Archive for July 2nd, 2009

Two more arrests following ganja haul

Two more arrests following ganja haul

| 02/07/2009 | 0 Comments

(CNS): A man believed to have captained a canoe seized by officers from the Drugs Task Force and another man have been arrested, bringing the number of arrests made in connection with last week’s seizure of 196 pounds of ganja to four. A 35-year-old man was detained on suspicion ofimportation of ganja and possession of ganja with intent to supply, while the charges that the suspected captain has been arrested for are unknown. The drugs were found by officers from the Drugs Task Force who carried out a raid on Thursday, 25 June.

Two men were arrested at the George Town address during the operation. All four men arrested in connection with ganja haul have been released on police bail pending further enquiries.

As part of the enquiry, officers confiscated the 32-foot Jamaican canoe fitted with a 1 x 65 horse power engine. The vessel, which was found abandoned in the water in the Prospect area, has been seized and will be forensically examined, police have said.

Anyone with information about the use and supply of illegal drugs is asked to contact their local police station, the Drugs Task Force on 949-7710 or Crime Stoppers on 800-8477 (TIPS). All persons calling Crime Stoppers remain anonymous, and are eligible for a reward of up to $1000, should their information lead to an arrest or recovery of property/drugs.

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CIDB to give cheap loans

CIDB to give cheap loans

| 02/07/2009 | 16 Comments

(CNS): The leader of government business announced today that the Cayman Islands Development Bank (CIDB) will be offering low cost loans and mortgages to small business and individuals in financial trouble to help the community weather the financial storm. McKeeva Bush explained that the bank, which is under his ministry, would be launching this assistance programme on 13 July when loans would be given to those in need with a interest rates as low as one percent.

“This initiative is aimed at providing assistance and relief to small businesses affected by the downturn,” said Bush, who added that during the election campaign the UDP had promised to put in place measures to assist Caymanians to enable individuals and small business owners to make it through the economic downturn.

Speaking at the new government’s first live press briefing, the LoGB explained that small businesses would be able to access funding for debt consolidation and get lower interest rates of between one and 5 percent as well as loans for operational and capital expenses from the CIDB.

Bush added that the second part of the initiative would be to help individuals who are about to lose homes or who are in financial trouble and that the bank would provide mortgages and help people consolidate their existing personal debt and property loans. He said the intention would be to help people with arrears to spread the payments over manageable periods and to providing financing for insurance premiums and hurricane shutters.

Although he stated that it was unrealistic to think this initiative was going to solve all the problems, as there was a limit to the funding, he hoped it would minimise the fallout from the crisis.

“Business owners and residents have struggled during this economic downturn and the CIDB will be able to help,” he said. “We have taken a holistic approach to the solution and we intend to form partnerships with other financial institutions in order to get more funding for the initiative.”

He added that the idea was to use the bank’s expertise in credit risk and management as would be the case for normal bank lending, but the main difference is that the initiative was structured to target specific areas where people needed the most help at very low interest rates. Bush explained that this initiative would form 12 percent of the total portfolio of the bank’s current loans but the bank would be investigating other funding options to enable it to increase the scope of the initiative and availability of loans. In short, the government has allocated a portion of the bank’s existing lending capacity just to this programme.

The LoGB also announced that government had appointed a new board for CIDB with Paul Byles as the chair. He looked forward to the bank serving the economy and he had great hopes for the future of bank and its involvement in the economy.

Ralph Lewis, the bank’s managing director, said that over the next week or so the staff would be engaged in training and fine tuning the mechanics of how loans would be assessed and awarded but full details of how people can apply would be announced shortly.

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LoGB outlines national plan

LoGB outlines national plan

| 02/07/2009 | 13 Comments

(CNS): Despite the challenges that he expects to face, the leader of government business has announced his intention to create a national development plan. McKeeva Bush said that various administrations had attempted to address the speed of the islands’ development over the last four decades but despite the production of some good sector plans there had been a notable absence of real national planning. He said that the country’s current plans were both outdated and a hindrance to inward investment.

