The UK has sent the Cayman Islands
government a clear message: The borrowing limits set by the Framework for
Fiscal Responsibility must be achieved to ensure that Cayman’s government
finances are credible and sustainable.
This pours cold water on any plans
government might have harboured to increase government spending to stimulate
the economy. It effectively leaves public-private partnerships as the only way
to get major public projects off the ground.
The premier concedes as much, but is
concerned that they will be more difficult to achieve. If a public project is
truly needed, and more than simply a labour creation effort, the profits
involved will make it a viable venture for a private partner.
Rather than blame the UK or proclaim that
government’s hands are tied, this is an opportunity for the new government to
address the most important issues that the Cayman Islands are facing: A bloated
civil service, an ever-increasing budget, growing debt and inefficient
statutory authorities and government companies.
All of these have become a drag on the
economy and the ability to create jobs. And although government debt is not as
visible as government hand-outs, it has become a burden for the community.
Reducing debt and bringing government
finances in line with the parameters of the Public Management and Finance Law
is not just an academic exercise; it serves a practical purpose.
Every single year, the Turtle Farm loses
more money than the University College of the Cayman Islands spends to give
Caymanians the higher education they need to succeed.
Every year, government supports Cayman
Airways with significant funding that will not be returned – in the last year
to the tune of $23 million. This is more than $400 for every man, woman and
child in the Cayman Islands. Or, if one wants to look at it in another way,
more than $62,000 per airline employee.
The interest on government borrowing alone
is $35 million to $40 million every year. This is about $700 per resident,
which no doubt could be spent in the community in a better way.
“Prudent fiscal management and effective
fiscal planning is fundamental to economic success of all overseas
territories,” said Mark Simmonds, the UK’s overseas territories minister.
This is not hollow finance talk. It is
important to realise that we can only spend what we have. Every time government
spends more than it receives in revenue, ordinary Caymanians will ultimately
have to pay for it.
In a pay-now or pay-later scenario, any
government would be tempted to spend now and let later governments deal with
Fortunately for Cayman, the UK government
is not going to allow it. This has nothing to do with austerity, not least
because government expenditure continues to rise.
This government has the opportunity to put
Cayman on a path to stability that will distinguish the islands from the vast
majority of other countries that have decided to load their current fiscal
problems on the backs of future generations.
The good news is that the economy is
growing, albeit slowly, and that government is expecting a surplus for this and
the coming budget year. It should be used wisely.