The association that represents Cayman Islands civil service workers has warned that “privatization is not a panacea” in solving government’s budget crunch.
A letter sent to all government workers from Cayman Islands Civil Service Association President James Watler Thursday indicated the association’s view that privatizing or selling public sector assets doesn’t make sense in many, if not most, cases.
“Governments do offer services that cannot be privatized, outsourced and/or sold, not just because they will never be profitable, but also because of the social impacts of the profit or the loss of the service,” Mr. Watler wrote.
For instance, among the recommendations in a consultant’s report completed last week by accounting firm Ernst & Young, were proposals to sell assets or portions of assets such as the Cayman Turtle Farm, the Postal Service and Radio Cayman. The turtle farm is losing $9 million to $10 million per year in operational and debt servicing costs, the government radio station requires a $1 million per year subsidy to keep operating, and the postal service also requires government financial backing to stay afloat.
“The country must recognize that privatization is not a panacea that, when poured down upon a public service, will miraculously cure all ills,” Mr. Watler said.
“We also want to emphasize that, like any other government initiative, in order for true success, it is the individual civil servants that must make it happen. Thus, our involvement is critical.”
Officials with the Portfolio of the Civil Service met with association leaders prior to the release of the EY report last week. The 240-page report was released to all government workers via internal government email before it was given to the media.
Deputy Governor Franz Manderson has promised that any civil service workers who face outsourcing or even job loss would be treated fairly and with respect. However, Mr. Watler warned in the letter that the association would also be looking out for its membership.
“[We] look to ensure that the employer’s moral, contractual and legislative obligations are honored,” the letter states.
Both Premier Alden McLaughlin and Finance Minister Marco Archer said early on in their administration’s term that privatization of government services would be necessary as Cayman battles with an unwieldy public service that now employs in the neighborhood of 6,000 people. That’s about 17 percent of the country’s entire workforce.
Mr. Archer, in a speech before a government professional development conference in December, said government must bring public sector finances within U.K.-required limits by mid-2016.
Current budget numbers, he said, particularly those involving government’s statutory authorities and government-owned companies, could be used to make a case for privatization.
For example, in the 2013/14 fiscal year, which ended in June 2014, 18 percent of government’s operating expenditure, or $100.1 million, went to purchase outputs and services from the statutory authorities and government-owned companies. Nearly 50 percent of government’s capital [construction] expenditures, $24.6 million, will go to statutory authorities and government-owned companies.
“Collectively, the [statutory authorities and government-owned companies] are expected to generate a net profit of $5 million during the 2013/14 fiscal year,” Mr. Archer said. However, the minister indicated the administration would not support random privatizing of certain public sector services without “careful consideration” and that the government was only taking a “global” look at it presently.
Premier McLaughlin said in February, and has repeated several times since, that attempts at whittling the edges of the government budget by delaying supply purchases and waiting for attrition through worker retirement or expiration of contracts has not significantly reduced spending and may have made the civil service less effective.
“The reality is that, if government is to significantly and permanently reduce its head count … government is going to have to hive off some of the services it currently provides to the private sector,” he said.
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