Bush added that there were a number of major issues that were in dire need of addressing, such as a comprehensive sewerage system for George Town among many others, and he intended to produce a national plan that would guide the islands over the next twenty years.

“This plan will provide strategies, policies, programmes and it will include area plans and it will reflect the wishes and aspirations of the Caymanian public,” Bush said, adding that it would be a collaborative effort through his ministry and be headed by Kenneth Ebanks and Chief Officer Carson Ebanks.

In the first instance he announced that the planning law and regulations were in need of a serious review and that a review committee was being appointed. Bush explained that although planning is suppose to be reviewed every five years, the current review had been ongoing for the last nine years without any changes to the law.

“The current planning laws and regulations are based on planning and design principles from the 1900s and are out of date,” he said, noting that modern principles of urban design and planning were difficult to achieve in Cayman due to the existing laws. “It’s a headache, it’s a mess for this country,” Bush lamented. “While the department planning director gets the stick for it, the laws are really to blame.”

He explained some of the red tape problems, which he described as nonsense, and said as a practical person he was going to change it. Bush said real changes were required and those who used the laws on a regular basis would be involved in the review. He said he hoped to generate a new modern planning vision, which would be incorporated in the new national development plan.

The goal, the LoGB explained, was to immediately impact inward investment positively and promote new development under modern principles, as well as creating a new planning and zoning map. He said Burns Connolly would chair the committee and representatives from various relevant professions and areas would be involved.

“All of us know that over the years, once a government starts on this it could be the death knell of a government because the country always wants better planning but no one is willing to give an inch,” Bush warned. “But there are far too many things that are not right, that are inhibiting development and we are losing revenue on all sides. Some of the reasons why the country is suffering are because bureaucracy is so high and so tight and people just shy away. This administration has a mandate to change that.”

He also confirmed that his government supported the National Conservation Bill, albeit with some amendments, but he committed to ensuring that someone with environmental expertise would be involved in the committee. Bush also announced that in future planning meetings would be held in a public forum.

Speaking about the plans for the port, he confirmed that while there was some opposition he felt Cayman needed cruise berthing facilities in George Town and his government would be examining how that could best be done. However, he said he wanted to see cargo facilities eventually move to the eastern end of the island where facilities for mega yachts and other marine commercial activities could be developed.

Bush also said that the George Town landfill was a priority and the Minister, Juliana O’Connor- Connolly was wrapping her hands around that problem.

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Global challenges & opportunities

Global challenges & opportunities

| 02/07/2009 | 0 Comments

We are passing through some of the most turbulent times the financial services industry has ever seen. This applies to the industry onshore and offshore and around the globe. We are also in an era of heightened initiatives both international and domestic that are rapidly changing the shape of the industry.

The financial crisis has significantly added to the momentum.

Reports of the impending death of the offshore industry are exaggerated (pace Mark Twain). I believe there will continue to be a place for high quality offshore financial centres (OFC’s), unless (unlikely I think) the world is prepared to go back to the days of strict exchange controls and restricted global trade and investment. Assuming I am correct, there will also be a place for high quality banks and service providers in those OFC’s.

Let us first consider what is behind all this activity. It is a question of who will control the world’s capital. And the old guard (the G7-8-9) is fighting hard to maintain the status quo under the guise of propriety, integrity and transparency (being the latest favoured buzzwords).

Most major jurisdictions publicly support open and competitive global markets between which capital can freely move. There is a growing body of academic studies that argues that OFCs can and do enhance competition in onshore markets and facilitate foreign investmentinto onshore jurisdictions that might not otherwise be made due to domestic constraints in those jurisdictions. After all, the funds do not remain in the OFC’s. Their domestic markets are far too small and undeveloped to absorb the capital flows.

In reality, many jurisdictions that claim to support free markets principles and the unrestricted flow of capital do so only as long as this system works in their favour. Behind the façade, they actually pursue self interested financial imperialism and protectionism.

