Civil service leaders have been told to help slash almost $50 million from the government’s budget by the end of the year as public spending creeps towards the $1 billion mark.
Premier and Finance Minister Wayne Panton, in an internal memo dated 11 Aug. seen by the Cayman Compass, instructed all chief officers to help find savings of $47.1 million, or 8.5% in forecast expenditure, for the remainder of the 2023 financial year.
Panton, in the memo to chief officers and financial officers and copied to Cabinet ministers, parliamentary secretaries and caucus members, said “hard decisions” would have to be made to “achieve affordable financial targets and ensure compliance with the principles of fiscal responsibility”.
In issuing his call for cost cutting, the premier said, based on the current run rate of actual operating expenditure as of 30 June 2023, “the Government is on the path of exceeding CI$1.0 billion in operating expenditure in 2023 with further growth in expenditure for the 2024 and 2025 budget years”.
The Compass has reached out to the Office of the Premier for comment on the memo and is awaiting a response.
Cuts made over last few months
The memo comes in the midst of ongoing budget preparations.
The fiscal package for 2024 and 2025 is due later this year and is expected to be presented when Parliament convenes for the new 2023-2024 legislative session.
Panton, in his memo, said the revised position following the slashed expenditures “will inform the basis for the 2024 and 2025 operational expenditure budgets”.
He told his parliamentary colleagues, “it is important that Ministers/Official Members play a part in reinforcing this message to all of the agencies under their respective areas and take clear actions to restrict operating expenditure”.
Noting that this will mean that “hard decisions will have to be made regarding certain planned activities”, Panton said, “every effort should be made to ensure that the operating expenditures targets are achieved”.
However, the premier’s position on financial prudence seems in conflict with his ministers, including his own deputy Juliana O’Connor-Connolly, who, on Friday, offered what she called “some unsolicited, broad-brush guidelines” on salary-increase recommendations for educators.
A cursory scan of the summaries of minutes of recent Cabinet meetings shows regular changes being made to budgeted items by way of cutting from one area to augment another portfolio or project.
‘No surprise’
Opposition legislators said they were not surprised by the premier’s warning, having previously raised concerns over spending.
Opposition Leader Roy McTaggart, in a statement to the Compass, said it would be a ‘huge task’ to cut $47.1 million from the budget over the last four months of 2023.
“The PACT Government must show an unusual unity of purpose and collective restraint in order to achieve this,” he said.
The Opposition, McTaggart said, has repeatedly warned the government of the need to prioritise its spending.
“We have always said that every Minister will not be able to get everything they want to see done. The Premier ignored our pleas and put it down to politicking on our part,” McTaggart said.
He said the Opposition has consistently argued that the priority for spending should be support for Caymanians facing the post-COVID cost-of-living crisis.
“Ministers seem more concerned about pursuing their pet projects. That has to stop. There will indeed be hard choices that have to be made,” he said.
McTaggart added that it was evident government was still a way off from agreeing on its upcoming budget.
“Given these concerns, the Premier must do more than send a memo. He needs to bring his team together to actively determine where savings can be made and agree on where money will be spent over the next two years,” he added.
Former Finance Minister Chris Saunders, when contacted for comment, said he had warned his former PACT colleagues back in January that “they were sailing too close to the wind”.
“I am honestly not surprised to see this memo being circulated by the Premier as blind Bartimaeus could have seen this coming,” he said in a written response. “The Premier should have sent that email in January when the expenditures were still under control instead of 7 months later when more than half the money is already spent.
“I am asking everyone to pray that the Cayman Islands remain compliant with the FFR (framework for fiscal responsibility) as the alternative isn’t pretty. We all know what the UK Government position is on this matter.”
Saunders said earlier this year that he had sent an email to Panton, copied to all members of the PACT government, regarding the expenditure targets for the 2023 financial year, and it took the premier more than a month to respond to that email.
“During the [Strategic Policy Statement] debate, I again highlighted the forecast financial performance of the government and told them that they were sailing too close to the wind. During the pension debate, I reminded my colleagues that the Government’s financial performance will result in the Government not being able to assist our people as well as they should when the time comes and thus the reason why we need to allow our people to be in a position to help themselves,” he said.
Concerning signals
The government’s Quarterly Financial Report for the six-month period ending 30 June 2023 showed concerning signals amid somewhat glowing figures.
The unaudited financial results for the second quarter 2023 showed that total revenues of core government increased by $19.5 million, “largely due to increases in various categories of coercive revenues”.
The first six months of 2023 generated coercive revenues – from taxes, duties and fees – of $621.2 million, which was $14.1 million more than budgeted expectations and $7.1 million higher than the 2022 year-to-date actual results.
In its media release on the figures, government said the second quarter’s performance positioned it to be “optimistic” about its overall performance for 2023.
But, it cautioned that “the report signalled increased costs as more personnel vacancies are filled and further capital projects come online over the remaining two quarters of 2023. The report advised that these costs would have to be diligently monitored to ensure unnecessary spending is not incurred.”
The release pointed out that the half-year report also highlighted that core government revenues must exceed the performance of $978.1 million set out in the original 2023 budget in order to reach the revised target of $1.037 billion detailed in the Strategic Policy Statement tabled in Parliament on 26 April this year.
The Framework for Fiscal Responsibility, implemented by the UK to monitor the Cayman Islands government’s spending, states that the islands’ should have enough cash reserves for 90 days.
The premier’s forecast in the Strategic Policy Statement for 2024-2025 shows Cayman skirting close to the maximum limit of those reserves – for 2023, cash reserves were forecast at 172.7 days, 117.6 days in 2024, 101 days in 2025, and 90.1 days in 2026.
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