LA opens for budget session

(CNS): The country’s parliament will open at 10am Monday morning for the government to present its full 2013/14 budget. Despite being more than three months into this financial year, the change of government following the general election led to the need for an interim emergency budget, based on the previous year’s, to enable the new PPM government to collect and spend public money until it shaped its own spending plan. The government has promised that there are no new revenue raising measures, with the exception of the already earmarked directors’ fees, which were set for the last budget but were never introduced.

The budget, which received the nod from the UK last week, is expected to reveal a significant reduction in spending.

The session will begin, as is traditional, with the governor’s throne speech, which will be presented on the floor of the Legislative Assembly. This will be Helen Kilpatrick’s first major public presentation following her short acceptance speech when she arrived last month. As a fiscal expert herself, Kilpatrick is expected to play a significant part in managing public finances. Premier Alden McLaughlin is expected to deliver a presentation outlining the thinking behind the budget, followed by the delivery of the details by Marco Archer, the finance minister.

Speaking at the recent Chamber of Commerce Legislative Lunch last month, the premier said that the PPM’s four-year fiscal plan had received the approval of the UK on first submission and this will be the first budget under the revised long term plan. Without what McLaughlin called “a lot of fiscal space in which to operate”, he said the budget was “a test of fiscal discipline characterized by new levels of efficiency and imaginative solutions” to achieving the necessary budget goals.

Over the years the Cayman government’s spending has reached almost three quarters of a billion dollars, pushing revenue generation to the maximum. But with a new era of fiscal discipline in the civil service, which McLaughlin said had been embraced by public sector management, and with the assistance of  Richard Holmwood, the FCO’s economic advisor, the budget would see even further reductions in spending and in particular personnel costs.

With no new borrowing and plans to continue paying down the existing debt and make a substantial contribution to government’s past service pension liability, any “investments in capital projects will be responsible and revenue measures will be zero inflationary,” he said, adding that the budget projects a substantial surplus.

Including statutory authorities, the government holds more than $700 million of debt, which still breaks the country’s own fiscal standards set out in the Public Management and Finance Law, which states that government’s loan package cannot be more than 80% of its annual core government revenue earnings. As a result, the UK government is keeping a close supervisory eye on Cayman’s public finances. It has banned all borrowing and is looking for realisticachievable budget plans.

The ban on borrowing imposed by the UK will remain in place until government has reduced its debt and builds up its cash reserves, despite the private sector’s demands on government for more infrastructure development, such as the airport redevelopment and the cruise berthing facilities.

The battle to pull this budget together has not been easy and McLaughlin has spoken about the need for government to think about designing budgets for a full 4-year government term, as the process dominates the legislative calendar. As soon as one annual spending plan is presented to the LA and passed, the cycle starts all over with the delivery of the government’s Strategic Policy Statement in December, which should guide the delivery of a budget in the following April. This needs to be approved and steered through the LA and Finance Committee before the end of June.