Going through Deputy Premier and Finance Minister Chris Saunders’ budget address from Friday, Opposition Leader Roy McTaggart said that very little, if any, time had been devoted to discussing the government's overall financial strategy.
“To give us the chance to question and debate that financial strategy requires the sitting government to clearly state the direction it is taking and the fiscal principles it is working to,” he said.
When his party was in power, they worked towards: the achievement of year-on-year substantial budget surpluses; no new taxes or fees levied on families or business and reducing existing 'tax burdens' where possible; no new borrowing and the paying down of existing government debt; and all capital investment to be paid for from operating revenues, he advised.
“These were principles that we kept repeating but, more importantly, they were principles we lived by,” he said. “We believe that was the right financial strategy to follow then and, we believe, it is the strategy The Cayman Islands needs to continue going forward. Strong finances today provide the resilience to meet the challenges and uncertainties of tomorrow.”
Borrowing the biggest concern
Most worryingly, the PACT Government had turned its back on the past eight years of prudent financial principles that brought stability to government finances and had underpinned consistent economic growth, he advised.
“Our biggest concern with the PACT budget, therefore, lies not in the detail of the resource allocation decisions, but the disregard it shows for the long-term financial interests of the Cayman Islands,” he worried. “At the heart of this budget lies a single choice made by this Administration. That choice is to go down the path of massive borrowing once again.”
Over the period of the Progressives-led Governments, the national debt fell from around $560m in 2013 to under $250m on the day they left office. A reduction of over $300m or over 55% in Cayman's national debt, he said.
“That meant a rock steady credit rating with major agencies; reduced financing costs, so more to spend on services for people; and more flexibility to meet future challenges, including Covid. Most importantly, it meant that government paid its way, investing for the future while not saddling future generations of Caymanians with the millstone of debt around their wallets,” he stated.
The PACT Government had thrown a highly successful strategy into reverse. Instead of prudently paying down debt, they were “borrowing with abandon”. In taking out new loans totalling some $350m, $20M more than stated during the SPS, to fund infrastructure, the government was negating with one stroke the hard work done by the last two Progressive Governments.
“By the end of the period, debt will have spiralled back up to around $400m. In just the two years covered by this budget, the proportion of debt to Government revenue nearly doubles, while the cost of servicing that debt goes up by nearly a third,” he stated.
Mr McTaggart said Cayman was not the United States.
“There are limits on our ability to borrow – legal limits, and I would add perhaps common-sense limits. At the same time, as interest rates rise from their historic low, and it is increasingly likely that they will start to rise in 2022, debt financing costs will increase putting further pressures on revenue budgets. How then can government respond? Will it be forced then to put up taxes to balance the books?” he questioned.
27 Jan, 2020
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