The Leader of the Opposition corrects the Minister of Finance
The Opposition is preparing to respond to the Strategic Policy Statement (SPS) that the government will introduce in the Parliament in July. The SPS will be the first time the country will learn, at long last, what the new government’s collective plans and ambitions are for our Islands. The Opposition will be ready to do its job and provide the government with helpful feedback on their proposals.
Two documents that help form the basis for the SPS are:
(a) the Unaudited Results for the Financial Year Ended 31 December 2020 (the 2020 year-end financial results), and;
(b) the Pre-Election Economic and Finance Update (PREFU).
Both documents are prepared by the Finance Ministry’s technical staff, approved and signed off by the senior team, including the Financial Secretary.
The 2020 year-end financial results presented in March were relied upon by me as Finance Minister, and by the Cabinet, as a good indication, albeit unaudited, of the core government’s financial position at the year-end. These results indicated that Government finances had performed far better than expected during the pandemic, and the deficit at the end of 2020 was reported to be $38 million. This estimated deficit of $38 million for year end 2020 was also noted in the PREFU.
The PREFU, as required by the Public Management and Finance Act, was compiled by the Ministry, approved and signed off by the Financial Secretary and the Account General for completeness and reliability. This provided confirmation that the document fairly reflected the country’s forecast financial positions for the years ending 31 December 2021 and 2022, as well as reconfirming the 2020 year end results.
In keeping with established best practice, the PREFU was not presented to me as the Finance Minister or to the Cabinet before being gazetted in March by the Financial Secretary. The PREFU estimated the deficit at the 2021 year-end to be $98.3 million based on what the Financial Secretary and his staff knew or assumed regarding the government’s expenses for the year.
I, like the public, rely on the statements of the new Finance Minister regarding the country’s finances. But as he has been preparing for the SPS, the finance minister has made some curious comments on more than one occasion. Looked at in one light, it could be that the Minister may not understand how government truly works and is simply wrong. Or perhaps, as some have suggested, the Minister wishes to create doubt in the minds of the public regarding my stewardship as Finance Minister. Either way, I will help set him right.
Mr Saunders asserted that governments fiscal deficit for the year ending December 2020 was some $48M more than the earlier reported deficit of $38M provided by the Ministry. This change, he said, created a revised 2020 deficit of $87 million – a deficit that has caused his government some challenges.
It is noteworthy that the Finance Minister also relied on the PREFU when he read from it during his government’s first press briefing in May to provide an update on the country’s finances. No mention was made of any concern regarding the information contained in the PREFU, including the estimates for 2020 and 2021. So, it appears that whatever adjustments were made to the 2020 year-end results occurred after the election and seemingly after his first press briefing.
I will tell the Finance Minister that I trust the Financial Secretary, the Accountant General, and the Ministry staff who prepared the 2020 year-end financial results back in March. I have some difficulty believing that they would have gotten their March figures that wrong. The change looks to have occurred under the Minister’s watch but hopefully not under his direction. And so, I eagerly await the Minister’s explanation as to what accounted for this supposed increase in the 2020 fiscal year-end deficit. I hope, though, that he has a better rationale for this increase than the one he offered for the increase in the estimated population numbers.
The Minister also commented that the PREFU omitted any forecast funding for the Tourism Stipend after May 2021. He intimated that my government was hypocritical for saying we supported continuing the programme yet only provided partial funding. Again, he is either unaware of how the process works or is deliberately misleading.
I recall the funding for stipends being in place to June 2021, but the Minister says it was May – this does not matter for me to make my point. My government quite correctly provided funding for the stipend until only a month or so after the election, bearing in mind the principle that a government leaving office should not financially bind a new government. This would have allowed time for a new Government to increase the funding and continue the programme if it so wished. Based on the statements made in the PREFU, it seems unlikely to me that the Financial Secretary would have assumed a new Government’s intentions regarding the stipends or any other expenditures for that matter, and thus considered only the amounts that cabinet had approved for Covid relief and other programs.
So, there was nothing sinister in this – we acted responsibly. The Minister was right about the funding period, but he is wrong that we would not have continued the stipend. As we said during the campaign, we would have increased the monthly stipend from $1,500 to $2,000.
We would certainly have continued the programme through 2021 and noted this in our election Manifesto and on the campaign trail. It would be interesting to know if the Minister can say whether he campaigned to keep the stipend in place as I do not recall him saying so before the election. Further, as I said in my 17 June press statement, had we formed the government, we would have convened Finance Committee in May and sought the additional funding to extend and increase the Covid-19 relief programmes. Our position was clear to everyone before election day. Indeed, our position was clear regarding this and many other things as unlike anyone in Government, save for the Education Minister, we provided the country with a clear set of priorities and policies for government in our election Manifesto.
I suspect that the real challenges that the Minister has are disagreements amongst the PACT team about what plans and policies to support. This disagreement was highlighted by a recent online news site that many believe has a direct line to the Premier. I suggest the Minister stick with putting together his SPS rather than spending time on innuendo.
I am proud of the vastly improved financial position that the two governments that I have been a part of has achieved. It is our strong fiscal health that has greatly assisted us over these past 15 months as we have fought Covid. The Progressives led coalition governments have left behind a solid foundation and successful policies on which the PACT government can build.
I await the Minister’s explanation as to what caused the Ministry to increase the 2020 year end deficit since he took office. I also look forward to hearing the governments strategic policy statement. Of course, those of us in the Opposition will support any sensible policies proposed by the government. And we will provide alternatives solutions to those policies we believe are not in the interest of these beloved Cayman Islands.
YouTube Link: https://youtu.be/KpEwmMbCmKI
Submitted by: The Progressives