Premier predicts further cuts

| 15/06/2010

(CNS): Full update 6pm – In his budget address this morning (Tuesday 15 June) the country’s premier has predicted more public sector cuts over the next three years as well as increases in customs duty. For 2010/11 McKeeva Bush confirmed there would be an immediate 25 cent increase on fuel from 1 July and announced an 11 percent cut in public spending this year with more to come in the next. With an estimated core government deficit at the end of 2009/10 fiscal year of around $45 million, he said he would reduce that to less than $32 million by the end of the next financial year. He also confirmed the government’s debt would be increased to almost $624 million with additional borrowing now approved by the UK. (Photo Dennie Warren Jr)

The premier announced that government would focus on five overall key strategies in order to restore the country’s finances. These will include public sector reform, limits on borrowing, a broadening of revenue base, government expenditure review and the development of public private partnerships. Bush warned of further contractions in Cayman’s economy before the long awaited recovery would start towards the end of 2010.
Although the government is working on restoring fiscal prudence over a three year period, Bush revealed his expectations for revenue and spending for the next financial year, which he said was predicted to be in deficit to the tune of $32 million.
Although he said he was only introducing one new revenue raising measure, which was the 25 cent increase in duty on a gallon of fuel, he said that after working hard with the public sector and statutory authorities he had managed to reduce operating expenditure to $507.75 million — over $68 million less than the civil service had said it would need, and some $25 million less than the original spending predictions for core government in 2009/10.  
The premier confirmed that the government will borrow a further $155 million this year, bringing public debt to a total of $623.7million. “This is not where I want to be and I will take steps to rectify this dangerous path, this year,” Bush told the Legislative Assembly in an address that lasted more than three hours.
He said that government would spend over $108 million on capital projects, including John Grey High School and the Government Administration Building. However, there were no funds allocated to the Frank Sound campus, which government implied would be not be completed in the next fiscal year as it opted to phase down the construction of the school projects.
He said government would invest a further $18.54 million in statutory authorities but subsidies would gradually be reduced in government companies.
The premier said that government expected to end the 2009/10 financial year with a cash balance of $77 million, some 24 million better than expected, and by the end of the 2010/11 budget year government would still have around $66.6 million in the bank.
While other economies around the world were showing improvements as a result of financial stimulus packages by government, he said Cayman was showing signs of improvement as a result of financial prudence, and this would continue over the next three years when spending reduction and divestment would play a key part in government’s plans. By the end of 2010/11, Bush said his government would have reduced the deficit from $81 million when it took office to $31.89 million.
“We have worked assiduously to trim operating expenses in government, fully conscious of the need to maintain morale among staff while choosing the path of least negative impact on the gross domestic product. This is why the non-wage components of expenditure have been tackled more vigorously than the components which have an immediate human face,” Bush stated.
He warned the economic recession was expected to persist for the rest of 2010 with GDP forecasted to fall before growth turns around by the last quarter of the year. “Gradual economic recovery is expected to start in 2011 as two consecutive quarters of positive growth are required to make the recovery official. And this is premised on a strong rebound of tourism-related services, the start of a number of new construction projects and a modest recovery of the financial services sector,” the premier added.
He predicted gradual improvements from the unemployment lows of 6% in 2009, to 4.3% in 2010 and around 3.2% in the next three years.
However he noted that the population was declining and was expected to be cut further by 3.5 percent in the 2010 calendar year, but a definitive population count would be provided by the October census.
“Assuming a modest improvement in expatriate labour employment beginning in 2011 as key industries show signs of recovery,the current estimate is that population size may settle at fifty-three thousand four hundred and thirty-six (53,436) by 2013,” Bush said. The shrinking population will have an impact on local demand for goods and services.
“Housing, which comprises the largest component of the local consumer price index basket, experienced declining prices at an average rate of -5.1 percent in the last three quarters of 2009. With the outflow of foreign workers, it is not expected to reverse in the 2010 calendar year, a downward trend in housing rentals is also likely to continue,” he added.
With an increase in gas and other imported items, average inflation rate would be 2% in 2010 from the negative 1.3 percent in 2009.
Over the next three years, the premier said, government would pursue a limited borrowing policy with no more than $25million or 1% of GDP spent on new capital projects each year as well as further cuts in public spending. He said with the 11% cuts made to the expenditure predictions for the next financial year, government had already made an encouraging start to further cost cutting in public sector expenses.  
According to the government’s three year plan, it intends to cut core government expenses down to operating to under $480 million in 2011/12 and to just over $462 million in 2012/13 through cuts and divestment.
Once again emphasising his government’s rejection of direct taxation, he said new revenue would come from consumption-based fees. “This type of fee has the benefit of spreading the burden across the wider community while minimizing the impact on businesses,” he said. “The government will therefore be examining the full list of tariffs under the Cayman Islands Customs Law with a view to adjusting some of these rates.”
As VAT would be expensive to introduce, Bush said the alternative of restructuring the current import duties would be a more efficient and cost-effective way to achieve the result of broadening the revenue base.
Bush said that the theme of this budget speech was “Partnership for Recovery” and emphasised the need for a private sector led recovery.
“There must be a new emphasis on the public/private sector partnership to drive our economic recovery. There must be a renewed emphasis on the partnership between the government and the people to deliver social cohesion,” he said.
Concluding his presentation, Bush said his government was advocating that, as the economy is driven by private-sector led growth, the government’s relative share of the economy would naturally decline, leaving government to concentrate on doing what it does best — the provision of services to the public. Warning anyone who was offering opposition instead of a helping hand, Bush said the work would still get done as, he said, he had a job to do.
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  1. Anonymous says:

