Archer targets $121M surplus in 3rd budget
Marco Archer, Minister of Finance & Economic Development
(CNS): The finance minister has predicted that government will clear a surplus of $121 million by the end of the 2015/16 financial year and reduce government debt to just over $500k in a budget that, for the first time in several years, meets all of the fiscal requirements of the Public Management and Finance Law. In Marco Archer’s third budget there was no new borrowing and no new taxes and the minister appears to have balanced the government books. But with the exception of the 25 cent reduction on fuel duty, there were no other tax giveaways as Archer focused on the need for financial stability.
As promised, in the PPM’s plan submitted to the UK when the party took office in 2013, this budget sees government back in line with the PMFL and the requirements of prudent public finance management. Cash reserves and cash flows, debt management and ratios, a well as revenue and spending targets have all been met.
Archer also confirmed that by the end of the current financial year, as a result of better than expected revenue across the public sector, there would be a surplus of over $134 million — some $12 million more than originally predicted and more than enough to cover extra operating costs in the 2014/15 year. He explained that unpredictable expenses, including legal aid, Cuban refugees and overseas medical expenses, had increased government cost by some $1.3 million in this financial year, which ends on 30 June.
Next year government is aiming to collect over $661 million in revenue and spend some $525 million on running public services – more than half of which will be spent on personnel costs for government workers. Once the earnings of the statutory authorities and government companies (SAGC) are factored in, government expects a significant surplus of over $121,3 million. But Archer made it clear there would be no spending sprees as the money was needed to address the government’s debt, cash flow and reserves to meet the requirements of the PFML and in particular the stringent and even higher requirements of the Framework for Fiscal Responsibility imposed by the UK.
By the end of the next financial year, provided Archer’s predictions are accurate, the CIG will, however, no longer need approval from the UK for future budgets or require its permission to increase borrowing levels if they remain within law. But Archer made it clear that prudence would continue to be the theme and that the PPM government intended to stay away from future borrowing to maintain stability in public finances.
The additional 25 cent duty cut on CUC fuel imports per gallon, which it is expected to cut household bills and reduce the cost of doing business, was the only giveaway from Archer, as he emphasized the need to keep a tight hold on the public purse, though he said last year’s 2% duty cut on many items for retailers would remain. The second 25 cent fuel reduction is in addition to that which was implemented in January this year and will start on 1 January 2016. This means the 50 cents added to the fuel duty by the UDP administration, when it was facing a major budget deficit, will have been completely rolled back by the start of next year.
Despite delivering a comfortable spending plan for government, Archer pointed to a number of major problems ahead for the CIG that can no longer be ignored. In addition to its liability for public sector pensions, the minister pointed to the developing crisis regarding financing healthcare costs for retired civil servants. He revealed that government spent $135 million this year on health cover for retirees and if it fails to act, in less than three years that is predicted to rise to over $160 million per year.
He said the current regime was “unaffordable”, as he spoke about government taking ownership of the problem and finding solutions. Increasing the retirement age, co-payment, reducing the lifetime cover limit of $5 million and creating a graduated pension benefits packet depending on years of service were some of the solutions being discussed, he said, to address the complex problem.
Archer also said that putting pressure on the SAGCs had seen payback because although government is still subsidizing the Cayman Turtle Farm to the tune of some $9 million and covering Cayman Airways debts, there were impressive turnarounds for other entities and SAGCs overall are now contributing to government revenues rather than adding to the losses.
Check back to CNS for more from the 2015/16 budget address.
Category: Economy, Government Finance, Politics
Good job to have met the PFML requirements. Now please start to fix some of the country’s real issues like crime, ship berthing facility, unemployment and education etc. It makes absolutely no sense to place all focus on meeting financial ratios/targets and neglect the problems/issues that will inevitably erode all surplus gained.
If you read through this carefully it looks like any surplus will simply go to servicing historic debts so at the end of the year there will still be a $multi-million deficit that, thanks to things like interest, will continue to grow. There is also no indication how this will impact the predicted long-term shortfalls in things like health care and civil service pensions. It’s an interesting exercise in smoke and mirrors – in fact I suspect that this ‘surplus’ has already been spent several times over.
He talks about the 50 cents fuel duty imposed by the UDP due to a deficit but neglects to mention that it was a deficit left by the PPM’s outrageous spending.
He also neglected to mention that the FFR that was put in place by the UK was due to the PPM’s excessive borrowing.. No UDP fan here but don’t make it seem like the PPM does everything right and is so much better..As for as the surplus, we seem to hear this every year, I’ll just wait for the true picture to come out.
A surplus is no surplus when you still still owe millions above that number, over all that makes it actually a deficit
I certainly appreciate the work that has been done to improve the financial picture and credit is due! 2 comments; I wish they would stop calling it a surplus, it is not! What it is, is income expected to exceed cost by the amount stated. As Minister Archer said, there are many costly issues to be addressed! Secondly; the fact that income has improved more than expected, cannot just be credited to this Government, many efforts take years to produce results and, to a large extent Cayman is subject to global economic climes.
Let us hope that everyone keeps their feet on the ground!
So we paid 121 million to much in fees and duties ?
ROFLMAO!!! Archer is either funny or spinning more tales of economic miracles that have miraculously occurred in the last 2 years.
Thankfully Lord Swarbrick’s and his reports from the Auditor General’s office give us a true picture of Cayman’s fiscal management realities.
Marco Archer’s brilliance is matched only by his humility. We are so lucky to have him, at a time like this, in the position in which he is. Thank you for your service, Minister Archer!
“$135 million for health care costs for retirees this year”. Are you sure this is correct CNS? Is a decimal point not missing?
What about the ever increasing costs for indigents? A year or so ago it cost $18 million a year, so what is it now? And how much do the prisoners cost?
The funny part is that Archer then budgets $11.4 million for it next year and says that is “prudent financial management”. Can’t wait for Mac to rip into Alden about this as it is under his Ministry, bunch of jokers
Good job, Archer!
Good. Money for training, equipment, and personnel for the Ambulance service. Please and thank you. We are working in the dark ages here. Help us to help you.
Good job Progressives! That is what smart honest politicians do.
Population control.