For example, in financial services and products and in facilitating the global allocation of capital, OFCs pose a major competitive and potentially uncontrolled threat. Thus, the UK and the US in particular are not keen to see OFCs thrive too much, but they have traditionally recognised that, for their own financial service industries and multinationals to be competitive, they must allow them to use OFC domiciled structures. Further, they recognise that such structures are also often the conduit for valuable inward investment from foreign investors. This traditional position is now under serious pressure as politicians appear to see more downsides than upsides in the continued symbiotic relationship between onshore and offshore

Other major European nations with growing and unfunded entitlement programmes and ageing populations fear loss of capital to OFC’s and reduced tax revenues. And they wrongly see OFC’s (as opposed to their own domestic policies) as the cause. So, while voicing their commitment to open markets for (their own) financial services and products, they continue to impose burdensome and anti competitive regulation on OFC’s and to raise barriers to their residents investing in or using OFC financial products or services. Again, protectionism in all but name, despite protestations to the contrary.

The international standard setters mandated to execute the various initiatives are the creatures of and funded by the very same major countriesthat have no real interest in a level playing field open to OFC’s or to anyone else threatening to deprive them of control of the world’s capital.

Let us now look briefly at the various important international and domestic initiatives that are underway or threatened. These initiatives have been significantly energised by broad political support at the highest level in the major economies of the world as a result of the financial crisis. At the very top are the G8 and the G20 policymasters leapfrogging each other every few months in producing macro statements, followed up by often overlapping reports. In no particular order of merit, the more significant are as follows. 

The G8 is about to issue a report laying out the “big picture” framework for global standards such as corruption, banking, corporate governance, taxation, financial markets and executive pay.

The OECD has for over ten years been pursuing its global tax initiative, that has been chameleon like in its changes during the period. Having been beaten back (principally by the Bush Administration) on tax harmonisation (i.e. everyone should adopt French and German tax rates), the programme is presently focused on tax information exchange and transparency. In concert with (or under the direction of their political masters) the G20 and G8, the OECD has recently been playing the “name and shame” card to remarkably good effect.

OFC’s are scrambling to sign up at least 12 double tax agreements or tax information agreements (TIEA’s) that meet the OECD standards and thus secure a place on the favoured white list (although it is not clear what specific reward that actually brings). Cayman missed making the white list by a narrow margin (having been slow to build on both its early TIEA with the USA in 2002 and its implementation of the automatic reporting under the EU savings directive in 2005), but has recently signed with the UK, Ireland and the seven Nordic countries, pencilled a draft with the Netherlands and with more to come, and adopted locally enacted unilateral measures that will allow it to exchange tax information with designated countries (currently 12 countries have been so designated).

Recent statements from the OECD and leading members now make it clear  that simply signing 12 agreements is not necessarily sufficient. The requirements now seem to be agreements with the major players, effective implementation and satisfactory peer review of implementation. And possibly even moves to sign multilateral agreements. All this may further delay Cayman’s promotion to the white list.

IOSCO (the international organisation of securities commissioners) has recently published six high level principles with respect to hedge funds, that in particular recommend that all hedge funds and/or managers/advisors and prime brokers and banks that lend to hedge funds should be subject to registration, there should be regular reporting to regulators to protect against systemic risk and better cooperation between regulators. I doubt that the IOSCO principles will be overly problematical for the major offshore hedge fund domiciles such as Cayman.

IAIS (the international association of insurance supervisors) is now actively working on the first common rules on solvency requirements (margins etc) for international insurance and reinsurance companies. It may be early days but is a sign that the insurance regulatory environment is at long last going global.

The Basel Committee on Banking Supervision, having only recently finished Basel II, is busy working on what will probably be called Basel III to apply the lessons coming out of the recent crisis. There will be much focus on the issue of on and off balance sheet transactions and structures, related capital requirements, risk management and stress testing. I do not see this as troubling Cayman’s banking industry (other than increased compliance costs).