    The "Premier" NEED to start think about cutting at least $1500 off his pay MONTHLY and giving it back to the government! Does he know how much that $1500 will add up to yearly? $18000 that the government need! He trying to kill poor people while his pockets get richer. He don’t care about the people of the Cayman Islands because if he did he would set an example so people can see that he is really trying and that his concern is to help the Cayman Islands.

  2. Anonymous says:

    Only cut I want to see is a significant one in our Premier’s (exorbitant) salary and perks – him and the rest of the cronies in the LA and other high ranking government positions.  I don’t believe I know of any other county pays their equivalents so much tax free… and there’s a thought – I said it before and I’ll say it again… tax them! 

    How about a 50% ‘community duty’ and direct the money straight back strictly to paying off loans… anyone with me?

  3. Anonymous says:
    Draining the economy
     
    Government is planning to draw even more blood out of the economy.
    And the more they draw, the higher the cost of living in these Islands
     
     
    It is well past the time for Government to find out where the blood is
    going, and apply some tourniquets. .
     
     
    Everyone knows that Cayman is over-governed by at least a factor of
    two, and probably three, and that Caymanians are already struggling to
    support it.
     
     
    Many businesses are  already transferring out, closing, or hanging on by a thread.
     
     
    In fact, Cayman could be very close to a collapse, when our producers will
    simply give up, and our high cost edifice will crumble around us
     
    Cayman needs to be released from this cost pressure, and fast.
     
    The last thing it needs is increased taxes.

     

  4. Anonymous says:

    If this is true

    "his government would have reduced the deficit from $81 million when it took office to $31.89 million."

    Then at least we are heading in the right direction. It means that the Civil Service cuts in operations, salaries and staff would be for some good.

    Now the question is do you believe those numbers?

     

    Boy am I waiting on a Government that will cut the cost of living in this country.

    • Anonymous says:

      My answer to your question is NO!

      …and boy do I agree with that final sentence!

  5. Bloody Sick and Tired says:

    That’s it for us. We concede. We endured for as long as we could.  You win, Cayman.  Time to move on.  I’m sorry that the expertise of so many great people has fallen on deaf ears.  You had a chance and you failed. Great countries were built from the insight of people from all over Mother Earth that were willing to share their wealth of information to help make this beautiful island a better place for everyone, including primarily Caymanians.  

    However, this has not been the case on this beautiful Isle.  Over and over again, the worst possible decisions of all those on the table are the ones that prevail.  How can those "Decision Makers" continue to make, year after year, day after day, choices that will cripple their own economy in Cayman for decades to come.

    All the best, Cayman.  It’s been an increasing Gas….Bill.

     

     

     

     

    • Anonymous says:

      As usual, as with after Ivan, those not fully committed to the Cayman Islands run when things get rough.

      I agree you should return to your perfect country (that you left?) where ever that may be and you can take the nine thumbs ups  with you.

      The Cayman Islands will survive and eventually thrive but maybe we need to rid oursleves of transients like you whose response to difficulty is to run and who thinks that, unless we listen to them because they know how to run a  country perfectly, we are ruined. This is one of the biggest problems we have in Cayman;allowing transients too much say.

