Plan depends on cuts
(CNS): According to the Cayman Islands government, its financial recovery will depend on a combination of improvements in external influences and major cuts on internal ones. The three-year plan that government submitted to the UK reveals that the country’s earnings won’t reach the levels it had predicted to collect in the 2009/10 (last October) until the 2012/13 fiscal year. However, government aims to cut government spending. In this long term national financial plan it says public expenditure will continue to fall from the predicted highs of almost $532 million for core government in 2009 to just over $462 million by 2013 — eliminating the country’s deficit.
Government says it aims to do this through pro-growth policies combined with public sector reform and spending cuts, as well as the anticipated eventual turnaround of the country’s own domestic economy and the impact of the worldwide recovery.
In the plan submitted to London the CIG has stated that the adoption of four key strategies will reduce spending and increase earnings over the next three years to turn the current budget deficit into a surplus, reduce the country’s debt and add to the government’s cash balances and grow the reserves. These are public sector management and spending reform, limits on new borrowing, a realignment of revenue bases and the use of public finance initiatives.
In his budget address on Tuesday the premier said the improvements in the country’s fiscal fortunes would be as a result of gradual economic recovery, which is expected to start in 2011. McKeeva Bush predicted 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.
“Apart from pursuing fiscal prudence, the projected international economic recovery is expected to fuel the local economy. In addition, the private sector led investment strategy is forecasted to bear fruit in the medium-term, and this in combination with external driven demand would boost government revenue,” Bush told the Legislative Assembly. “The fiscal recovery is achieved by expenditure control and revenue growth stimulated by increasing economic activity.”
The three-year plan depends on a number of variables, not least the hope of considerably more inward investment into the country as well as recovery in various sectors. Although the premier has warned of increases in duty, with the exception of 25 cents on fuel this financial year the plan does not give specific details of what other increases in consumption taxes the country is likely to face.
Rejecting direct taxation, the three-year plan focuses on consumption based fees through customs and Bush said government plans to examine the full list of tariffs under the Cayman Islands Customs Law with a view to adjusting them. “This type of fee has the benefit of spreading the burden across the wider community while minimizing the impact on businesses,” he added.
The three-year plan, now a public document, points to major public sector reform and the implementation of a number of the recommendations in the recent Miller/Shaw report. Government also plans to use the results of the current internal civil service review to cut operating expenses. According to the predicted figures, spending cuts form a key part of the plan but details of exactly what will be cut over the coming years have yet to be revealed. The plan talks about early gains with cuts of more than 10% (later increased to 11%) in the spending appropriations initially planned for the 2010/2011 fiscal year. Some of the significant future spending cuts are likely to come as a result of the government’s decision to look at divestment.
Government will also be looking to the private sector to finance the country’s major capital projects in future, which will in turn limit its need for future borrowing. Government says it will now pursue a low borrowing policy over the next three years, limiting new capital expenditures to a nominal amount, which is not to exceed CI$25 million (approximately 1% of GDP) in any of the three years.
The plan will also depend heavily on a number of outside influences and creating a business friendly environment. Bush said in the immediate term there would be minimum increases in fees, as the plan points out that the increase in work permits has likely driven business away.
“The experience of the current fiscal year indicates that the economy is at the point where further taxes will very likely cause direct harm to the economy. The attempt to raise significantly work permit fees for foreign workers, for example, has likely contributed to firms restructuring their personnel to work from other jurisdictions outside the Cayman Islands,” the plan states. “This has not only resulted in lower than expected work permit fees but has also contributed to a reduction in the level of spending within the local economy.”
Government hopes to increase the physical presence of financial services firms, target new sources of business in Asia and facilitate major investment projects, which it says can generate close to $2 billion in the next five years. From the proposed cargo port in East End to the new hospital project, the projects are expected to generate jobs and bring in significant revenue to government according to the plan.
See full document: The CIG’s 3 Year Budget Forecast (2010/2011 to 2012/2013) presented to the FCO 24 May 2010
Category: Headline News
The plan depends on disipline that the leadership has proven time and time again that it does not have and never will have. The past has already proven that this and any other "plan" can not work in Cayman.
Increase the presence of financial firms? What on earth is he talking about? Worldwide banks know all about Cayman and those that want to be here, are here. Companies wishing to form captives have already done so. Most of the top 10 accounting firms are here but they rarely bring in new business. They just sit back and wait for clients. They are never proactive. We have more than enough law firms so that leaves the fund industry. The US and Europe have ganged up against us and funds are in an ever accelerating downward spiral.Madmac is in cuckoo land, eggbound and has no idea what he is talking about. He does remind me of Chancy the gardener although not nearly as funny as Peter Sellers.
What is Kim Lund’s phone number?
It’s time to get out while the gettin’s good. The crime, economy, jobs, higher gas and thus CUC prices has gone too far.
Thanks Cayman, We will miss you.
CNS – Where is the $$$$ for the Brac,
Just looked at the 3-year budget forecast. Noticed that the Brac is only getting $1 million for roads and $0.9 million for an emergency shelter over the next 3 years.