The UN held a summit to tackle the global economic crisis last week. The communiqué specifically stressed the need for transparency, cooperation in tax matters and combating illicit financial flows.

The UN and the World Bank are actively pursuing a (welcome) programme the StAR project) to assist developing nations stamp out official corruption and to trace and recover stolen assets in financial centres (onshore and onshore).

Lurking in the wings are the other usual players such as the IMF, the Financial Stability Group (essentially the G20+) and the FATF (Financial Action Task Force, as subset of the OECD), expanding their oversight and assessments and developing new policies and rules as they go along.  

The international activity is complemented by proposals in the US, UK and the EU for domestic/regional legislation to limit and make the legal use of offshore centres by individuals and corporations increasingly difficult, burdensome and costly and to enhance the regulation and taxation of onshore hedge fund managers and, if they can find a way to do it, the offshore funds themselves. Both the UK and the US also wish to punish so called vulture funds that prey on poor countries’ debt.

 The EU proposes that the automatic reporting of interest income EUSD (savings directive) be greatly expanded to include different types of income and gains and cut through provisions to the beneficial interests behind companies, partnerships and trusts.

The US proposes to tighten up the QI (qualified intermediary programme) to prevent perceived abuse by US taxpayers hiding behind offshore vehicles, to expand the reporting requirements by US taxpayers regarding offshore accounts and investments and to limit the ability of US multinationals to utilise OFC’s to defer US taxes and to manipulate transfer pricing.

All the various current proposals are still very fluid with much lobbying and backroom negotiation before the fat lady sings.

So why do OFC’s take any notice of these issues? Why not ignore them and carry on a before? This is not a sensible long term option for those OFC’s that wish to participate in global financial markets. And uncertainty and delay are not good for the reputations of or quality business retention and development by OFC’s. So let us look at some of the things that are happening.

Heightened threats of meaningful sanctions (e.g. increased withholding taxes) against non compliant OFC’s and those that use them.

The UK Revenue has just released for comment a proposed code of conduct for UK banks under which they will (voluntarily) commit to meeting the spirit and not just the letter of UK tax laws. It aims to limit the banks’ use (for themselves and their clients) of offshore structures that do not support genuine commercial activity and that, while legal, offend the spirit of UK tax laws as intended by Parliament.

The European Investment bank (EIB) is reviewing its lending policies so that loans will not be signed with entities domiciled in jurisdictions that do not meet international standards on tax information exchange.

US citizens working overseas are finding it increasingly difficult to open, operate and maintain normal banking relationships. Banks are finding the compliance costs and risks are not worth it.

A number of publicly quoted non-financial companies domiciled in Bermuda and the Cayman Islands and with strong US connections (so far principally reinsurance and oil services companies) have already elected to transfer their domiciles to jurisdictions with established (and protective) double tax treaty networks and attractive corporate tax regimes. To-date Ireland and Switzerland have been the preferred domiciles.

There is anecdotal evidence that some international financial institutions are becoming concerned about the heightened reputational issues raised by their conducting business through or with offshore jurisdictions and certainly with those not on the whitelist. Some of Cayman’s key competitors have been ‘whitelisted” and are ramping up their marketing on this basis. Hopefully, this will be a short lived.

In light of this, let us now look specifically at what Cayman is doing. Cayman recently elected a new Government and approved a new constitution. With that has come a renewed commitment from the political leadership to support, enhance and protect the financial services industry and thus benefit the local economy. The list of what I think needs to be done is lengthy but an encouraging start has been made by the new Government.

Dedicated and focused political and executive leadership for financial services.

Increased actions and engagement to secure compliance with and effective implementation of relevant international standards and cross-border assistance through tax information exchange agreements and law enforcement and thus to secure due recognition of Cayman standing.      

Increased transparency in the private sector by enactment of holistic data privacy laws in place of the Confidential Relationships (Preservation) Law, by increasing the publicly available information regarding both regulated and unregulated entities and by increasing the statistical information published by the Monetary Authority and the Economics and Statistics Office.

