Archive for August 19th, 2012

Solutions vs politics

Solutions vs politics

| 19/08/2012 | 58 Comments

I write to discuss the acute political, financial and reputational issues facing our country and the need for our collective behavior and decisions to reflect the seriousness of the situation. The focus must be on solutions. I will deal first with the political issues. When I resigned as a member of the PPM in 2010 I said that we had made a mistake in embracing the Caribbean model of party politics and encouraged other party members, from both parties, to admit our collective mistake and to change course.

It is important for us to recognize and acknowledge when our country started on this pronounced downward trajectory. It was in 2001. It is no coincidence that 2001 was also the year that we embraced and introduced party politics in Cayman.

Since 2001 both parties have been focused on remaining in power and winning the next election. Prior to 2001, when there were no political parties, governments were traditionally given two terms to implement their agenda. Since party politics came into being good governance and effective policy making have taken a nosedive and voter frustration has grown exponentially, which has resulted in each government being given one term only. Our society has become more divided and the unity between Caymanians and expatriates, which was hitherto the cornerstone of our success as a country, has all but disappeared. There is widespread political victimization as well as politicization of our civil service. Our continued denial of these glaring realities is the reason why the downward trajectory continues.

The solution to our political problems must therefore be to vote in the 2013 general elections to  elect a coalition government consisting of a good mixture of candidates and begin the process of disbanding political parties. This will force the 18 MLAs, irrespective of their political views, to work together to form a government. You would still have the all important check and balance of an opposition to government when members, unrestrained by party rules, feel the need to oppose government policy.

I now turn to the current budget crisis. We all know how we got here and both the PPM and the UDP must share in the responsibility. As citizens we must also acknowledge some responsibility as our demands on government for services and favours are very hard for the party in power to resist. It is important that we all acknowledge that nothing is for free and every service and favour provided by government must ultimately be paid for by all of us. Government does not automatically generate money by its mere existence. So nothing is free and we must all pay, one way or the other, directly or indirectly, for government to operate.

Tinkering with our  revenue and expenditure, such as was last proposed by government, will do nothing to balance our budget in the medium term. If we continue this band aid approach the UK will never approve our budget and could ultimately assume absolute control of our finances by suspending section 54(1) of our 2009 Constitution which mandates that a Minister “shallbe charged with responsibility for finance.”

The government must focus on expenditure and implement a medium term plan to bring it in line with what is considered sustainable for a country with our tax regime and GDP.

Let us look at some significant spending that could be eliminated from our budget during the next two financial years. It is important to note that I do not have access to the government’s draft budget so I can only make recommendations about what I have personal knowledge of.

The size of the civil service must be reduced but that can only be done over time and on a phased basis through collaboration with the private sector but planning and execution must commence now. It would be wrong, for many reasons, to convert a large number of civil servants to ‘unemployed status’. This would result in unnecessary hardships on our families and cause a further downturn in our economy as those salaries are removed from circulation locally. At the same time it would increase government’s expenditure as more and more people seek government assistance to survive.

Therefore, an integral part of the programme must be to transition some civil servants to the private sector so as to ensure that their income is protected while simultaneously reducing government’s expenditure and providing labour for the private sector. The aim should be to reduce government’s expenditure on salaries by $10M annually over 5 years, which would represent a total reduction of $50M in expenditure. On the basis of an average annual salary of $39,000, this equates to the migration of approximately 256 civil servants to the private sector annually over a 5 year period for a total reduction of 1,280 civil servants. With an average of 19,000 work permits in existence annually, this is easily achievable.

The following additional actions could be taken to reduce expenditure :

  1. Cayman Turtle Farm Island Wildlife Encounter –  Close all components of this attraction except the Turtle Farm related operations. This would allow for the subsidy to be reduced from $9M to $1M, an annual savings of CI$8M;
  2. Tourism Attractions Board – Privatize its operations, including Pedro Castle, the Botanic Park, Hell and the Craft Market and save approximately CI$1.4M in annual subsidy;
  3. Cayman Airways – The Panama and Dallas routes should not have been launched in the middle of a budget crisis and a global recession. Immediately discontinue these routes and eliminate the approximately $1.5M marketing and operational budget associated with them. Reinstate the implementation plan for the Lufthansa Consultants Report which was commenced in 2008 and this will save the airline approximately $2M annually. This should convert into a $2M reduction in government’s annual subsidy to Cayman Airways;
  4. The Nation Building Fund – This has been justified on the basis that our children need money for scholarships and our churches need money for ‘nation building’. Yet we have properly functioning Education Council and Ministry of Tourism Scholarship programmes with properly established criterion awarding record numbers of scholarships annually. Our churches have an obligation to act as a moral compass for our society rather than inadvertently promoting greed through accepting government’s patronage. Any money given to churches for infrastructure projects, such as hurricane shelter space, is easily justified but must be properly funded through government’s capital development programme and not through this illusive creature called a “Nation Building Fund”. Eliminate it and save $4M annually;
  5. Government Administration Building – Mandate all remaining government agencies that were slated to move into the new Government Administration Building to do so withoutfurther delay. This could save the government approximately $2.5M in lease costs annually; and
  6. Health Services Authority – Implement and enforce more prudent policies and eliminate the significant waste by mandating the HSA to deliver its services within the $8M annual subsidy. This would save on average $12M annually by eliminating the need to provide large allocations of supplementary funding. Health care subsidies to the HSA have continued to increase to unsustainable levels growing from a total of $17M in 2009/10 to $19M in 2010/11 to $27M in 2011/12.

On the revenue side, if sufficient resources were made available to the right agencies the proposed revenue measures for this year would be unnecessary.

I am advised that if sufficient resources were deployed to enforce the Proceeds of Crime Law, $60M – $70M could be deposited into the government's treasury in this financial year alone. Why is this being ignored ?

My recommendations, if pursued, could potentially save the government $41.4M annually and much more over time. Revenue in this 2012/13 financial year could improve by $60M – $70M.

Finally we must look at what must be done about the significant reputational damage that has been caused to our country in recent times when good governance issues have arisen and when announcements about direct taxation sent shockwaves throughout our local economy. This presented yet another platform for negative international media coverage about the Cayman Islands.

Much damage has already been done to our economy but there is no point is crying over spilled milk. Let’s clean it up! There is an urgent need for the private and public sectors to collaborate and to launch a robust and cogent international public relations damage control campaign.

Premier McKeeva Bush’s insistence on remaining in office pending the outcome of the three police investigations must be addressed decisively. It is obvious that both political parties are impotent in addressing the issues. We should not expect our situation to improve absent leaders who do not have the courage to tell our country the truth and to do what needs to be done to fix our problems.

It is wrong to try to rush police investigations for reasons which are well known to law enforcement professionals. The only alternative, therefore, is for the business sector to call for the premier’s removal from office. The business sector is in a position to facilitate this and to prevent further reputational damage to our country. I call upon them to do so as a matter of urgency.

I sincerely hope that my recommended solutions will be objectively considered and that anyone who may feel personally offended by anything I’ve said will understand that this is bigger than any one of us. This is first and foremost about Cayman.

Charles Clifford is a former minister of tourism, environment, investment & commerce.

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