      I wish you well and we’ll just have to settle for learning from your perfect country (at least it should be easily recognizeable after you and your nine thumbs ups friends return to it?).

      But, please don’t return when things improve as we wouldn’t want you to come back and mess it up again.

  6. Jenna Who? says:

    Well … Well …  Is Mckeeva  really talking about more cuts again?

    I don’t know if anyone seen inside of mckeeva ‘s  house but I have and that looks like the darn white house.

     But yet he has people out here who are suffering and just because he’s the "Premier" he can just sit back and relax oh no Mr.Bush that can’t happen for too long crime rate is gonna continue to rise caymanians are fed up were tired of lies after lies face it government doesn’t wanna help the poor people out they rather trick us to vote for them and then when they are in power they don’t know who you are anymore government and by the government I’m talking about : MR.KURT TIBBETTS & MR.MCKEEVA BUSH!

    They constantly spend money on what? do we people of the cayman islands see where it goes nope! … look at their homes alone they are using the money on thereselves it’s all a scheme that government is doing .

    We are in hard times and government isn’t taking it serious they are constantly borrowing money from this one that one … and in the end after they spend the money on whatever they use it for were the ones who have to suffer from their spending … and were not even seeing anything from it!

    we don’t have  anything for the caymanian children no wonder why the mojority of them are : doing drugs  and having sex!

    we don’t  have anything for the caymanian adults  no wonder why the are constantly stressing because they don’t even have anything to relax them after work!

    CAYMANIAN PEOPLE PLEASE OPEN YOUR EYES! MCKEEVA AND KURT NEEDS TO GET OUT OF GOVERNMENT ALL TOGETHER BECAUSE SINCE THEY HAVE BOTH BEEN THERE NOTHING GOOD HAS HAPPEN TO CAYMAN!

    WE NEED A CHANGE AND WE NEED IT VERY FAST TOO!

    PLEASE SEE THAT MCKEEVA’S ONLY LOOKING OUT FOR HIS JAMAICANS NOT EVEN OUR OWN IMAGINE THAT!

    AND KURT SAME THING!

    I DON’T UNDERSTAND THEM AT ALL THEY BOTH GOTTA GO!

     

     

  7. Anonymous says:

    wow…two sham budgets in 10 months…

  8. Anonymous says:

    I wonder how much revenue would improve if more people honestly declared the value of purchases on their overseas trips? 

    Unfortunately, without more honesty, raising duty will only further penalize those of us who already declare and pay! 

    In the past, I frequently heard people say they had no intention of paying duty after a shopping trip.  When I suggested that I’d rather pay duty on items I "choose" to buy (new shoes that caught my fancy), than on items I "have" to buy (e.g., milk, gas), they agree that probably makes sense but say they have no intention of changing their ways.  Asked where they think the government gets the money to pave roads and pay teachers, they replied that Cayman is "rich" and already charging too much.  They do not seem to notice that the money has to come from somewhere and that they are modeling lying to their children.

    While government CERTAINLY needs to be more responsible, I think people also need a better understanding of the role we each play in facilitating or hindering ahealthy community.

    (On a possibly related note, could someone please make the declaration process quicker and easier! I get more questions for declaring than otherwise and the payment process takes so long…)

     

  9. Anonymous says:

    I don’t know why you all hating for, compared to what PPM did when they were elected in we haven’t seen nothing yet. I say give the man time before you start saying he’s ruining our country bla bla bla.

    • Anonymous says:

      Help us to understand what the PPM did that we can’t see the results of? Please let it be thing (s) you know as a fact (s) and not just hearsay.

      Also enough of the party politics!!

  10. Seriously? says:

    Hmmm, I think its very quickly getting to the point where I need to cut and run from this place.  Cayman is fast becoming an Island that only the rich can afford to live in, and I ain’t rich!

    25% increase in fuel – great idea Big Mac; this will push the price of everything up, from electricity to food.  As if stuff isn’t already grossly overpriced on this Island.  I always said England was a "rip off" country.  I can safely say that that title fits rather well when referring to Cayman.

  11. Anonymous says:

    i hope you are sincerly taking all the people in this country seriously with the previous comments that have been posted.  They are all speaking the truth.

