in a major backlash from the right wing financial industry, their staff and clients.

    Although there are significantly different economic issues between say, Greece and Cayman, the fact remains that austerity measures have been proven to be an absolute failure.

    Unless, of course, you happen to be wealthy – then you have much to gain (GINI).

    0

    0
  7. Not even premiere as yet and showing his true arrogance. God help these slands with Alden as the new premiere. Even worst if he decides to make him self minister of finance. We thought we got change, but we didnt. We will never get change until you see new faces in government. He bought a bunch of new vehicles when he thought he was going to be first premiere only to have Makeeva enjoy them. I support the government that is in now fully, even though i dont think some should be in there, but i cannot support such foolish comments that no thought has been put into. Now we will all see if he really is in it for the better of our country or just for the mere social status. CUT GOVERNMENT SPENDING!!!!

    0

    0
  8. Although there are significantly different economic issues between say, Greece and Cayman, the fact remains that austerity measures have been proven to be an absolute failure

    Lets examine what austerity means…in the European economic model…and then we might figure out exactly what Mr. McLaughlin meant when referring to it.

    And don’t use Greece, use England as an example; after all, Cayman is still under British administration and economic supervision.

    Let’s start with the income tax rates, shall we

    20% on all earned income up to 35,000 per annum.

    40% up to 150,000 and…

    50%, or half of one’s earnings on anything over 150,000.

    Going to fund…

    A totally Govt. funded health service, free for all, from cradle-to-grave.

    Social welfare and housing benefits, along with child-care and a complex system of add-ons for lower income families..or out-of-work people, the ‘unemployed’.

    Along with all other essential services such as the military, police and civil service administration.

    In an economy where business regulations strangle the up-start and success of small businesses, again through excessive taxation and regulation.

    Does this sound anything like the Cayman economic model ?

    When Mr. McLaughlin runs off at the mouth about austerity in Europe, he is talking about cuts in government spending upon which almost 60% of the population have been made dependent by the LAW, not by their own economic choices…

    And having their economic earning power again limited by a lack of emphasis on making employment a priority for those same 60% who have been weaned on the social benefit system.

    Mr. McLaughlin seems to ASSUME that population employment is high on the list of European governments.

    He should give up his cushy job in Cayman and come to Europe, preferably England…

    And throw himself into the employment market here…and if he does get a job at his current salary (MLA or lawyer)…

    Tell us how he feels when he sees 50% of his earnings go to the tax man.

    This is a short tutorial on the system that Mr. McLaughlin is talking about when he talks about ‘European austerity’.

    0

    0
  9. Austerity becomes a problem when it induces drop in GDP with further drop in revenues and need for further austerity, which economists would call a feedback loop or spiral. So to understand if austerity is devastating for Cayman you should first understand how much GDP growth depends on government spending.

    Main drivers of Cayman GDP growth do not seem to be dependent on Government spending at all (compared to those mentioned European countries). Tourism? Dependent only in terms of money spent on tourism related / promoting activities. Financial services? This is even negative dependence – the more government will try to increase revenue, the less Financial part of GDP will become. There is effect on local spending by government employees though. But increasing local spending by increasing government spending will have effect with quickly diminishing returns. Deeper analysis might be needed here, but based on these three observations probability of inducing austerity spiral in Cayman is very low.

    If you take countries Alden is referring to, their main sources of GDP generation for last decades was very much linked with government spending and yes, in this case austerity is killing economy.

    Being lawyer and leader of the party, Alden is not required (in my opinion) to know ins and outs of economy related subjects. But please, please, let Cayman finally have Minister of Finance WITH financial / economics education…

    0

    0
  10. Stan…

    You couldn’t be more correct.

    I’ve known Alden since we were both youngsters…there in no one better at ‘show-boating’ than he is.

    Which is what all this blabbing off at the mouth about European austerity is about…trying to make it seem like he knows more than he actually does…about world financial matters.

    The danger is…if he really believes what he is saying, then he is already determined to challenge the current budget restraints that Britain has Cayman under…

    Which came as a result of exactly this same approach to Cayman’s govt financial policies when he was last in power.

    The worst thing is a politician who has not learned from his own mistakes dictating financial policy.

    Let’s hope this new PPM government will be wiser now than they were the last time they held power in Cayman.

    0

    0
  11. The New Premier is correct there are no quick fixes and austerity has not worked and in those thoughts we should all give him room to put in place his own methods of putting the country back together. This is his chance to make these Islands functional. He’s intelligent enough to know that its his political backside on the line if he starts out on the wrong foot. That said let us all pray for him to do what is necessary to put together ministers that will work for all the people all the time. God bless him and his government because they have a lot of work to do and let’s support him all the way.

    0

    0
  12. How silly people are…Austerity has not worked anywhere. Just keep on spending and incurring debt and all will be fine. You’ll grow yourself out of this mess. Why on earth should anyone have to sacrifice anything. Debt will strangle mankind.

    0

    0
  13. The man makes a few statements and already he is being criticized for his statements. He uses Europe to compare and he is being criticized because of the comparison. He states austerity measures will cause people to spend less, and he is being criticized. At least give the man his first 100 days as Premier before you start to criticize him.

    0

    0
  14. I am about to Roll over in coming months and my wife works here.we have to stay departed compulsory for one year.what you think,put yourself in my shoes..god bless!

    0

    0
  15. Firery ,you seem to have a personal grudge against Alden ;care to elaborate.This seems to be the driving force behind your arrogant and condescending tone.Your arrogance is coming through loud and clear.

    0

    0
  16. Bodden, it’s what it is to be the Cayman Islands Premier. Alden now gets his chance to walk in Mac’s shoes..Let’s see how loved he is after 12 months or so..

    0

    0
  17. It seems we have a lot of armchair economists on hand eager to dispense their advice on world financial matters, mixed in with those who believe that saying that austerity has not worked necessarily means that the new govt. intends to go on a ‘borrow and spend’ spree. Then there are those who are demanding that Roy McTaggart be made Minister of Finance even though he has declined to form a coalition govt. with the PPM.

    As Bodden says let’s give them a chance to explain their ideas fully before we jump to conclusions, and so far as McLaughlin has explained himself let’s take all of what he has said into account.

    It is a popular idea in the private sector that all we have to do is to cut the civil service or slash their over-inflated salaries and all will be well with govt. finances and the economy. Popular, but overly simplistic. It takes no account that unemployed persons have no money to spend and in fact may just then line up for govt. assistance at the social services dept. Taxes in Cayman are basically consumption taxes so the less spending we have the less tax the govt. receives.

    One of the reasons I am a little apprehensive about someone like Mr. McTaggart having the Finance Ministry is because, given his background in public accounting and auditing, he might think that CIG should simply be treated like a business which slashes expenses, lays off staff etc. if it is failing to make a profit, and not have a good understanding that this does not necessarily work for governments because of their wider social responsibility and because of resulting effects on the economy.

    0

    0
  18. Wow, our new Premiere doesn’t think the size of the civil service is a problem. Over 10% of the country’s population work for government. Most are overpaid for what they do, they get a full 12% pension (where the private sector pays 5% equally between employer and employee) and 100% health insurance for them and their dependents. Private sector again pays half and half and dependents are covered in full by the employee.
    I know they are not going to cut the civil service (even though they should) but at least revamp the pensions and healthcare benefits. Follow the private sector standards listed above as a first step to reducing over spending in the civil service.

    0

    0

Comments are closed.