$1million for Brac roads – wonder how far that will go? Perhaps some areas in Watering Place will at least get done.
And just a note to all you nay-sayers about government finances, audits etc. Remember that all of the CFO’s, Chief Officers, Deputy Permanent Secretaries, etc are CIVIL SERVANTS. They are compelled by the Government of the Day to make the numbers say what they want to say. They cannot do any better in fear of their jobs – otherwise more and more of them would be put on Administrative "Gardening" Leave or be forced out of their contracts somehow.
CNS, who is the legal counsel for Government? The reason I ask is because of the amount of funds that are being spent on CIVIL SERVANTS (who are basically not allowed to work because the government of the day does not like them).
Please let the public know who is providing all of this questionable legal advice – must be able to get the information via FOI – as it is the Caymanian public who is ultimately paying for all of this.
Thanks for sharing my opinion.
Sign Me,
The FCO and FOI is watching.
Hey Cayman Brac! If you want millions to fix up the place, maybe you could pay the same fuel hike that the rest of us are going to have to pay… the fuel hike that would probably wind up funding your little paving project, etc.
Let the Private Sector run things,
We don’t need all of the tax and spend philosophy of the current government to get things done here on the Brac.
Why don’t we let the private sector run things? Or perhaps we could let some primary school children control the budget!!! Here you are young person this is your allowance and this is what needs to be done – bet neither the private sector or primary school children would take long to find solutions.
Our real problem on the Brac is that we have one MLA who wants to spend all the Government money she can by encouraging people to take hand-outs and be sponsored by social services – especially those in the district of Watering Place (she does not spend any of her own money on the Brac or invest in our economy). The other MLA is recognised as being one of the leading businessmen in the Cayman Islands, but he is shunned from being involved in any of the discussions/solutions.
Ladies and Gentleman do not be misled by the proposed budgets.
Sign Me,
Undecided Dividing Party
Undecided, you have summed it up quite well. The problem with operating any business in Cayman Brac is that the available pool of labour is quite happy with the money they already receive to sit and do nothing, other than vote every four years that is.
This plan is doomed.
I will wager that the UDP will not come anywhere near the cuts and revenue increases needed to make this plan work.
All those that want to gamble in Cayman should bet against this plan. It is a sure loser.
If Mckeeva really believes in his plan he ought to put his money on the line. I’d take his action. No need for those trips to the Hard Rock Casino and Paradise Island Mac. You can scratch your gaming itch right here at home.
As usual, the devil is in the details. Here are some details from the budget the Premier presented to the FCO in September 2009.
The Premier/Ken Jefferson forecast the total loss attributed to Public Authorities to be $6.75 million for the year 2009/10. Note that actual loss for the previous year was $11.38 million.
The majority of the estimated losses would be attributed to Cayman Airways ($4M), Health Services ($1.2M), and Turtle Farm ($11M).
The Health Services estimated loss was smaller than I had expected, given that they had actual losses of $10M the previous year.
Now on to the 3-year plan (no details available yet) the Premier/Ken Jefferson presented to the FCO last month, which shows a SURPLUS of $1.57M from Public Authorities.
My first question is: Given that the projected overall surplus of $5M for 2009/10 is now a projected loss in the region of $45M, what is the actual loss attributed to Public Authorities? Is it much higher than the $6.75 estimated?
I did not hear anything in the Throne Speech or the Premier’s Speech addressing how the losses at Cayman Airways, Health Services, and theTurtle Farm would be addressed in order to bring down the overall loss attributed to Government Authorities.
Are we working on the premise that there will be an election in the UK every year, and we will have a new person in the FCO to present with yet another farcical budget?
I really can’t believe he had the nerve to write in that budget that the Premier and the Leader of the Opposition would take ten percent pay cuts, and the other MLA’s would take 3.2% like the rest of the Civil Service.
I’m just eagerly awaiting the Budget Debate to see where our representatives stand when it comes to the details.
As kids always say "fool me once shame on you, fool me twice shame on me". What government said last year has been proven to have been complete nonsense. Why should we put any faith in what the government has put forward this year?
Most of the smart people on Cayman have never be lived anything your Government has said after proving they don’t know what the hell they are talking about a long time ago. Unfortunately most of the smart people are not allowed to vote or make Cayman leadership responsible for their many mistakes. Your submission should read "fool me once, shame on you, fool me twice, shame on me, fool me three times, shame on me, fool me four times, shame on me , fool me five times………………….Shame on me five hundred and twenty times? I don’t think you got the point!
"Government hopes to increase the physical presence of financial services firms" did I not read that more Funds are leaving the island in a previous article on CNS?
I personally don’t believe anything this government say, actions speak louder than words right? So far the only action consistent with the powers that be are back peddling and telling lies
so they realized rising work permit fees (Among others) drove away business/permit holders which in turn did more harm than good to the economy, yet they going to add a tax to diesel and god knows what else which just makes living here more expensive?
Yup they really know what they are doing….