Barlow: How to balance a budget

Gordon Barlow

The process of “zero-based budgeting” is familiar to everybody who has ever been involved in starting a private business, and to most people who have bought existing businesses. All it means is, justifying every dollar spent. Right away, you can see why it’s not popular with government bureaucrats.

Every new venture of theirs starts with plenty of cash in hand and with instructions to spend it all. Their job is to provide the authorised service within the authorised budget. They’re not asked to minimise expenditure. For existing government services, each annual budget is based on the preceding year’s expenditure. New expenses are required to be justified, but no existing line-item has to be justified ever again until the end of time. It is presumed to be justified, even when it obviously cannot be.

Whenever civil-servants say they have cut back on expenses, they mean they have cut back on budgeted expenses, not actual ones. That’s the way they think. “We have cut expenses 10 percent! Are we being ruthless, or what?” Well, no, the reduced expenses are below the budget for the current year, but higher than last year’s actual. “Government accounting” is a different beast from real-world accounting. The former doesn’t even have to justify a purpose. That, too, is presumed to be justifiable, however many years have passed since it was originally justified.

Zero-based budgeting would require the closing down of Cayman Airways, for instance. Its formal purpose – bringing tourists to Cayman – could be served by paying foreign carriers a few million a year to guarantee a certain number of flights. Five million dollars, tops. We’d still be saving 20 or 30 million each and every year. Is Cayman Airways worth raising taxes for? Oh, please!

The formal purpose just wastes time and money; yet it goes on and on like the Energizer Bunny. The true-but-unacknowledged purpose is to provide free trips to and from Florida for the families of government employees, past employees, friends, friends of friends, old Uncle Tom Cobbleigh and all. It’s simply a variation of the petrol-card scam – free use of the public’s assets.

(The total of all the Cayman Airways subsidies – overt and covert, and you can bet there’s plenty of covert – over the years is about equal to the entire Public Debt. That’s irresponsibility of a very high order.)

All these years, you know – all these years! – Cayman could have been running substantial Public Revenue surpluses, not deficits. Ours is a wickedly rich little Island, and we should have no public debt at all. Our representatives have acted with all the restraint of kids running wild in a candy store.

A few years ago, the British FCO turned up and demanded that our local politicians and bureaucrats balance their budgets. No more borrowing to finance operating expenses. No more “cheque-book accounting” – spending whatever is in the bank and leaving nothing for a rainy day. Public Revenue doesn’t have to increase year after year after year; tax-increases are not the best option.

After a lot of argie-bargie (an income-tax was one of the sillier ideas, rejected out of hand by the local politicians), the FCO settled for imposing a modicum of fiscal self-discipline – at least at the level of day-to-day expenditure. Hundreds of millions of dollars continue to be wasted every year on sacred cows, bloated bureaucracy, and penny-ante corruption such as the theft of government petrol. Even the mighty FCO and its colonial administrators cannot change the culture of political and bureaucratic entitlement that wastes those hundreds of millions each year.

Our government receives far more in taxes than it can sensibly spend, and at least half of it comes from non-residents – visitors and “offshore” companies. (Imagine what a state our government would be in if it relied on residents for all its revenue!) My next guest-column – if there is one – will focus on the millions successive generations of politicians and senior civil-servants have wasted on government’s education programs, and why so many Caymanians are unemployed and largely unemployable.