“The deputy governor [said] that it was important that a comprehensive report be prepared that will allow ministers to determine what services provided by the government should be abolished, amalgamated or privatized,” according to a record of a Sept. 16 civil service chief officers meeting.
“It was agreed that civil servants should not be asked to perform this work and that expertise from outside of government was necessary. However, it was important for ministers to also hear the views of chief officers.”
If the outside review is undertaken, it will be the fourth such review within the past few years.
“Project 1,” which started last year as a restructuring effort in the government service, led to the formation of two new ministry positions and the combining of others. Another review started under former Deputy Governor Donovan Ebanks identified in several stages some cost-cutting possibilities, only some of which were put into effect.
In early 2010, the government released the Miller-Shaw consultancy report which exhaustively identified privatization opportunities within government entities as well as areas where the public sector could outsource or reduce employees.
Current Deputy Governor Franz Manderson said civil service personnel costs were reduced by about $12 million during the recently ended 2012/13 budget year. However, the cost cutting was partially negated by spending on health care, legal aid and other budget items.
A similar $12 million reduction was anticipated in the 2013/14 government spending plan, set to be released in the Legislative Assembly on Monday, Premier Alden McLaughlin said.
Mr. McLaughlin said Tuesday that the UK’s foreign office had approved the government’s full 2013/14 budget along with its four-year spending plan in line with the established Framework for Fiscal Responsibility. That plan includes no new long-term borrowing for government through the 2016/17 fiscal year and agreements that no supplementary expenditures would be undertaken during the course of the budget year.
Premier McLaughlin allowed in a public address last week that government was engaging in “cost containment” measures in recent years that were not sustainable in the long term. Those include deferral of hiring key personnel or purchasing certain supplies “which you can only do for so long.”
The core government service has steadily decreased over the past five years, from more than 3,800 employees at its height in 2008 to just over 3,500 today.
However, employment in the related statutory authorities and government-owned companies has not kept pace, according to a government human resources report completed for the 2011/12 financial year.
Between June 30, 2011, and June 30, 2012, entire public sector jobs increased by 91 positions, according to the report. In mid-2011, there were 5,810 people employed in the entire public sector; 3,619 in the civil service/core government and 2,191 in the statutory authorities and government-owned companies.
“Seventy-eight percent of the [91 employee] increase [came] from the statutory authorities and government-owned companies, and 22 percent [came] from core government,” according to the human resources report for 2012.
Mr. Manderson has said that overall government service numbers dropped during the 2012/13 budget year, but a full-year human resources report has not yet been made public.
Mr. McLaughlin has said that privatization initiatives would be considered going forward, as government continues to seek ways to cut costs.
“We are fast reaching the point that, unless government is prepared to take hard decisions to divest itself of certain services, that we are not going to be able to drive down costs,” he said last week.
The premier said government would look at “hiving off” some of the services it provides, but has not determined which services.
“As far as true privatization, the only [government entities] people express an interest in buying are the profitable ones,” Mr. McLaughlin said.
Some government-owned companies and statutory authorities make money each year, such as the Water Authority-Cayman, the Civil Aviation Authority and the Maritime Authority. Others are perennial money-losers, such as the Cayman Turtle Farm and Cayman Airways.
The government projected a $1.6 million surplus in the overall operations of statutory authorities and government-owned companies for the 2012/13 budget year. However, certain initial expenditures – such as an $18 million stipend from Cabinet to Cayman Airways – are not counted in the “surplus” total.