    You want to build up all these buildings yet there is hardly any room to build any homes for our self. The government does not need anymore buildings. The problem is that your not helping us by going and borrowing money again. Do you not see what your doing. if you have all these people having the same opinion on this. that should mean there is something wrong with the picture. why can you not see it. try to build us up. not drown us in debt.

     

  12. Anonymous says:

    The Premier is burrowing too much XXXXX money now…this is getting out of hand!! so much for fixing things and cleaning up after PPM! Seems like things are just becoming worse if you ask me!!

  13. Bobby Anonymous says:

    Maybe it’s just me!

    More Duty????

    Has this Island gone nuts????? 

    Let’s see now?

    "Introduced rollover" People stop buying property/spending.

    "Immigration permit difficulties" No permits, no fees. no hastle = bye, bye.

    "Way to expensive to Get/stay hear for tourists" now we sink a ship and charge them to see it!

    Beats me how we can do, next to nothing flights to Jamacia but nowhere else!

    Open your eyes! Reduce costs not increase them. How do you think Wallmart are so successful?

    As for foreign workers, Cayman be carefull what you wish for. remember the "brain drain" that happened in England years ago? That’s exactly where Cayman is going if were not carefull.

     

  14. Anonymous says:
    How about economy travel for all official trips? That should save us several million dollars!!
  15. Anonymous says:

    cns:

    what does the new fuel duty mean in terms of increased costs at the pumps or on your elec bill?

    • Pending says:

      Add another 1.50 per gallon for the gas; $6+ per gallon

      Add another $100 onto your CUC bill.

      Both of which will not affect Big Mac as he is driven in one of three govenrment SUV’s which wil probably cost $100+ to fill the tank. and he doesn’t pay a dime.

      The CUC bill wont be a problem for him either as he makes $14k+ a month onhis salary.

      Hit em hard Mac, good one.

      • Anonymous says:

        I don’t think your math is quite right. Currently the duty per gallon is $0.50 per gallon. It will be increased by $0.25 and therefore the total duty will be $0.75 per gallon. At current prices $4.53 per gallon the price of gasoline  would increase to $4.78.   

        Re Big Mac’s salary you need to add to that the $10,000 per month he receives as pension.

  16. Kaptain Kayman says:

     Frank Sound Rd. School = Good Place for Shetty’s Medical Centre?

    Me thinks YES!!!!!!  Kill two birds with one stone.  

    I will be running as an independent next election, please vote for me.

    • frank rizzo says:

      There’s 450 acres for sale towards East End just down the road from the junction.

  17. Broken Heart says:

    Dear Mr. Bush,

    I have been in Cayman since the early 1970’s. You can herewith take your banana republic and shove it. I am out of here.

    The Caymanian Status that I so valued is not worth a damn. Heck, the day I got it, I wrote to the Chief Immigration Officer to say it was one of the proudest days of my life.

    Mr. Bush and you caymanian politicians, I no longer believe in you. Sorry.

    Thankfully, I never applied for a caymanian passport. It would be an embarrassment now.

    To my beloved friends of Cayman. My soul weeps for you. I know you expect more. I don’t know what to say. May God stand strong for you.

    A friend

     

  18. Anonymous says:

    What happened to the promised cuts in MLA’s pay and benefits? Any chance that the travel budget for politicians will decrease or that payments to "consultants" will stop? How about the personal servants and the famous wall – is that all business as usual?

  19. Anonymous says:

    Another 32 million deficit next year!!!!

    Stop the spending now before we are sent to debtors prison.

    All capital projects must stop unless the funds are in place.  Public/Private financing would suffice but we must stop all borrowing without a proper plan to repay the debt and to get us out of this mess. 

    At the moment the Premier has nothing but a bunch of pipe dreams which he hopes will bail us out all of the red ink.

    Thanks for the 25% increase on my CUC bill though.

    • Anonymous says:

      Why don’t we start at all the wasted offices Government is renting.  Immigration for one, there are numerous Immigration buildings downtown, yet there is also an office accross from the Post Office by the Airport.  What sense does this make?  Then Government spent all this money on a new building for Licensing, yet there is still an office on Walkers.  Why can’t all the offices be combined, why is Government spending on rent every month.  There may also still be an office in Governor Square. 

       

      This is what you call wasted money being spent!!!

      • Anonymous says:

        I agree!  There are too many extravagant offices for government all over the place and from what I hear even when the new admin building is built it still will not house the majority of government offices. What they need to do is cut back on all the unnecessary staff in many of the governemnt departments.

