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Tackling Cayman’s Cost of Living Crisis

Politics 24 Aug, 2022 Follow News

Roy McTaggart

“Cost of livin’ gets so high

Rich and Poor they start to cry….”

~ Bob Marley (Them Belly Full.)~

 

By: Hon Roy McTaggart; Leader of the Opposition.

There is hardly a day that I do not hear from someone concerned about the increasing cost of living. Several people have thanked the Opposition for getting the government to address the issue. And they ask us to keep pressing - and we will. The government needs to do more to help people; they can afford to do more.

In a previous article, I noted that our country faced the twin threats of record-high inflation and a possible looming recession. Either one by itself is bad, but a combination can mean a world of hurt. We do not need to get there. That is a place where people can become desperate if unable to afford to live. To quote Bob Marley, “Them belly full but me hungry. A hungry man is an angry man”.

Government can provide the necessary support to people so that those who are less well off, including our pensioners, do not have to go hungry. Or to get angry. 

Let us look at where things stand. Cayman’s inflation rate topped 11% in the first quarter of this year and will likely go higher. Across all three Islands, living standards are being squeezed. And at the same time, wages are lagging significantly behind prices.

Businesses face spiralling costs. Families are paying more for everyday essentials. Housing, fuel, and utility bills have skyrocketed. At the grocery stores, food prices have increased by at least 5%. That was in the first months of this year – food prices have gotten higher since.

These are not luxuries that people can choose whether to buy. 

Cayman is at the mercy of global trends, and in particular, price rises in the United States bear directly upon us. As stated in the first of these articles, much of this inflation is imported. We import much of our food from the United States, and in June, food costs in the US surged 10.4%, the most since February 1981.   So we know that we will be facing higher prices for some time.

Imported inflation means that our government’s ability to control inflation is limited. But there are important steps that this PACT government can and should take.

Let me be clear. The assistance provided to many households to lower their electricity bill is welcome. I was happy to see that action, limited though it was, taken by the PACT government in the last few weeks. 

But the announced electricity credit programme only lasts for three months. What happens after September? Can families expect a spike in their electricity bills in the fall? At least there was some relief for three months.

However, suppose you are one of the many small business owners who will struggle to pay electricity costs over the summer. In that case, there is no relief assistance package for you. Suppose you are a homeowner or renter whose electricity use is marginally above the programme’s cut-off point. In that case, there is no relief assistance package for you.

In the last week or so, we have seen a website launched that repackages some other ideas. But this looks like a case of too little, too late.

It did not have to be this way.

The lack of clarity in the government’s response to the cost-of-living crisis reflects their lack of preparedness for it.

For the first half of this year, the PACT Government did nothing, despite mounting evidence that soaring prices were impacting hard-pressed families and businesses across our islands.

In June, when Parliament met, I was hoping that the Premier would have addressed the cost-of-living issue at the start. He was undoubtedly aware that the government statistics office had just confirmed what we were all feeling, that inflation had jumped to over 11%.

The Premier ignored the issue and seemed unwilling to address what was the most pressing concern for our people.  So, I put forward an urgent question in Parliament asking what action PACT would take in response to the cost-of-living crisis. I also offered up several suggestions as to things that government should consider. 

Those who watched that session of Parliament may recall it took the Premier several hours, closeted in a meeting room with his colleagues, to answer that question. And that answer was so inadequate that he felt compelled to try again early the following morning.

The Premier’s inadequate reply to my urgent question in Parliament made it clear that PACT had no clear ideas on what action needed to be taken.

So, I immediately wrote to the Premier, setting out some of our ideas. These included those that I had suggested in Parliament, such as:

• an increase in the stipend paid to retired seamen, veterans, pensioners and those dependent on financial assistance from the government.

• reducing the import duties on gasoline and diesel for six months to help ease the cost at the gas pump.

• deferring the government’s planned reinstatement of pension contributions to the end of the year.

• and providing a cost-of-living adjustment for all those working in public services, not just civil servants.

I made other recommendations to the Premier. Such as:

• the continuation of Covid stipends to those in need, given tourism, would be slowly returning.

• requiring the Government-owned Cayman Islands Water Authority not to increase water rates for at least six months.

• and I urged the government to seek other ideas from Chief Officers in the various ministries.

All our recommendations would bring some immediate relief to a broad cross-section of hard-pressed Caymanian families and businesses. I am pleased that we have seen some action taken in response, notably the extension of the ‘pension holiday.’

However,  it was not just my urgent question that finally got the government to pay some attention to this issue.

At the same June meeting of Parliament, my colleague, David Wight, Member of Parliament for George Town West, proposed a Private Member’s Motion urging the government to cut stamp duty for all Caymanians and to provide extra support to first-time Caymanian buyers. The measure was specifically designed to bring additional relief when housing costs are spiralling.

I am pleased to say that the government accepted and voted for David’s motion. We are now waiting for them to implement the measures we proposed.

Also, at that meeting, Barbara Conolly, the Member of Parliament for George Town South, pressed the Minister for Education over whether she had plans to extend the support offered to young families through the Early Childhood Assistance Programme. The Education Minister could not provide any ideas at the time, but she subsequently announced that the programme would be extended to cover the summer months.

This is excellent news for young Caymanian working parents who, as a result, can continue to afford quality childcare over the summer. Again, I welcome the government’s willingness to listen once we had raised the issue with them.

The government’s lack of preparedness for this cost-of-living crisis reflects their gross misjudgement of the future likelihood of inflation in the economic forecasts the Minister of Finance announced at the time of the budget last December.

The government’s budget forecast that inflation would be 3.4% in 2022 and only 2.2% across 2023-25. The Minister of Finance told the House and the country that these relatively stable prices would be enabled by ‘relatively stable rental prices and declines in transport and electricity.’

Of course, the Minister got it completely wrong, and his numbers have turned out to be wildly inaccurate.

And it is not just hindsight that allows me to say this. I told the Finance Minister in November that his estimates would prove wrong, and the consequences could prove disastrous.

In my response to the government’s budget, I pointed out that inflation in the United States was already at its highest level since 1990 at above 6%. I told the Minister of Finance that this would inevitably lead to higher inflation in Cayman. Indeed, I pointed out that there was already evidence of that inflation in our grocery stores, the gas pumps and utility bills.

Finally, I warned the PACT Government that inflation often hits the poorest and most vulnerable in our society the hardest. As costs rise due to inflation, so must government support.

Despite my warnings last November the government sat on its hands and did nothing for six months as prices spiralled and families suffered. It was only once my colleagues and I forced them to confront the reality that the government has taken any action at all.

And, while I welcome what they have done, they must now go further.

It is much less important who has the ideas than that something is done. I have said many times that if Ministers have no ideas and do not want to listen to us in the Opposition, they should ask their capable civil servants to develop proposals.

The only wrong answer at this time of a cost-of-living crisis would be to do nothing. Whatever the source of the solutions, I urge the PACT Government to act swiftly to help alleviate the adverse impact that runaway inflation is having on the living standards of thousands of families across our Islands.


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