UK expert to help with revenue forecasting

| 19/02/2013

1981503_stock-photo-error-word-on-calculator-inaccurate-bad-data-glitch.jpg(CNS): As the Cayman government continues its struggle to balance the public books, another technocrat has arrived from the UK to assist. The latest British consultant is an expert in cash revenue forecasting, which has been one of the government’s main problems. Since the economic downturn began in 2008, budget predictions made locally have proved to be completely inaccurate and hampered both the PPM and UDP administrations’ ability to manage the public purse. The finance consultant arrived on Thursday and will be on Island for two weeks. According to the minutes from the deputy governor’s 11 February meeting, he will be assisting with forecasting.

The visit by the consultant, who was not named, has been paid for by the UK and is another element of the efforts by the FCO to keep Cayman on its budget track. This year there can be no additional appropriations to the government’s budget, and although the interim government managed to secure a short-term extension to the overdraft facility, there can be no further borrowing.

Revenue expectations for this budget are extremely high, but if the track record of poor forecasting continues, the government could find itself in difficult circumstances as the year end approaches, at a time when the interim government will be facing a general election from what is already a position of weakness. A poor showing in the budget will further undermine the former UDP members' chances of re-election, as well as that of their former UDP colleagues.

According to the latest minutes released by the governor’s office for the 11 February meeting with civil service heads, the Expenditure Review Committee has also submitted recommendations on the budget, which have been accepted by Cabinet, though the details were not revealed.

Meanwhile, a draft policy on voluntary redundancies in the civil service has now been drawn up in consultation with CICSA and the Public Service Pensions Board. Chief officers have been asked to review the draft and provide feedback in two weeks.

An update on Phase IV of the Public Service Review and potential spending cuts is also expected at the next deputy governor’s meeting.

Cutting spending and managing revenue will be crucial to the next administration as the global economy shows no sign of any significant upturn. With all of the candidates campaigning against any kind of new or increased taxes, cuts in public services and public jobs wil be the only way government will be able to stick within the extremely tight parameters set by the UK to reduce Cayman’s debt over the next three years. To do that, politicians will need the support and cooperation of a more able civil service and will need much more accurate predictions when it comes to calculating how much revenue government is likely to raise in a given year .

See deputy governor’s meeting minutes from 11 Feb below.

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  1. Anonymous says:

    First find the books!

    Thats the problem with bringing outside forecast experts, to get any answers on the future, firtst you have to record the past. The quality and timeliness of the book keeping in Cayman is so dreadful that they dont have a start point for the future, not only that, but they dont have regard for expense contracted but not yet paid out, the system politicians still use is to dig in the bag to see whats there, spend it regardless of the fact it is already spent. Not only that but they seem to deliberately avoid due process presumably to hide sticky fingers, so against that background what hope has even the best forecast expert!

  2. Anonymous says:

    I wish people would stop blaming the 2008 economic downturn for the problems here.  The fact remains that the reason for the "completely inaccurate budget predictions" is that the people doing the predictions don't understand basic economics.

    There is the principle of diminishing returns.

    When you raise the price of something people will buy less of it.  At some point you reach negative returns, where people will buy none of it and it actually cause you a loss because you expended resources to acquire it.

    When you raise the import duty on cigarettes from $2 a pack to $4 a pack for example, and predict a 100% increase in revenue from import duty on cigarettes you fail to understand that fewer people will buy cigarettes because the price has increased.  It's called diminishing returns.

    If you raise the price even more, to the point where people no longer buy cigarettes, then you reach the point of negative returns.  That is the monies you were getting when the duty was $2 stops.  Now you get nothing, hence the negative returns vs where you were before.

    Likewise, to count each license plate as a vehicle and predict revenue based on fees from each license plate ignores the fact that there are thousands of vehicles that have been taken off the road permanently and discarded, but the license plated were not turned in.

    I personally had a vehicle that was old, rusted to pieces and sitting in the yard for a year. When I took the plates in, they told me in  order to accept the plates I had to  pay the back year in registration fees.  I said thank you, walked out and have the plates here still, some 15 years later, but the old truck was taken to the dump many years ago.  I believe they still count fees from that license plate in the budget each year.

    These are just examples.  I could give many more.  But the point is that the people who are making these revenue predictions have no idea what they are doing, so it is not surprising that there is a budget prediction shortfall each year.

