Archive for June 23rd, 2012

FCO wants more budget cuts

(CNS):  The FCO has told the Cayman government it must cut this year’s proposed budget further, and as a result the premier will be forced to bring an emergency appropriation to the Legislative Assembly on Wednesday and not a proper budget. The premier admitted to the crisis situation on Friday night in an unpublicised radio broadcast. McKeeva Bush said the UK had described the government’s proposed operational expenditure as “unsustainable” and his government now needed more time to cut public spending. He claimed that a temporary appropriation was a “mature” approachto the problem which, despite being the finance minister, he blamed on others.

In the short broadcast Bush blamed the previous administration, civil servants and the UK for the budget crisis as he revealed that the Foreign and Commonwealth Office had instructed the Cayman Islands Government to cut the proposed spending plans for the next financial year.

“The position taken by the Foreign and Commonwealth Office is that this (is) unsustainable expenditure,” Bush said. “The FCO made it absolutely clear that they require further reductions to operating costs. This will take us more time to achieve.  The government has taken the mature and responsible outlook that, whilst further expenditure reductions are required by the FCO, such decisions must be made in a careful and measured way.”

Despite claiming to be responsible, Bush had sent his budget proposal to London last week, which was well short of the timeline required in the Financial Framework Agreement he signed last year as well as the time required for the budget to go through the proper legislative process at home.

Although the Strategic Policy Statement (SPS) was delivered in December and a budget circular sent to chief officers in January, it appears that Bush did not begin reviewing the civil service spending requirements until very recently and had been out of the country in London, Honduras, Panama and the US over the last month.

As a result Bush now faces the inevitable consequence of having to call for a temporary or emergency appropriation on Wednesday to ensure that government does not grind to a halt next weekend when the financial year ends on 30 June.

As permitted by section 11 of the Public Management and Finance Law, government will present a resolution on Wednesday to the Legislative Assembly seeking an appropriations for a two or three month period for next financial year.

“This approach is sensible, mature and responsible,” Bush claimed. “It will allow the government additional time to make further cost cutting decisions required by the FCO in a measured and fully considered way.” As a result of failing to bring the budget in on time the finance minister can expect to face some serious criticisms from the opposition benches as it appears such a situation has never arisen in Cayman’s political history before.

However, the premier said this approach was endorsed by the FCO and was consistent with his government’s position that the “responsible management of the country’s finances is our utmost priority.”

Bush pointed the finger at the PPM for overspending and creating the situation where the FCO controlled the local budget; he blamed the civil service for not staying within the parameters of his spending targets set in January and also listed a number of issues that had driven up public spending since 2005.

The cost of government has been increasing over the last seven years as a result, he claimed, of growing numbers of government employees, as well as higher healthcare and consumable costs. Bush pointed to the global economic difficulties that have impacted Cayman and seen government rendering “much more social assistance”, like rent and scholarships, to its people. In addition, he also pointed to the tremendous escalation in the cost to fight crime.

But Bush said government had to make cuts. He said expenditure had to be re-examined and a more sustainable level of spending found.  “Government cannot allow our expenditure to rise as it has in the past; we must cut,” he said. “Because the last government put us in this intolerant situation we must reduce expenditure if we are ever going to control our finances again.”

Although this is the third budget prepared by the UDP administration, this government has not made any reduction in public spending and, year on year, has presented a budget with higher operational costs. The current government has failed to stick to the three year plan originally agreed with the FCO, and despite continued rhetoric about ending public sector borrowing, the government was still seeking further long term borrowing in this budget and an extended overdraft.

The spending target which Bush set in the SPS in December of $498 million was still higher than any previous years. When the government departments came back with their operational expenses this year, the premier said it exceed that figure by some $130 million and capital expenditure exceeded his target by more than $21m.

Although Bush has persistently blamed the previous administration for the country’s fiscal woes, once the UDP government gets a budget through for the next financial year it will have significantly exceeded the overall spending of the PPM’s much maligned four years in government.

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