Budget not balanced

(CNS): Despite being only two weeks away from the end of the financial year, the government is struggling to balance the budget and may face a shut-down from midnight on 30 June unless it enacts some form of emergency legislation to enable it to pay bills. Government’s earning and spending plans should go to the UK three weeks before they are presented to the public and the Legislative Assembly. However, the 2012/13 budget has not yet gone to FCO officials, and despite claims by the premier that he will deliver the budget next week, sources tell CNS this will not be possible as the UK is unlikely to approve the current financial projections.

According to the three year plan, which McKeeva Bush signed with the UK in 2010 in order to gain approval for borrowing after the government fell afoul of the public finance law, it was forecast to have reached a surplus this year of $60 million. Instead, the Cayman government is facing yet another deficit of significant proportions. Bush, in his capacity as finance minister, has spoken about the need to cut $130 million from the first budget requests submitted by government departments.

As this financial year ends it is estimated that government is facing a deficit of over $40 million, despite having predicted a surplus when the budget was presented in June last year. Now the UDP administration is facing the prospect of significant cuts to public spending as it moves into its last fiscal year before a general election.

It is not year clear how large a deficit Bush intends to put to the UK but sources have confirmed that the budget does not balance.

With the year-end deadline just two weeks away, there is not enough time for government to gain approval from the UK and pass the appropriations law. According to the Financial Framework Agreement signed by Bush and the OT minister last year, the FCO must see the Cayman government’s budget at least three weeks before the minister of finance is due to present it to the country. With the UK minister, Henry Bellingham, now travelling overseas and the likelihood of the budget being rejected by the FCO technocrats, Bush could be facing a serious fiscal crisis.

Even when London is finally satisfied, government still needs time to present the approved budget documents for debate in the Legislative Assembly and the public arena, allow Finance Committee to examine the proposed spending plans, make necessary amendments to the bill and then pass the appropriations law -- all before midnight on 30 June. If that does not happen, government will have no legal authority to spend any money, pay salaries or meet any financial obligations. As a result, it will need to pass new or change existing laws relating to financial management to enable government to appropriate funds to keep the public sector going.

The member for North Side told CNS that this was an appalling state of affairs for the country and was down to the incompetence of the government, as he made the point that the most important thing the elected government must do every year, if it does nothing else at all, is put together the budget.

“This is an unbelievable way to run a country that claims to be the fifth largest financial services centre in the world,” Ezzard Miller said. “A little less travelling and a little more at home time for the finance minister may have helped. After all, he is the one who must present the budget to the public and the LA but that is hard to do from Honduras, Panama or London,” the independent member said as he pointed to the extensive travelling the premier has undertaken over the last few weeks when the budget should have been his priority.

Miller said he believed that because of the way Bush runs the government nothing gets done without his OK, so the civil servants who have been trying to pull government’s spending plans together have been stalled in his absence.

“As minister of finance he should realise the budget requires a lot more from him than a couple of days to just sign off,” Miller told CNS. He said he expected civil servants would be blamed for the difficulties ahead when it should be squarely placed at the feet of the premier.

Miller explained that there is no legislation at present that can allow government to spend money if it does not pass the appropriations law before the year end during an existing term of office. He said that while provision exists for a new government to appropriate a three month spending plan in the wake of an election based solely on the previous year, this does not extend to an existing administration.

“Government will need to pass a law or amend the PMFL. We know this administration has had no problem amending laws to suit it but it will still need some legislation otherwise it will not have the legal authority to spend a signal dime come midnight June 30th,” the independent member warned.

Miller said he understood that the budget was still, at the eleventh hour, a complete disaster, having gone before Cabinet on Tuesday, but government had little chance of gaining approval from the FCO. This, he said, meant that there was probably still weeks of work to do to try and balance the books, placing government in an untenable position and making a mockery of claims by the UDP administration of success with the management of public finances.

See original three year plan proposed by the UDP in 2010 and agreed with the FCO as a way forward to address public finances here.