    • Anonymous says:

      Well if you had gone past basic economics you would have learnt that the price elasticity of demand varies according to the product concerned. Some products, particularly those which are habit-forming like cigarettes, have a relatively inelastic demand, i.e. demand may abate somewhat but the overall of an impact of an increase in tax is an increase in revenue.   

      • Anonymous says:

        And if you had gone past just the example and applied yourself to the source of Caymans income, fees to the finance industry, you would I hope agree that demand for those products is far from inelastic. There comes a point when the other jurisdiction looks better, and Cayman is close to that, and I am sure that is what his point was!

        • Anonymous says:

          Nice of you to speak for him but that is not what he said at all. It was a really bad example if that is the point he was trying to demonstrate.

    • Anonymous says:

      There must be somebody out there that may remember "CHUCKIE's" famous comment (a few years back), that the Depression/Recession in the USA will not affect "US"????

      Compass printed it……..

  3. Whoufa? says:


  4. A Struggling Merchant says:

     Revenue forecasting is not the problem.  The problem is waste and theft.  Of course, buying votes is expensive too.

  5. Anonymous says:

    So why do we have a Financial Secretary (Ken Jefferson) a Chief Officer (Sonia McLaughlin) paid huge salaries to do this job. This has always been what those positions were supposed to do. Maybe they need to retire?

  6. Anonymous says:

    As long as we appoint people to senior civil service post mainly on the basis they are Caymanian, we will never get a better civil service. Recently a decent intelligent young man was appointed Cabinet Secretary. He is about 35 years of age. In other mature jurisdictions, you don't get that position until you have many many years of senior civil service experience -one would expect to be at least 50 before getting the position. Same with Permanent Secretary positions (we call them Chief Officers). Some years back, a young Caymanian was appointed at that level at the age of 32. It's TOTALLY absurd. You can't ( not even Caymanians, Ezzard!!) have the knowledge and experience at that age to carry out these senior posts………unless, that is, these senior posts in Cayman are really not that senior and weighted down with responsibility. In which case, they should not carry these huge salaries. Any comment, Mr Manderson??

    • Anonymous says:

      Not just Caymanians.  You have to be from certain pedigree families to get a top post.  Most of these people were promised these positions because their parents were either ExCo members, Permanent Secrtetaries or maybe even past president of the Community College or past head of Civil Aviation.

      Nevertheless, they are as dumb as a cement block.

  7. Anonymous says:

    The UK should not pay for this.

  8. Anonymous says:

    Does anyone know the names of the individuals within the CIG that are currently responsible for revenue forecasting? As the CIG is looking to downsize these individuals should be some of the first to get the boot.

  9. St Peter says:

    Ok I just need to ask him a few questions first:

    1. Have you tested your methods on the UK economy?

    2. How did that work out for the UK's economy?

    3. Do you see any problems getting our thick headed civil servants and elected officials to follow what you suggest?

    If the first two were positive and you are an expert at lobotomy –  then welcome.

    I wish you success…


    • Anonymous says:

      At least the UK government accounts are not signed off by Mickey Mouse.

  10. Anonymous says:

    Yup. You can only ignore the problems of spending more than you earn for so long. Eventually you get cornered and have no choice but to take very painful decisions. This whole mess is down to an utter FAILURE of past politicians to take action a lot earlier when it would have been less painful.

  11. Humpty Dumpty Pajamas says:

    Thanks you UK. We need the help.

    • Anonymous says:

      what does the financial secretary do exactly?  it's it his job to make sure all of this is correct?  we need someone else to come and babysit him?

    • Chris Johnson says:

      The expert needs to look not only at projected income and administration expenses but to satisfy himself as to the estimated cost of future lawsuits. I very much doubt if the past regime has even thought about it. A word inthe Auditor General's ear might help plus a thorough review of the Attorney General's files. The TCI Governemt has recently been the subject of a lawsuit for $100m and I imagine that there are several skeletons in the Cayman Government coffers or perhaps I should say coffins.

    • Anonymous says:

      R u people out of your friggin minds???? Did this expert come here free of charge??? Who paid for his ticket, who is paying all his expenses?? OMG don't we have people here in the cayman islands who have degrees that can do this? This is why we are in debt…

  12. Anonymous says:

    Cayman's management of the public purse goes something like, spend whatever you want without paperwork or cost/benefit analysis, then when holes appear increase fees and add some zeroes to the revenue side of the budget and when that revenue doesn't materialise borrow, blame someone else and claim to have solved the problem.  Repeat annually until fees are so high no-one will do business here.