Implement the Anti-Corruption Law and the Anti-Corruption Commission

More effective enforcement of our existing financial services laws and regulations by the regulators and law enforcement.

Better targeted and effective intelligence gathering, lobbying and media relations, particularly in key centres such as Washington, London, Brussels and Paris to influence political and media perceptions, opinions and outcomes

Develop better governmental contacts and business promotion in Asia, Latin America and the Middle East.

(Re)establish Government offices (with the right staff) in key centres such as Dubai, Hong Kong and Washington DC.

Strengthen the London office including the ability to cover Brussels, Paris and other key European jurisdictions.

Support think tanks, symposia and the research, publication and dissemination of quality academic studies analysing the beneficial impact of OFC’s on the world economy.

Encourage new financial and otherinternational businesses to establish in Cayman with  meaningful physical presences and also encouragement of much greater decision making and economic activity within the jurisdiction by the entities domiciled here.

Encourage wealthy people to take up physical residence, buy houses and invest locally.

Develop sensible and welcoming immigration policies to attract and keep the brightest and the best together with a well educated, motivated and participating local professionals and staff working alongside them.

So what might OFC’s such as Cayman expect for the future?

The pendulum is swinging against OFC’s for the moment. But unless the world goes back to the dark ages (unlikely), the rhetoric (even from the French and Germans) will reduce and some semblance of balance will return.

The world is full of global businesses and families. And their number and wealth (pace Bernie Madoff and Allen Stanford) should continue to grow over time. The real growth will be in the new BRIC worlds and not so much the traditional world of the G7,8 and 9.

Increased rates of taxation will make proper tax and estate planning for wealthy families even more important and also lead to greater demand for tax advantaged and good places to live where there is access to quality professional services and advice.

In tax matters, the rule of law requires the legislation to be clear. Broad anti-avoidance wording can go a long way towards discouraging too much envelope-pushing, but subjective statements like “paying your fair share” are on their own unhelpful in the extreme. The fair share is in the eye of the beholder. To be meaningful, the statement must be converted into legislation and regulations that can be understood and applied consistently by professional advisors, tax departments and courts.

Global economic competition inevitably means tax and regulatory competition. No-one has yet created the perfect tax or regulatory regime, so competing regimes (within broad agreed norms) are perfectly proper, just as there are many ways to make a safe automobile. Individuals and corporations are entitled legally to maximise their wealth. Indeed, corporations have an obligation to their shareholders to do so. Thus, legitimate tax and regulatory planning will always have a place. OFC’s with high standards of sensible regulation, appropriate transparency, cross border assistance arrangements and good infrastructure and providing quality value-added service have a valuable role to play in that scenario.

The challenge for OFC’s and their service providers will be to maintain their competitive advantage in the face of the inevitable increase in the cost of doing business. So I expect the required minimum net worth of clients and size of transactions will likewise increase. That may be no bad outcome.

Government controlled banks in the UK and the US may feel obliged to pull back from the offshore market; if so, that leaves greater opportunities for those banks and others that are not so constrained.

I do not believe legitimate quality offshore centres, such as Cayman, need suffer death by a thousand cuts; if the lessons are learned and applied, they can and will survive and thrive as (albeit reluctantly) accepted participants in the global financial world.

The above is a presentation given by Ridley in New York City on 30 June 2009 at the Stuarts Walker Hersant andRBC Wealth Management Forum.


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Second woman attacked

Second woman attacked

| 02/07/2009 | 13 Comments

(CNS): Following another attack on a women by an intruder, this time in a West Bay Road condo, police are looking into the possibility that this incident could be connected to the aggravated burglary which occurred in Boggy Sands Road earlier this week. Police say they have arrested a 40-year-old man on suspicion of aggravated burglary after a woman, a visitor from the US, was attacked in the early hours of this morning (2 July). The offence was reported to the 911 Emergency Communications Centre around 3:50am and the suspect was arrested soon afterwards following a police pursuit on Seven Mile Beach.