        • Anonymous says:

          I agree too.  And add to that the multiple commercial/warehouse/storage facilities they rent at extortionate cost to the public island-wide.  They should be dumped in favor of one huge central location and perhaps one in each district too. 

          I am thinking this might also make an interesting FOI request: the cost, location, purpose and current use of every property currently being rented by government…

    • Madam Speaker says:

      Yessssssssssss

      a dat mi a seh

  20. Anonymous says:

    Does MacDinejad understand that Cayman’s economy is in recession?

    When the economy is in free fall he is increasing taxes (ahem, sorry ‘duties’) on one of the key commodities that impacts all sectors of the economy and the average consumer.

    What an outstanding economic stimulus policy…

  21. Anonymous says:

    Here we go again taxing the little guy with an additional fuel tax. When is everyone going to stand up to this guy? Can the average Joe afford a electricity bill that is any higher? Government is releasing expat civil servants (necessary or not) arbitrarily without regards for what impact that might have on the productivity of departments or statutory authorities and eventually that will drive costs even higher on things like plane tickets and groceries. And those people who are left, Caymanian or expat, will have to leave for shores they can actually afford to live on. He won’t stop until his pockets are full of money and new influencial friends and the common person is begging on the street.

    • Forelock says:

      Private sector businesses have already been taxed to the point where its better to go elsewhere, or hold cash, rather than risk doing more business in the Cayman Is.

      The "little guy" (whoever he/she may be) must realize that job opportunities will only come if there is a return on investment that is greater than the risk for the business leaders in our community.

      For decades our politicians have devised Laws that give the "little guy" the impression that business will pay for social benefits, not realizing that he/she pays just the same once the costs have passed through to higher pricing.

      In a local market such as construction and retail that’s bad enough, but in a global marketplace such as tourism and finance, its economic suicide.

      In these recessionary times, few employers will risk their cash taking on mediocre workers who have a sense of entitlement given them by the Immigration Law and the Department of Employment Relations that have "protected" them for so long.

      I agree with the Premier. release the private sector from those shackles and maybe, just maybe, a new day will dawn for the "little guy".

      In the meantime, as long as the civil service remains as big, expensive and inefficient as it is then the "little guy" will always pay in reduced living standards and unemployment.

      • Anonymous says:

        I want to know who the heck you claim that the Immigration law and DER are protecting?? I can assure you that  it is most certainly not Caymanians! You insult me and my people with your remarks about "entitlement". For your information many of us are qualified with advanced degrees and are entitled to be given first chance in our country, as would incidentally be the case in any other country, however, we do not believe that we are entitlted to the position without qualifications and/or experience. What is disturbing is when we discover that many of the individuals that businesses are allowed to recruit through Immigration are in fact not even as qualified or experienced as the Caymanian, yet they are allowed to gain a work permit!!! Something is terribly wrong.

        • Forelock says:

          The comments I made were for the "little guy" mentioned in the first post. they were not aimed at anybody with an advanced degree.

          If you have an advanced degree you should not need, or want, any protection at all.

          I have Caymanian children with advanced degrees and if I heard this from them I’d remind them that it was their grandparents hard work that made this place ready for their parents to do well and now its their turn to work hard and make themselves a living no matter what.

          My point was that to win one has to compete. Protected species eventually become extinct because they forget how to do it. 

          Just compete and stop whining.

  22. I am all in favor for the development of public-private partnerships. It is a better option than privatization where political opportunist, especially, backers of a government party could through money-transactions, appropriate funds for their own gain whilst selling or transferring the ownership of public assets. Once the government entities are privatized (depending which entities), the new owners could concentrate the wealth into the hands of foreigners and disregard Caymanians altogether. The entities could economically control the Island somewhat like how CUC does with its rates; moreover, these entities could provide little benefit for the hardworking local. At least, public-private partnership is where a business entity is funded and operated through a partnership of government instead of “privatization.” It is a sort of a partial ownership of governmental services where government can have some legislative control and oversight in case of civil injustices and economic downturns.

    The Permier is following Germany’s lead – also France. Germany I believe has bought shares in an energy company, identified as “E.ON.” The state retained shares in the said company controls costs, which the company could incur upon the people of Germany. We can learn from Europe.

    Cayman’s growing Civil Service is becoming more complex and larger – give some of the excess to the private sector!

  23. Anonymous says:

    What about the tax on you guys, CNS? Anymore word on that?