Police report that operators received a call from a man reporting that a woman had been attacked at Locovia Condos. The man, who is a friend of the victim and was staying in another room in the condo, said the victim had woken to find a man talking to her and holding a knife. He said the offender had threatened to assault her but her 8-year-old daughter, who was also in the room, screamed and the offender ran from the building. The victim received a laceration to her arm during the incident.

Police responded to the scene, carried out an area search and located a suspect on Seven Mile Beach. Upon seeing the police the man ran into the sea to try and evade the officers. The Maine Unit was deployed and Tornado responded to the location. The man’s actions were monitored by officers on land and sea and he was soon arrested by the Marine Unit. He was brought to shore and is currently in police custody.

Scenes of Crime Officers processed the scene and assistance is being offered to the victim, who is a visitor to Grand Cayman from the United States. “This was clearly a terrifying experience for the victim, her daughter and her friends who are travelling with her,” said Commissioner of Police, Mr David Baines. “We will be offering all the support we can to the victim.”

Police confirmed that they are looking into the possibility that this incident could be connected to the aggravated burglary which occurred in Boggy Sands Road on Tuesday, 30 June (See Woman attacked by intruder).

“We cannot immediately connect the two incidents, however, we will be keeping an open mind and following all lines of enquiry and that includes looking to see if there are any links between the two,” said Mr Baines.

Anyone with information about the incident should contact Detective Sergeant Dwayne Jones of George Town CID on 525-6494 or 949-4222. People can also call Crime Stoppers anonymously on 800 8477 (TIPS).

The RCIPS would like to take this opportunity to remind residents to keep security and personal safety in their minds at all times. Anyone with concerns about their safety or their security arrangements should contact their Neighbourhood Police Officers for advice and guidance through their local police station.

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Recession hits migrants

Recession hits migrants

| 02/07/2009 | 0 Comments

(WJS): The global economic crisis is hitting immigrants around the world harder than native-born workers and putting the brakes on a decades-long increase in international migration, the Organization for Economic Cooperation and Development said.  Wealthy countries including the U.S. should avoid taking too many steps to discourage immigrants from coming, because many will need immigrant workers in the long run, the Paris-based group said in its annual migration report.

Go to article.

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McCarthy bids farewell

McCarthy bids farewell

| 02/07/2009 | 0 Comments

(CNS): Chief Secretary George McCarthy stepped down from his post on Tuesday and retiredfrom the civil service after more than 36 years. Earlier this week top government officials, colleagues and staff of his Portfolio attended an informal lunch to celebrate the culmination of his distinguished career. Incoming Chief Secretary Donovan Ebanks said McCarthy had been a role model to many and wished him a long and enjoyable retirement.


McCarthy joined the civil service in 1974 as an internal auditor. In 1992 he became Cayman’s Financial Secretary, and in 2004 he was appointed to the country’s most senior civil service position – Chief Secretary, head of the Portfolio of Internal and External Affairs and Head of the Civil Service.

Speaking of his many retirement plans, Mr. McCarthy simply said, “It pays to have a sense of adventure.”

However the Leader of Government Business  McKeeva Bush announced to the Legislative Assembly on Monday that McCarthy would be taking up Chairmanship of the Cayman Islands Monetary Authority as his talents were too good for the country to lose. In his tribute Bush said he had made a “stellar contribution,” to the country.

The Leader of Government Business said that McCarthy’s accomplishments were all the more impressive because they were achieved with “customary unflappable efficiency.”

As he said goodbye to his public sector colleagues lunch McCarthy encouraged civil servants to always be courteous as well as efficient.  “We’re the beneficiaries of a very rich heritage,” he said. “It should be a privilege to serve.”


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Jamaica won’t be a tax haven says Shaw

Jamaica won’t be a tax haven says Shaw

| 02/07/2009 | 0 Comments

(CNS): According to a release from Jamaica’s Information Services the country’s Minister of Finance, Audley Shaw, has told Parliament that Jamaica will not earn the reputation of a tax haven, when the proposed International Financial Centre (IFC) is established in downtown Kingston. Addressing the House of Representatives on Tuesday 30 June Shaw argued that a tax haven is a jurisdiction that does not have competitive tax base, and refuses to provide information to foreign tax authorities.


"Contrary to the concept of a tax haven, the IFC has been conceptualised to operate in a profoundly different manner, owing to its fundamentally different nature and character,” he said. “That is, the centre will serve as an outlet facilitating offshore offices and services, in addition to the outsourcing of different aspects of financial services." TheFinance Minister pointed out that with many Caribbean neighbours taking advantage of these lucrative opportunities, it is essential that Jamaica focuses on specific market niches and harness its competitive advantage.

"These include the large cadre of professionals in the fields of accounting, law, banking and finance; the high-ranking quality of transportation infrastructure especially our airports, our seaports, and our excellent telecommunication capabilities; a stable democracy; proximity to the world’s largest market, (and) availability of training facilities for professionals in the financial industry," Shaw added.

JIS stated that some $100 million have been earmarked in the Jamaican budget to establish the IFC. Cabinet, last month, approved establishment of a statutory company to oversee the development of the IFC. The next step is the drafting of appropriate legislation, including amendments to the Urban Renewal Act, and the refinement of the list of products and services that are to be offered.


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Emergency expenses spent

Emergency expenses spent

| 02/07/2009 | 29 Comments

(CNS): Among the many revelations by the financial secretary in his statement to the Legislative Assembly on Wednesday is that the country’s provision for exceptional circumstances is also overspent. Together with record levels of borrowing at $590 million and a $74 million deficit, the emergency provision for the year 2008/09 of $24 million has also been used up, and not all of it on emergencies. According to Kenneth Jefferson the CI$3 million for the establishment of a new route for Cayman Airways also came from this source of funding.

Jefferson explained that under the Public Management and Finance Law, the ‘exceptional circumstances’ expenses is an emergency provision which allows government to pay for unusual items that it did not expect and has not budgeted for, such as Hurricane Paloma and the Special Police Investigation, items which Jefferson described as of a “genuine exceptional nature”. The limit on this fund is set out in section 11 (5) of the PMFL and can be no more than 5% of budgeted revenue for the year.

With Hurricane Paloma, the judicial review and Operation Tempura, the previous administration faced a number of what would be considered emergency expenses that the provision was created for. However, it appears that Cabinet drew down on this source of funding for other projects that would normally be included in an annual budget. The administration used the funding for the costal protection project, medical care for the uninsured, scholarship supplementaries, the Golden Age home/East End clinic and the new Cayman Airways route.

Jefferson said that by October 2008 the Cabinet had spent more than half of the emergency provision, but that spending had not been approved by the Legislative Assembly. At the same time that the financial secretary was advising the elected government to take a supplementary budget to the House to ‘lock in’ the 6% cuts to start reducing the predicted deficit, he noted that the $14 million expenditure from this provision also needed to be approved. However, government did not bring the appropriations to the House until March, by which time Cabinet had spent another $10 million from the exceptional circumstance expenses. This meant that by March 2009 government had spent the entire emergency budget without approval from the Legislative Assembly.

Moreover, Jefferson stated that by the time these expenses were laid before the House that Cabinet was asking for even more emergency funds exceeding the legal allowed limit.

The financial secretary explained that over this financial year Cabinet has approved $26 million of ‘exceptional circumstances’ expenses which were not originally budgeted for. CI$24 million was eventually presented to the Legislative Assembly on 20 March during the supplementary budget. However, Jefferson noted that since that date Cabinet approved a further $2 million in emergency expenses which has not yet been approved by the Legislative Assembly and which breaks the terms of the exceptional circumstances expenses as set out in the PMFL.

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